Many political prognosticators predicted several options for the outcomes of the 2022 midterm elections to determine control of the U.S. Congress. One outcome they did not predict was a mirror image in the U.S. House of Representatives – Republicans control this new 118th Congress sworn in on Jan. 3, 2023, by a 222-213 margin. This is the ex-act same four-seat majority that Speaker Pelosi held with 222 Democrats and 213 R3publicans heading into those November elections.
In the upper chamber of Congress, Democrats retain power in the U.S. Senate and even expanded their majority by one seat – a feat few thought possible. Now holding 51 seats, Democrats have more direct control over the Senate process but still face a U.S. House run by Republicans. This begs the question, “What can we expect from this current Congress, especially as the 2024 race for the White House is already underway?”
To state the obvious, Republican and Democratic politicians agree on little these days in Washington, D.C. Working with members of the other party can often cost an elected official their seat through a primary challenge. This is a real issue on Capitol Hill. In the House, one needs 218 votes to move legislation and 60 in the U.S. Senate. With such a slim margin, House Republicans can only lose four votes on any legislation, whereas Senate Democrats now have one additional vote to spare than just a month ago. With Democrats lacking 60 votes to act unilaterally, however, the Senate will focus on moving through as many of President Biden’s nominees as possible.
In the House, as expected, Republican Committee chairs are launching investigations and will hold hearings into various aspects of the Biden administration, ranging from his son to Department of Energy loans and the Afghanistan withdrawal. We expect a review of the new climate change law, efforts to reduce industrial emissions and government investments in renewables. However, Republicans likely lack the votes to roll back or outright block implementation of the new climate law and regulations. This means the Biden administration is likely moving forward with its focus on process heating, electrification and carbon-intense industries in the U.S.
The partisanship and narrow margins are clearly obstacles to this Congress legislating. To some, inaction by the government is action enough. Despite this, we do still expect Capitol Hill to send some bipartisan bills to President Biden for his signature. The Farm Bill (as it is known) and the reauthorization of Federal Aviation Administration activities are at the top of the list. Some type of permitting reform for energy and other infrastructure projects is also possible. Congress is expected to continue to replenish stockpiles and munitions at some point, in addition to increased military sales to allies to support the efforts in Ukraine.
If the U.S. falls into a recession, one should not look to Congress for support. Sources here in Washington, D.C. confirm that lawmakers, and the economy, cannot support additional direct stimulus checks to workers or significant tax cuts for employers. On the topic of taxes, many of the Republican-passed Tax Cuts and Jobs Act of 2017 provisions begin expiring in the coming years. Outside of expensing for research-and-development activities, few tax provisions have bipartisan support in today’s political environment. Just as GOP lawmakers lack the votes and control of the Senate to reverse many of the cli-mate and energy initiatives, they also lack the support to unilaterally extend expiring tax provisions, and businesses should plan accordingly. The same applies to Democrats. Changes to tax policy, education or immigration are out of reach on their own.
The greatest showdown to expect in the coming year is over government spending. This is where the parties in Congress have leverage with the White House. Expect extended drama surrounding government shutdowns and battles over restricting funds to implement Biden administration priorities.
When we have a divided Congress in Washington, many of us lobbyists start looking at the federal agencies. There is a saying: “If you can’t legislate it, regulate it.” Businesses should expect an increase in regulatory activity coming from the EPA, OSHA, NLRB, SEC and IRS, among others.
The Biden administration recently revealed it may set the Social Cost of Carbon at $190 per ton, up from the current $51 and the $1 set under former President Trump. The EPA uses this measurement to justify major regulations issued to governing utilities and other industrial emitters. OSHA is actively working on a rule to place additional requirements on workspaces when the heat index reaches 80°F. The National Labor Relations Board is on track to reclassify independent contractors and change the definition of joint employers using temporary workers or staffing agencies.
The Energy Department continues to issue millions of dollars to companies to reduce their carbon footprint through their industrial decarbonization roadmap. Over at the Commerce Department, manufacturers should expect to begin seeing millions of dollars in grant opportunities become available as part of the CHIPS semiconductor law signed by President Biden on Aug. 9, 2022.
In short, even if Congress does spin its wheels for much of the year, federal regulators have no shortage of items on their agenda. Give this new 118th Congress a few months to settle in, the sparks to fly and the cameras to cover it all. As we move into April and summer 2023, we will begin to see those lawmakers serious about legislating begin to show that some parts of government can function some of the time. In this environment, that is saying something.