We are past the halfway mark of the year, which in political speak means we have four months until the midterm election and only five months in the remainder of this Congress – possibly the last fully controlled by Democrats during President Biden’s first term in office.
As we look back on the first half of 2022, we saw Congress send nearly $60 billion in support to Ukraine, President Biden replace steel and aluminum tariffs on some allies with tariff rate quotas, and federal regulators release proposals to regulate indoor workplaces when the heat index reaches 80°F.
Partisan fighting on Capitol Hill continued as expected with Democrats and Republicans in the House rarely interacting. Most in Washington expect the GOP to seize control of the lower chamber in November. Other than Ukraine, one bright spot of bipartisan cooperation this spring came in the form of legislation to address domestic supply-chain vulnerabilities, increase U.S. semiconductor manufacturing and combat China’s rise.
The House and Senate each passed their own versions of a bill leading to a rare conference committee on Capitol Hill with 107 lawmakers assigned to reconcile differences. The differences are significant, but members of both parties want to see a bill signed into law to incentivize domestic production of semiconductors, which have caused factory shutdowns across the globe. Most of us lobbying on the bill expect President Biden to sign some version of it into law later this summer.
Not to be outdone by Congress, the White House (after a 12-month review period) in February released their plan to “Revitalize American Manufacturing and Secure Critical Supply Chains in 2022.” Seven cabinet agencies published reports identifying key weaknesses in parts of the U.S. supply chain and will hold regional summits to bring together economic stakeholders to discuss how to align future local economic activity with the needs of the national supply chain.
The plan, nearly all of which federal agencies can implement without waiting for Congress to act, focuses on how to create and increase domestic manufacturing capabilities. A goal is to provide more capital and other resources for businesses to conduct domestic R&D for critical supply-chain goods that lead to product commercialization.
Among the worst-kept secrets in manufacturing and national-security circles is that the U.S. remains reliant on foreign governments for the rare-earth critical minerals Americans use to power their electric vehicles and motors, need to fly on airplanes and require to manufacture steel. For several reasons, including environmental restrictions, the U.S. has not extracted the minerals we have available. That neglect has led to a lack of capability to extract and process the materials here at home. This is also a reason that the federal government is now increasing its payments for government contracts using U.S.-made goods in high demand and reclassify the definition of Made in America for procurement.
The Biden administration announced plans that will expand domestic rare-earth processing, strengthen the National Defense Stockpile, and work to demonstrate the feasibility of a full-scale integrated rare-earth element extraction and separation facility and refinery from mine waste. The Department of Energy is also releasing $44 million to provide commercial-ready technologies with at least a net-zero emissions pathway to help with the expected increased demand for domestic supplies of copper, nickel, lithium, cobalt, rare-earth elements and other materials. The Department of the Interior is also updating its list of critical minerals the federal government deems a priority and requires additional attention to avoid supply disruption.
The disruptions continue, however, and not just for businesses but also for average consumers. The Biden administration is under increasing economic and political pressure to help provide relief for the thousands of businesses and voters who continue to face higher costs and persistent inflation more than two years after the pandemic began. In some ways, the efforts of the Biden administration will meet their intention. In many others, their action will lead to additional costs for manufacturers.
Looking forward to the second half of the year, the Department of Labor is expected to release a rule to increase worker eligibility for overtime pay by raising the exemption threshold currently set at $35,568 by former President Trump. This allows employees earning below that level to earn overtime pay. The Department of Labor recently announced its intention to further raise that rate for executive, administrative and professional salaried employees that will have significant implications for employers and hiring.
Sources in Washington indicate the Biden administration is considering increasing the exemption threshold to at least $53,000, with pressure from outside groups to set the level at $83,000. Either rate could cause employers to reclassify workers, hire fewer employees or withhold raises and limit hours worked. Expected in April 2022, the new levels could take effect January 1, 2023, and also increase the exemption for Highly Compensated Employees currently set at $107,432.
Meanwhile, manufacturers should expect: updated carbon monoxide standards for industrial, commercial and institutional boilers and process heaters; new rules for energy conservation for commercial water heating equipment; and rules on securing the workplace from infectious diseases.
With Congress in full election mode after Labor Day, it is unlikely they will pass substantive legislation until December, leaving regulators to increase their activity. At the EPA, we expect a number of significant rules in the coming months addressing greenhouse-gas emissions, soot pollution and additional standards for heavy-duty trucks.
Like with everything else in business, we have to take the unexpected with the expected, especially when it comes to policymaking from Washington. One certainty we do have is expecting the federal government to continue its focus on manufacturing in America.