As we cross the halfway mark of 2023, a midpoint review of the current U.S. Congress and the state of Washington, D.C. is warranted. As of this writing, lawmakers have sent five bills to the White House that President Biden signed into law; federal regulators issued 1,336 final rules and proposed another 948 regulations; and the White House reached an agreement with House Republicans on a bill to suspend the debt ceiling.
It was this law to allow the government to keep borrowing until Jan. 1, 2025, that took up all the attention in Washington, D.C., bringing other legislative activity to a halt. With that bipartisan agreement now behind us, lawmakers are looking toward the next policy crisis of their own making on Sept. 30, 2023.
This is the date by which the U.S. Congress must pass all 12 of its federal government spending bills to prevent a government shutdown. While the debt-ceiling deal allowed for a 3.3% defense spending increase while keeping non-defense dollars largely flat for FY2024, the agreement did not prevent the federal agencies from running out of money at the end of the current fiscal year on September 30.
Conservative lawmakers in particular are eager to exact additional cuts on programs after many voted against the debt-limit bill, while liberals believe President Biden gave away too much. This sets up a difficult scenario for keeping the government operational. The debt-ceiling law will also impact spending talks because the spending limits will force lawmakers to make difficult choices. We could see some Defense Department programs not see the expected increases, less-than-anticipated dollars for Pentagon procurement, and possibly cuts to defense budgets at the expense of procurement priorities.
On the domestic spending side, the debt agreement means some programs will likely face cuts. Even those that saw significant increases over the past several years, such as workforce development and career technical education initiatives, are vulnerable. Most in Washington expect Congress to pass a temporary extension in late September, allowing them to negotiate a spending package they should complete by December 31 at the latest.
Congress not only has to pass the federal government spending bills by September 30, but they also must send a massive every-five-year farm bill to the White House. This is among the most significant of bills lawmakers move twice a decade and covers everything from crop subsidies and disaster assistance to SNAP programs, loan guarantees and biofuel policies. Typically a bipartisan bill, billions in support for agribusinesses dries up if Congress fails to send legislation to President Biden by the end of the fiscal year.
The same applies to legislation needed by September 30 to finish the five-year Federal Aviation Administration bill to not only fund airports but also modernize federal air operations. The federal government’s pandemic policy expires that day as does authorization for U.S. Coast Guard funding.
This is a long list with countless obstacles for a united government. With one chamber controlled by each party and a Democrat in the White House, the hill to climb is even steeper. Complicating matters, both the House and Senate are in Washington together for only 22 days between July 1 and September 30. Through the end of the year, the two chambers are in the Capitol at the same time for 50 total days over a period covering six months.
This condensed timeframe is of significant concern to manufacturers and industry because significant tax increases continue to linger. This summer, House Republicans are expected to move their legislation, the American Families and Jobs Act, extending and reinstating a number of tax provisions important to business. This includes reinstating the ability to fully immediately expense Research and Development activities retroactive to Jan. 1, 2022, and remove the requirement to capitalize R&D activities while amortizing those over five years as is currently law. The R&D tax language reversing Section 174 extends R&D expensing through Dec. 31, 2025. This provision has bipartisan support even if Democrats are unlikely to vote in favor of the House GOP tax bill.
The action this summer is a formal first step in starting negotiations with Senate Democrats on a year-end bipartisan tax bill lawmakers will likely move in November or December. This will keep businesses in limbo for months as the two parties work on which tax provisions make the final cut.
These next six months represent the final opportunity for Congress to move major legislation prior to the 2024 presidential primaries and caucuses beginning in January 2025. On the regulatory side, the Biden administration will likely convene a small business review panel in the fall over OSHA’s potential rule regulating indoor and outdoor workplaces when the heat index exceeds 80°F. This could require training, environmental monitoring, workplace control measures, acclimatization, PPE and other requirements on employers – similar to California’s indoor heat rule slated to take effect by summer 2025.
The U.S. EPA has significantly escalated its activities this spring, which will undoubtedly carry into the fall as the Biden administration presses forward with its industrial decarbonization initiatives. We could see a Particulate Matter (PM2.5) standard released that would place more of the country in a nonattainment zone, potentially restricting economic activity due to industrial pollution. Tighter ozone requirements under the National Ambient Air Quality Standards for Cross-State Air Pollution Rule are on the agenda along with a replacement of the Clean Power Plan and other priorities of the Biden administration.
While the debt ceiling took over much of the first half of this year, expect a busy second half before the onset of the political circus that will be the 2024 election.