June 2023
Top Line Take Aways:
· We have a deal! Improbable as it may seem, a Congress whose two chambers are separated by six votes and the White House came forward for a major bipartisan bill with major repercussions for federal spending. Will this kind of deal-making last? We doubt it.
· The debt limit negotiations pushed everything even further back. The deal requires Congress to pass 12 individual appropriations bills to avoid a CR. To get that done it’ll necessarily crowd out a lot of other legislation. Further, with the spending caps in place, the incentives for Democrats and Republicans to default to a CR position will vary by bill.
· We are ready to call it: reauthorization efforts like FAA and Farm Bill are going to need—at minimum—short term extensions.
· The next two months will be all about appropriations.
On The Floor
· Appropriations, Appropriations, Appropriations: First up will be Mil-Con-VA and Homeland Security. Keep an eye on the sequence afterwards. The House Committee on Appropriations had originally teed up Agriculture and Leg Branch but these could change with elements of the debt ceiling. Those eagerly waiting to see if their earmarks are included in the Transportation-HUD bill may now have to wait.
· Tax Package? Ways & Means Chairman Jason Smith (R-MO) stated he wants a tax package on the floor by his birthday, which is June 16th. The package will likely “include a full restoration of research and development deductions, full bonus depreciation, removing caps on business interest expensing and a doubling of the $1.08 million limitation on the section 179 deduction (which, like bonus depreciation, allows a company to deduct an asset’s cost up-front)” according to Committee member Randy Feenstra (R-IA). Rep. Vern Buchanan’s (R-FL) full reauthorization of the Tax Cuts and Jobs Act was also promised a vote. House GOP will have to be careful here though, as none of these bills are likely to garner much Democratic support.
· Supply Chain Part II?: The House Transportation & Infrastructure Committee passed a package of bills aimed at alleviating the supply chain challenges, some partisan and some bipartisan, with the idea of having them fill floor time in June while the House works its way through various appropriations bills.
Get Smart – What is a Rescission?
You may start to hear a lot about “rescissions” now that the House and Senate have passed the Fiscal Responsibility Act. What is it, and why does it matter?
Simply put, a rescission is a provision of law that cancels a given amount of budget/spending authority prior to when it may be set to expire under current law. As an example, let’s say the 116th Congress during the 2nd session (2020) passes a bill authorizing spending of $100 million over the next five years with a $10 million increase every year. In year five, authorized spending is $140 million. Then the 117th Congress comes in and in its first year (2021) passes a bill that rewrites that spending authority to only increase by $5 million each year. So now the instead of $100, $110, $120, $130, and $140 million spending authority is adjusted down to $100, $105, $110, $115, $120 million, for a net decrease in future spending authority of $50 million.
Congressional budgeting requires all of the relevant accounts to be adjusted down to reflect these new spending authorization levels. Some accounts can be spared while others are targeted for bigger cuts to make up for it but assume for this conversation it’s all equal. The reduction in the accounts to reconcile with the new budget authority is known as a rescission.
A more in-depth primer from CBO can be found here.
Why does this matter? In the main, it sets a new CBO baseline spending level which will impact the reauthorization efforts of the Farm Bill and FAA among others.
Rescissions From Fiscal Responsibility Act: According to CBO, the total amount of rescissions due to the Fiscal Responsibility Act is $27 billion, which they estimate will result in an $11 billion net reduction in spending over a ten-year budget period.
Rescissions for the Fiscal Responsibility Act are attached.
What to Watch in Committee
In the House
Agriculture: House Agriculture is going to hold a pair of hearings, one on the Nutrition title of the Farm Bill, which is going to generate some sparks, and another on Digital Asset Spots Market.
Appropriations: The Committee will essentially take its calendar from the end of May and shift it to June. MilCon-VA, Homeland Security, Agriculture and Legislative Branch appropriations will see full committee markup while the remaining bills with go through subcommittee and then full committee. It’s going to be a packed month for Appropriators. If you see your friendly neighborhood Approps staffer, assume they need a hug.
Armed Services: House Armed Services had to postpone their planned May markup of the annual National Defense Authorization Act, a bill that’s normally through committee by Memorial Day and on the floor before the 4th of July. Armed Services members largely got the numbers they were looking for in the debt deal, though you’ll hear some grumbling from the more hawkish members of the House and Senate. This should smooth the way for a bill to come out of committee and to land on the floor in a relatively bipartisan fashion. The only unanswered question is whether issues surrounding U.S. aid for Ukraine jeopardize the bill’s passage. Remember there are issues on the left and right wings over continued funding for the war in Ukraine. Though to be sure House and Senate Leadership are generally on the same page on both sides of the aisle.
Energy and Commerce: E&C will hold hearings on AM Radio, The Biden Administration’s Clean Power Plant Rule, Blockchain, FERC, the NRC and two field hearings. One Health Subcommittee hearing in Gettysburg, PA and an Energy Subcommittee hearing in Moore County, NC. The Health subcommittee is also expected to hold two legislative hearings.
Transportation and Infrastructure: The T&I Committee has quietly been one of the most productive committees this Congress, holding several markups in bipartisan fashion and avoiding the partisan sniping that’s plagued other Committees. Credit this to Chairman Graves and Ranking Member Larsen’s good working relationship and also the temperament of the two men who are generally seen as easy to work with and committed to getting to yes. Chairman Graves has stated he wants an FAA reauthorization at a full committee markup in June. This also tracks with Ranking Member Larson’s goals. A large CODEL of House and Senate members are heading to the Paris Air Show mid-June.
Ways and Means: Chairman Smith wants to have a tax package on the floor in June. Definitely an ambitious goal since they haven’t held a markup since early March and the House needs to do its work on Appropriations. However, the Committee wants to look at legislation on 1099Ks, research and development deductions, full bonus depreciation, removing caps on business interest expensing and a doubling of the $1.08 million limitation on the section 179 deduction (which, like bonus depreciation, allows a company to deduct an asset’s cost up-front). Rep. Vern Buchanan has also been promised a vote on a full extension of the Tax Cuts and Jobs Act.
In The Senate
Appropriations: First comes the debt deal, then comes the real negotiations...with non-defense discretionary spending set to see a small haircut compared to FY 2023, expect lots of wrangling behind the scenes as Chair Patty Murray (D-WA) and Vice Chair Susan Collins (R-ME) work to continue their united fight in promising bipartisan appropriations bills. With subcommittee oversight hearings wrapping up, the panel’s leaders have said they’ll start marking up bills in June. We hear things are likely to kick off the week of June 18th with Agriculture and Commerce-Justice-Science. But even beyond the perennial fights over riders, it won’t be as easy as taking the FY23 numbers and calling it a day. Rising interest rates, for example, have escalated costs on the housing side of the Transportation-HUD bill that could threaten the DOT-side accounts.
Commerce, Science, and Transportation: The march to FAA reauthorization continues, with staff continuing to be locked down writing bill text and searching for any and all areas of bipartisan agreement. But it wouldn’t be an FAA bill without some perennial hang-ups, and we hear Ranking Member Ted Cruz (R-TX) is taking up the DCA slot fight resurrected earlier this year by Delta Air Lines, with an eye on landing a direct flight between DC and San Antonio. We’re told Cruz is also bringing back the idea of privatizing the FAA’s air traffic control responsibilities...a fight your authors remain scarred from when it last came up in the 2018 reauthorization battle. Regardless, Chair Maria Cantwell (D-WA) remains optimistic about holding a markup in mid-June, but time will tell if the negotiations can advance that far in time.
Finance: Can a narrowly divided Senate still produce some bipartisan legislation? That’s the hope of Majority Leader Chuck Schumer (D-NY) who in May announced a Caucus-wide initiative to develop a package focused on countering China, following on the surprisingly bipartisan work so far from the House select China committee. Look for Finance Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) to play central roles and resurrect their bipartisan trade enforcement legislation that was hitched to the Senate-passed United States Innovation and Competition Act (USICA) before it fell out of the final CHIPS and Science Act agreement last year.
