Latest news from Washington, D.C. produced by Total Spectrum/SGA exclusively for members of the Arizona �鶹��ýӳ�� of Commerce & Industry

More Info: Michael DiMaria | Partner and Vice President of Business Development | 602-717-3891 | mdimaria@totalspectrumsga.com

Happy New Year. Thanks for your interest in Washington, D.C. and thanks for reading This Week in Washington.

Once a year I restate our vision of providing an accurate view into Congressional activity, the Administration’s actions, and national politics exclusively for members of the Arizona �鶹��ýӳ�� of Commerce and Industry. My perspective is as of a Republican, as is that of .  provides his perspectives as a Democrat.

This week’s Heard on the Hill is a benchmark report on where Republicans and Democrats are as we start a reelection year. It focuses on Senator John Thune’s decision to run for reelection, and how this election year could have been impacted if he had announced his retirement.  Our friend  provides his monthly Defense Update, and  shares the schedule of hearings and happenings on Capitol Hill. 

We’ll be back in two weeks for the next issue of This Week. Stay well.

Total Spectrum Managing Director

Heard on the Hill

By n, Total Spectrum Managing Director

Happy, Healthy, and Successful 2022.

I greatly enjoyed being in Arizona last week and attending the Arizona �鶹��ýӳ��’s Legislative Forecast Luncheon. Let’s start the year in Washington by reviewing where we are with about 10 months until the mid-term election.

Democrats have their backs against the wall. President Biden’s agenda is stuck in the mud. Majority Leader Schumer can talk about breaking the Senate’s filibuster rules, but he doesn’t have the votes in his own caucus. My guess is that Democrats will have to stop swinging for home runs and start hitting for singles and doubles. Small victories are still victories. We’ll see how that develops.

Republicans start the year with momentum.  The off-year election generally bounces against the President’s election… and 2022 is unlikely to be an exception. 

The House looks like it will go Republican in November. My old friend Charlie Cook at the Cook Political Report with Amy Walter said in a January 6, 2022  that “it would seem to take divine intervention, Republican self-destruction, or both to save the House Democratic Majority.” The big factors are Congressional redistricting, the number of Democratic incumbents retiring, the economy and inflation, and the President’s current polls. It has never been fun serving in the House of Representatives as a member of the minority party, and the number of Democratic Congressmen who now want to spend more time with their families tells the whole tale.

The Senate is currently 50-50, so it won’t take much of a wave election to knock the status quo off kilter.

Another great friend of mine is Nathan Gonzales, the publisher of Inside Elections. Nathan said in his January 7, 2022 report that “…Senate Democrats have no room for error. They probably can’t afford to lose even one of their own seats in a challenging environment where President Biden’s job approval rating has leveled off at mediocre.” Nathan also pointed out the historical trend in off-year elections, noting that there have been 27 midterm elections since 1913, when the 17^th Amendment was ratified which allowed for the direct election of Senators. The President’s party gained Senate seats in six off-year elections, broke even in two, and lost seats in 19.

Senator John Thune – some background, and a personal disclaimer.

It goes without saying that the President and the Democratic Congressional leadership are looking for ways to start bending the curve and move momentum in their direction. Republican leaders have been working to retain their incumbents and put themselves in position to win in November – so everyone on Capitol Hill over the past five or six months has wondered if Senator John Thune (R-SD), the Republican Whip –the second most senior Senator in the Republican caucus – was going to retire or run for reelection.

John Thune grew up in Murdo, South Dakota, a wide spot on a narrow road. He was a bright student who was also a great athlete, and he was marked for success in his hometown. John earned a bachelor’s degree at Biola University and later a master’s degree in business administration at the University of South Dakota. John got his start in politics as a staff member for U.S. Senator Jim Abdnor (R-SD), who was defeated for reelection by Tom Daschle, who eventually became the Senator Majority Leader. 

John Thune went on to serve in various key roles, including a presidential appointment with the U.S. Small Business Administration, the executive director of the South Dakota Republican Party, and then the executive director of the South Dakota Municipal League. John Thune became Congressman Thune in January 1997 and won reelection in 1998 and 2000.

He made a pledge to only serve three terms in the House of Representatives, so John decided to challenge Tim Johnson, South Dakota’s junior Senator in 2002. John lost that race by less than 1,000 votes – a race where I was the fundraising consultant. John was then asked to consider the near impossible task in 2004 of defeating a sitting Senate Majority Leader. John Thune did indeed defeat Senator Tom Daschle in a race that probably went better than 2002 because I was not involved. Senator Thune glided to reelection victories in 2010 and 2016.

Senator Thune has previously served as Chairman of the Senate Commerce, Science, and Transportation Committee, Chairman of the Senate Republican Policy Committee, and Chairman of the Senate Republican Conference. He was elected by his peers in 2020 to be the Republican Whip, the number two position in Republican Senate Leadership.

Senator Thune, Senator John Barrasso (WY), and Senator John Cornyn (TX) are the conventional choices to become Republican Senate Leader when Mitch McConnell retires. But Senator Thune was very non-committal all last year about whether he wanted to run for reelection in 2022 – a run he would surely win in a walk.

I was often asked in 2021 for my opinion whether he would stay in the Senate.  My reply was consistent – he will run because Senator Thune has a genuine desire to serve. But a great number of people became concerned as summer turned to fall and the Senator started to look pained and unhappy. Leader McConnell made a public statement in December that he wanted Senator Thune to continue in the Senate, which meant that the Leader and other Republican Senators were putting real pressure on him. 

Last Saturday Senator Thune announced that he would indeed stand for reelection in November. 

South Dakota is solidly red, so the seat would not have been in peril if Senator Thune had retired. But political waves are built on good candidates, great timing, a dash of good fortune, and momentum. There’s little question Senator Thune leaving the Senate would have created a speed bump for that momentum.

2022 so far has the potential to be a strong Republican cycle. 

Defense Update

By Al Jackson, Total Spectrum Strategic Consultant

After months of debate, the Senate voted in December 88-11 to pass the National Defense Authorization Act (NDAA), which authorizes $740 billion in spending for the Department of Defense in Fiscal Year 2022. This will be the 61^st consecutive year this legislation has passed both Houses of Congress and sent to the President for signature. 

The legislation contains an annual 2.7% pay raise for members of the armed services and increases spending at a level $25 billion more than the administration’s request. The measure also overhauls how certain sexual misconduct crimes are prosecuted under military rules.  To ensure passage, the negotiators of the final version dropped language that would have added women to the Selective Service System for potential future conscription. The language was evident in both NDAA versions in the House and Senate but was deemed too controversial for the final bill.   

To the dismay of some, including Senator Kirsten Gillibrand (D-NY), the bill does not go far enough in reforming how the military handles serious crimes. Senator Gillibrand voted against final passage in protest of the omission of stronger language. Instead, in the final bill, the Department of Defense would be required to create an independent prosecutorial office within each service to handle serious crimes, including rape, sexual assault, murder, manslaughter, and kidnapping. Senator Gillibrand vowed to pursue this topic again in the FY2023 NDAA bill, as she and others desire for all serious non-military crimes to be taken out of the traditional military chain of command. 

Because of the additional $25 billion, the legislation includes authorization for 12 additional Boeing F/A-18 Super Hornets for the Navy. It added five more Boeing F-15EX jets above 12 already planned, and 13 ships total including two attack submarines and two destroyers, resulting in five more than the White House’s budget plan. The NDAA also authorizes 85 Lockheed Martin F-35 aircraft. As it relates to military end strength, the number of Army soldiers would drop by 900 to 485,000 compared to this year’s levels and the Marine Corps would cut its troop numbers by 2,700 to 178,500. The Navy’s end strength total would drop by about 900 to 346,920, which results in approximately 700 more sailors than the White House requested. The Air Force would see a decrease of about 4,200 personnel to 329,222, which is 1,000 more airmen than the administration requested. The Space Force end strength would be set at 8,400 guardians. 

One provision provided for a new “Basic Needs Allowance” to give additional financial support to some low-income service members.  The legislation also has language to provide 12 weeks parental leave to all service members following the birth or adoption of a child, standardizing the rule across the services.  

Of major significance, the bill authorizes $2 billion above the administration’s request for the Pacific Deterrence Initiative, which is designed to bolster the military’s position in the region and deter China, for a total of $7.1 billion. Most of this initiative involves the leadership of the United States Marine Corps. The bill authorizes $4 billion for the European Deterrence Initiative, which is designed to deter Russia by bolstering cooperation with Eastern European allies, an increase over the administration’s $3.4 billion request.  Lawmakers added $50 million to the administration’s request for security assistance for Ukraine for a total of $300 million. 

Congress approved in the NDAA the retirement of more than 160 legacy aircraft for the Air Force, thereby freeing up money for the service to invest in new technologies, but once again, Members stifled the service’s hopes to retire A-10 Warthogs.  The Air Force will be allowed to retire all the aircraft it proposed divesting of in its FY22 budget request, including the 47 F-16C/Ds, 48 F-15C/D Eagles, four E-8 JSTARS ground surveillance aircraft and 20 RQ-4 Global Hawk Block 30 surveillance drones. 

Congress did impose significant restrictions on the F-35 program, per planned procurement of the jet by the Air Force, Navy and Marine Corps unless sustainment costs meet the services’ targets. The NDAA would also create an Afghanistan War Commission to review the nearly two decades of war there and review of the failed departure, which resulted in 13 service members killed and over $85 billion of modern weaponry left behind.  

In unrelated news, Boeing announced in late December that it had suspended its requirement for U.S.-based employees to be vaccinated against COVID-19. In an internal post to employees, Boeing indicated it made the decision after reviewing several recent developments that thwarted the federal government’s vaccine mandate effort for federal contractors. The Boeing decision was based on a U.S. district court in Georgia decision on Dec. 7 to invoke a preliminary injunction that would prevent the vaccine mandate for contractors required in executive order 14042 from taking effect.  This followed another injunction issued by a federal court in Kentucky on November 30, halting a national vaccine mandate for health care workers. As a result, on December 9, the Defense Department issued a memo suspending the enforcement of the mandate to comply with both court orders until further notice. Other defense contractors, both small and large, are doing the same as the Boeing Company. 

Congressional Calendar

Tuesday, Jan. 11

• 10 a.m. Senate Energy and Natural Resources Committee  – Hydropower Opportunities and Challenges.
• 10 a.m. Senate Judiciary Committee  – Domestic Terrorism threat 1 year Later.
• 10 a.m. House Appropriations Committee  – US Capitol Security Since January 6
• 10 a.m. Senate Armed Services Committee and Senate Foreign Relations Committee Briefing – US Policy on Afghanistan
• 10 a.m. House Oversight and Reform Committee  -Federal Cybersecurity Reform.
• 10 a.m. House Armed Services Subcommittee on Readiness  – Red Hill Bulk Facility Storage: The Current Crisis, the Response and the Way Forward.
• 10 a.m. Senate Foreign Relations Committee Closed  US Policy on Afghanistan. 

Wednesday, Jan. 12

• 9 a.m. Senate Foreign Relations Committee  – pending nominations
• 9 a.m. Senate Judiciary Committee  – pending nominations.
• 9:30 am. Senate Foreign Relations Committee  – pending nominations.
• 10 a.m. House Small Business Committee  – SBA Management/Performance Challenges
• 10 a.m. House Agriculture Committee  – Electric Vehicle Implications for Agriculture/Rural America
• 10 a.m. House Transportation and Infrastructure Subcommittee on Water Resources  – Water Resources Development Act Proposals
• 10 a.m. House Appropriations Committee  – Continuing Resolution Impacts on the Department of Defense and Services.
• 2:30 pm. Senate Indian Affairs Committee  – Closing the Digital Divide in Native Communities Through Infrastructure Investment.
• 2:45 pm. Senate Environment and Public Works Committee  – USACE investment Implementation of Water Infrastructure Projects, Programs and Priorities. 

Thursday, Jan. 13

• 9 a.m. Senate Judiciary Committee  – Pending Nominations
• 9:30 am Senate Armed Services Committee  – Pending Nominations
• 10:45 am. Senate Homeland Security and Governmental Affairs Committee  – Civil Rights Cold Case Records Review Board Nominations

The post This Week in Washington appeared first on �鶹��ýӳ��.

Latest news from Washington, D.C. produced by Total Spectrum/SGA exclusively for members of the Arizona �鶹��ýӳ�� of Commerce & Industry

More Info: Michael DiMaria | Partner and Vice President of Business Development | 602-717-3891 | mdimaria@totalspectrumsga.com

Thanks for your interest in Washington, D.C., and thanks for reading This Week in Washington. 

Our goal is to provide you with all the information you need in a timely manner on the issues that are important to you. Our goal is also to publish on a regular schedule. Most of the time we can achieve both goals… but this week we simply can’t catch lighting in a jar.

Amy Walter, who recently took over the Cook Political Report, said this week that “this is the most consequential week of President Biden’s young Presidency,” – and she was correct.  Today is the first day of the new fiscal year, and as Congress had not completed their work on this fiscal year’s budget, they passed a continuing resolution this week to continue funding at current levels until December 3. Congress will have to raise the debt ceiling before mid-October. The House of Representatives tried to vote this week on the Bipartisan Infrastructure Framework, but moderate Democrats and progressives couldn’t agree on a way forward. There is also work going on in both the Senate and the House on the proposed ‘soft’ infrastructure bill currently priced at $3.5 trillion that Democrats want to pass using the budget reconciliation process.

I had dinner with a Senior Republican Senator this week, and he said that the smart money would probably bet that a ‘soft infrastructure bill’ of about $2 trillion would pass the Senate and a bipartisan traditional infrastructure bill will eventually pass the House. But he added that there is a 20% chance that the wheels will fall off the wagon and the President’s agenda goes into the ditch.

Taking all of this into account, you’ll understand why we adjusted our schedule this week to give  enough time to accurately report on all the week’s events, including the very latest on the ‘Manchin-Sinema vs. Progressives’ tug-of-war. 

�մǻ岹��’s&�Բ�����;This Week includes Patrick’s summary and analysis of the week’s crazy events in his Washington Whispers.  writes about a Ways and Means proposal that is not good news for many small businesses, and  updates on all things defense.  summarizes two recent Senate hearings – one on CARES Act Oversight of the Treasury and Federal Reserve, and another reviewing the administration of laws under jurisdiction of the Federal Energy Regulatory Commission.

We’re already planning the October 13^th issue, which will include the next Total Spectrum Spotlight.

Stay well.

, Managing Partner

Washington Whispers

By Patrick Robertson, Total Spectrum Strategic Consultant

This week, Democrats in Washington took one step forward, two steps back, no real steps, or something in between, depending on who is analyzing the actions of the last few weeks. Let’s start with the facts, as we always do in Washington Whispers. 

This week, Congress passed:

• A nine-week continuing resolution, funding the federal government through December 3. 

However, the following items remain hanging out there and unresolved:

• The $1.2 trillion bipartisan infrastructure package;
• The $3.5 trillion Biden social infrastructure proposal that Senate Democrats want to pass under the budget reconciliation process;
• The lifting or extending of the debt ceiling, which is set to expire in mid-October; and
• Other policy priorities, like immigration reform. 

We have arrived at the make-or-break moment for the Biden agenda in Congress. If negotiations take much longer there will be little or no chance to move something big before next November’s elections. After the events of Thursday, the president has achieved a COVID relief package but has not yet been able to strike a final deal on renewed infrastructure package that passed the Senate in August with a 69-30 vote. Progressives in the House have refused to move forward on the infrastructure bill until they know more about the fate of their priority – the multitrillion-dollar reconciliation package. 

The President ran on broad social promises like immigration reform, government-supported childcare, higher taxes, election reform, better health care, and more support for higher education. None of those things will happen if the Senate does not come to an agreement on the reconciliation package. 

The President and a Democratic-controlled Congress hit the ground running, passing the American Rescue Plan with COVID relief, COVID spending, and other short-term priorities like state and local government relief. Then they turned their attention to infrastructure and moderate Senators ran roughshod over the House, cutting a deal with the White House on what has become known as the Bipartisan Infrastructure Framework (BIF). 

House progressives started to howl once the infrastructure bill passed the Senate and said that they would only support the infrastructure bill if the House agreed to move the President’s full agenda at the same time. Moderate Democrats then dug in their heels and got an understanding from the Speaker that the infrastructure bill would have a vote in the House on September 27, and without a vote moderate democrats refused to support the $3.5 trillion reconciliation package. This sounds a lot like two grade school children fighting over playground equipment to me. 

The standoff was supposed to end this week when the House, almost two months after the Senate, was scheduled to vote on the BIF. Progressives stood up to say, “Not so fast,” as it became clear that Senate moderates scoffed at their $3.5 trillion reconciliation package. As a result, the infrastructure bill hangs in the balance. Senate Democratic moderates have said, “elect more progressives” if you want more progressive policies, and Washington is at a standstill. 

The question now is how can the President shake his agenda loose of the Democratic gridlock that has been gripping it for months? 

News broke this week that Senator Joe Manchin (D-WV), who gets more press coverage than really anyone in Congress these days, offered Senate Majority Leader Schumer a framework for a deal in July. Senator Manchin’s  included a corporate tax rate increase, an increase in the capital gains rate, a cap on spending at $1.5 trillion and oversight over climate policy for the coal-state Senator. The following months of silence indicate it was not well received. 

At the same time, Senator Kyrsten Sinema (D-AZ) has said that climate change policy is key to her vote and that she is not interested in major tax increases. Climate policy does not play well with Senator Manchin. 

When you take these two positions of cutting back the $3.5 trillion package and juxtapose them against Senator Bernie Sanders’ (I-VT), who said that $3.5 trillion in spending is already a compromise, you are hard pressed to understand how an agreement can be reached. 

It’s clear that the President and Democratic Congressional leaders are going to have to get very serious about compromising if they are to move the central pillars of their agenda. 

Senate liberals have already had their hopes dashed on a reconciliation move to do immigration reform when the Senate Parliamentarian ruled it would not be fit under the Senate’s Byrd Rule. Democrats now need to see if they can find any common ground within their 50-member Senate caucus to move something forward that will garner support from the center and the left.  

Democrats also need to find a way to lift or suspend the debt ceiling, the statutory limit for borrowing money by the federal government. While there are several kooky ideas out there on how to do it – all the way from minting a $4 trillion coin to deciding the debt ceiling is unconstitutional – it is still most likely Congress will simply extend or suspend the limit as it has done dozens of times in the last two decades. The idea that our country could default on our debt is just unacceptable. There is a whole separate column to be written on the need to lift or suspend the debt ceiling and the related politics, but we will save that for next month. 

In the meantime, keep watching the debate over infrastructure and reconciliation and watch for that make-or-break moment – which Democrats face imminently – when they must decide whether doing nothing is preferable to doing something less than what they want. I predict that once this reckoning happens, they will move on both the infrastructure bill and a reconciliation bill in the neighborhood of $2 trillion.

The Democrats’ Proposed Cap on the Small Business Deduction Will Hurt Over 900,000 Small Businesses

By Congressman Erik Paulsen, Total Spectrum Strategic Consultant

Congressman Richard Neal (D-MA), Chairman of the House Ways and Means Committee, has proposed in the House Democrat budget reconciliation legislation to severely limit Section 199A, the Small Business Deduction. This deduction is the centerpiece of the pro-small business tax reforms adopted in the Tax Cuts and Jobs Act passed into law in 2017. 

According to Small Business Administration (SBA) figures last updated in 2019, the United States has 30.7 million small businesses which employ 40.7% of the private workforce. Depending on the industry, the SBA defines a small business as one that has fewer than 1,500 employees and a maximum of $38.5 million in average annual receipts.

The vast majority of small businesses are organized as pass-through entities (partnerships, S corporations, LLCs, and sole proprietorships), not as C corporations. The owners of these firms pay individual income tax on income derived from their business. 

Section 199A specifically covers these pass-through entities and allows small business owners the ability to claim up to a 20% deduction on their share of the business’s income. 

Chairman Neal’s proposal would cap the deduction at $500,000. The Joint Committee on Taxation estimates that capping this deduction would raise just over $72 billion over ten years. It would also devastate many small businesses that found this deduction to be a lifeline during the pandemic, or who wanted to invest in new jobs and equipment. 

Another consequence is that many small businesses would now be forced to decide whether to structure themselves based on tax considerations rather than business considerations. This is because the owners of pass-through small businesses are taxed at a maximum tax rate of 37% while a C corporation is taxed at a maximum tax rate of 21%, a significant 16% difference. The small business deduction was adopted to ensure that business owners would not be penalized based on their choice of business entity. In other words, whether to operate as a C corporation or a pass-through entity should be determined by business considerations and not tax rates. 

As a result of Chairman Neal’s proposed repeal of Section 199A, over 900,000 small businesses that currently benefit from the 20% deduction could see their top tax rate skyrocket from 29.6% to 46.4%. 

That’s because the proposed legislation increases the top individual marginal tax rate from 37% to 39.6%. It also lowers the top bracket from $523,601 per individual and $628,301 for couples filing jointly to $400,001 per individual and $450,001 for couples filing jointly. The bill adds a new 3% surtax that includes business income and imposes the 3.8% net investment income tax on active business income. These tax changes would create a top 46.4% federal effective tax rate on passthrough business income before considering state and local taxes. 

The effective rate is 17.6% higher than anything being proposed for corporations. The rate does not even include the expansion of the Self Employment Tax with which small businesses would be burdened. 

Many small business associations and chambers of commerce are actively opposing the proposed cap on the small business deduction and are contacting members of their Congressional delegation.

Defense Update

By Al Jackson, Total Spectrum Strategic Consultant

The House of Representatives earlier this month approved their version of the National Defense Authorization Act (NDAA) for Fiscal Year 2022. The bill authorizes $740 billion to be spent on defense, providing $24 billion more than what the administration requested. It remains to be seen if the House and Senate Defense Appropriations Subcommittees will follow suit, however, this legislation portends more spending on defense. 

The budget policy bill, passed by a bipartisan 316 to 113 votes, includes a 2.7% pay raise for troops starting in January, sweeping changes to military sexual assault prosecutions, and language requiring women for the first time to register for the military draft. The bill also contains several provisions related to Afghanistan, as lawmakers specifically address the debacle that resulted from the recent military withdrawal. 

The House version of the NDAA mirrors the amount authorized by the Senate Armed Services Committee version approved earlier this summer and marks a victory for Republican lawmakers who indicated the military budget proposed by the administration was insufficient to counter threats like a growing Chinese military and worldwide terrorism. 

House liberal progressives and House Armed Services Committee Chairman Adam Smith (D-WA) had argued for lower spending levels after years of big defense plus-ups under President Donald Trump, however, the House overcame those objections by voting down an attempt to undo the $24 billion add. The vote on that amendment was 142 in favor of the cut and 268 for the additional $24 billion. An amendment to impose a broad 10% cut was also defeated, 332-86. 

Key parts of the House NDAA are as follows:

• The bill would create a 12-member bipartisan commission to investigate what happened in Afghanistan and whether there were intelligence missteps that led to America’s rapid evacuation of the country. The legislation would also require annual reports on the administration’s handling of long-distance counter-terrorism efforts now that there are no forces on the ground.
• It would fund 13 new ships for the Navy, including three new Arleigh Burke-class destroyers, and includes money for 85 F-35 fighters.
• Funding for the Ground-Based Strategic Deterrent, the next-generation ICBM, was protected against an effort from progressives to defund the program and keep the Minuteman III ICBMs working until 2040. 
• The House language includes a 2.7% pay raise for members of the military and sweeping changes to the sexual assault justice system. It also would require women to register for the draft for the first time, something expected to be backed fully in the Senate.
• It also includes language that would require any Defense Secretary nominee who previously served in uniform to have been retired for a full 10 years, rather than the current requirement of seven years. This comes after back-to-back administrations sought waivers to clear Jim Mattis and Lloyd Austin to serve as the top civilian at the Pentagon, neither of whom had cleared the seven-year period at that time. 

Procurement additions include:

• Aircraft: $394 million to buy four additional KC-130Js for the Navy and Marine Corps, $340 million for two additional P-8 Poseidon for the Navy, and $212 million for nine additional UH-60 Blackhawks for the Army National Guard.
• Combat vehicles: $234 million for Abrams tank upgrades, $183 million for HMMWV modifications, $139 million for Stryker upgrades, and $120 million for Joint Light Tactical Vehicles. The addition also covers $350 million more for missiles and $553 million to strengthen cybersecurity priorities. 

Of note are the recent remarks from Frank Kendall, Secretary, United States Air Force, pertaining to the retirement of older, legacy systems such as the A-10 Warthog aircraft. These legacy aircraft are stationed at Davis-Monthan Air Force base in Tucson. Secretary Kendall implored Congress in his remarks to allow the USAF to retire these legacy platforms to free up funding for next-generation planes, drones, and weapons. “I have one request of the Congress: help us to focus on the one fight — the strategic competitive fight — we must win,” Kendall said during a speech at the Air Force Association’s Air, Space and Cyber conference.  

In recent years, the service has shied away from seeking to retire full fleets of aircraft, as was common practice during the Obama administration when the Air Force unsuccessfully tried to divest its U-2 spy planes, RQ-4 Global Hawk surveillance drones, and A-10 Warthog attack planes. At the time, leaders from the Pentagon indicated the Budget Control Act caps made it impossible to modernize the force with next-generation aircraft while at the same time hanging on to aging planes that are expensive to maintain. Over the past two years, the Air Force has put forward budget proposals that called for retiring portions of certain aircraft inventories — several squadrons of A-10s, the oldest model Global Hawks, and dozens of aging KC-10 and KC-135 tankers. The retirement of these aircraft will impact the viability and economies associated with Davis-Monthan Air Force Base.  

According to Secretary Kendall, these older fleets are “consuming precious resources we do need for modernization. While it’s understandable that lawmakers try to protect their districts’ economies, local political interests are coming at the expense of national security priorities.” 

Kendall further adds, “it was a frequent occurrence during my confirmation process to have a senator agree with me about the significance of the Chinese threat, and in the same breath to tell me that under no circumstances could the — take your pick — C-130s, A-10s, KC-10s, [or] MQ-9s in that senator’s state be retired, nor could any base in his or her state ever be closed or lose manpower that would cause impact to the local economy.” 

COVID-19 pandemic protections for defense contractors would be made permanent under the House’s version of NDAA. The safeguards, originally codified in Section 3610 of the , allowed the Pentagon to reimburse contractors for paid leave if employees aren’t working due to the COVID-19 pandemic. Congress has had to act several times to renew the reimbursement authority, currently set to lapse after Sept. 30. The permanent protections are based on the , authored by Representatives Rob Wittman (R-VA) and Anthony Brown (D-MD), which proposed expanded coverage for other emergencies, like hurricanes and floods. However, the bill passed out of committee with narrower, more pandemic-specific language. 

Industry groups are pressing for the broader emergency powers to be included in the final NDAA for 2022 and for a short-term extension in the meantime. Both the National Defense Industrial Association and Professional Services Council said extending and expanding the 3610-reimbursement authority is their top legislative priority. Major defense contractors and their workers, such as Boeing, Raytheon, and Lockheed Martin will benefit from these provisions. 

Congress will once again not complete their work as it relates to Fiscal Year 2022 appropriations, most likely relying on a continuing resolution (CR) to keep the government funded until December 3, 2021. As of time of print, the Republicans in the Senate are blocking the CR, as it also contains a controversial provision that would raise the debt limit. A resolution will be needed to avert a government shutdown on September 30 at midnight. 

Hearing Report

By Ramona Lessen, Total Spectrum Executive Director

Senate Banking, Housing and Urban Affairs Committee Hearing on CARES Act Oversight of the Treasury and Federal Reserve: Supporting an Equitable Pandemic Recovery

Tuesday, September 28; 10:00 a.m. 

To view a livestream of the hearing please . 

Opening Statements:

Senator Sherrod Brown (D-OH)

Chairman

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Senator Patrick J. Toomey (R-PA)

Ranking Member

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Witnesses:

The Honorable Janet L. Yellen

Secretary

Department of the Treasury

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The Honorable Jerome H. Powell

Chairman

Board of Governors of the Federal Reserve System

Senate Energy and Natural Resources Committee hearing

Full Committee Hearing to Review Administration Of Laws Within FERC’s Jurisdiction

September 28, 2021; 10:00 AM

To View a livestream of the hearing please .

Opening Statements:

Senator Joe Manchin (D-WV)

Chairman

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Senator John Barrasso (R-WY)

Ranking Member

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Witnesses:

The Honorable Richard Glick

Chairman

Federal Energy Regulatory Commission

The Honorable Mark C. Christie

Commissioner

Federal Energy Regulatory Commission

The Honorable Allison Clements

Commissioner

Federal Energy Regulatory Commission

The Honorable James Danly

Commissioner

Federal Energy Regulatory Commission

Japan, China lead foreign holders of U.S. federal debt

A majority of Americans 65 and older have been fully vaccinated

What you need to know about worker shortages

Why four budget issues are causing so many problems on Capitol Hill

What you need to know about free community college

The Consumer Price Index went up in August — especially for gasoline

Congressional Calendar

All times EDT

Monday, September 27

• 2 p.m. House Rules Committee  to consider the PUMP for Nursing Mothers Act, the Protect Older Job Applicants Act and the Family Violence Prevention and Services Improvement Act.
• 10 a.m. House Foreign Affairs Asia, the Pacific and Nonproliferation Subcommittee  on strengthening U.S. ties with Southeast Asia.

Tuesday, September 28

• 9:30 a.m. Senate Armed Services Committee  to examine the Afghanistan withdrawal. Defense Secretary Lloyd Austin, Chairman of the Joint Chiefs Mark Milley and U.S. Central Command Commander Kenneth McKenzie testify. Part of this hearing will be closed to the public. 
• 10 a.m. House Financial Services Diversity and Inclusion Subcommittee  on increasing economic opportunity for “justice-involved individuals.” 
• 10 a.m. House Judiciary Antitrust, Commercial and Administrative Law Subcommittee  on antitrust reforms.
• 10 a.m. House Economic Disparity and Fairness in Growth Select Committee on the effects of globalization on U.S. economic disparities. 
• 10 a.m. House Science Oversight Subcommittee virtual  on social media data. 
• 10 a.m. House Transportation and Infrastructure Highways and Transit Subcommittee  on ferries.
• 10 a.m. Senate Banking Committee  to examine CARES Act oversight of the Treasury and Federal Reserve. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell testify. 
• 10 a.m. Senate Energy and Natural Resources Committee  on the jurisdiction of the Federal Energy Regulatory Commission. FERC Chair Richard Glick testifies, among others.
• 10:15 a.m. House Education and Labor Civil Rights and Human Services Subcommittee virtual  on models for preventing Covid-19. 
• 2 p.m. House Foreign Affairs Africa, Global Health and Global Human Rights Subcommittee virtual  on conflict in Africa. 
• 2 p.m. House Modernization of Congress Select Committee hearing on supporting agencies. 
• 2:30 p.m. Senate Homeland Security Spending Oversight Subcommittee  to examine existing resources and innovations needed to replace legacy IT. 
• 2:30 p.m. Senate Judiciary Constitution Subcommittee  on toxic conservatorships.

Wednesday, September 29

• 9:30 a.m. House Homeland Security Committee virtual  on the state of the Transportation Security Administration 20 years after 9/11. TSA Administrator David Pekoske testifies, among others. 
• 10 a.m. House Judiciary Committee  of pending legislation, including H.R. 2891 (117), the Preserve Access to Affordable Generics and Biosimilars Act. 
• 10 a.m. House Financial Services Consumer Protection and Financial Institutions Subcommittee  on the future of banking.
• 10 a.m. House Agriculture Conservation and Forestry Subcommittee  on wildfire response and mitigation efforts. 
• 10 a.m. House Small Business Underserved, Agricultural and Rural Business Development Subcommittee  on sustainable forestry as it related to climate change. 
• 10 a.m. House Science Committee members day .
• 10 a.m. House Oversight Civil Rights and Civil Liberties Subcommittee  on violent white supremacy. 
• 10 a.m. Senate Commerce Committee  on protecting consumer privacy.
• 10 a.m. Senate Homeland Security Committee  on worsening natural disasters.
• 10 a.m. Senate Judiciary Committee  on Texas’ abortion law.
• 10:15 a.m. House Education and Labor Early Childhood, Elementary and Secondary Education Subcommittee virtual  on best practices for reopening schools. 
• 10:30 a.m. House Energy and Commerce Oversight Subcommittee  on revitalizing the chemical safety board. 
• 2 p.m. House Coronavirus Crisis Select Committee  on infrastructure updates in state and local public health departments.
• 2 p.m. Senate Foreign Relations Committee virtual  on pending nominations.

Thursday, September 30

• 9 a.m. Senate Judiciary Committee  to consider the nomination of Rachael Rollins to be U.S. Attorney for Massachusetts.
• 1 p.m. House Foreign Affairs  of pending legislation.
• 9:30 a.m. Senate Armed Services Committee  on Afghanistan.
• 10 a.m. House Financial Services Committee  on oversight of the Treasury Department and Federal Reserve’s pandemic response. 
• 10 a.m. House Oversight Committee  on abortion rights and access.
• 10 a.m. House Transportation and Infrastructure Committee  on the federal government’s Covid-19 response.
• 10 a.m. House Small Business Committee  on providing capital to employee-owned businesses.
• 10 a.m. Senate Banking Committee  on pending nominations to positions at the U.S. Export-Import Bank.
• 10 a.m. Senate Health, Education and Labor Committee  on school reopenings. Health and Human Services Secretary Xavier Becerra and Education Secretary Miguel Cardona testify. 
• 10 a.m. Senate Foreign Relations Committee  on pending nominations.
• 10:15 a.m. House Education and Labor Subcommittee on Higher Education and Workforce Investment  – Protecting Students and Taxpayers: Improving the Closed School Discharge Process.
• 10:30 a.m. Senate Commerce Subcommittee on Consumer Protection, Product Safety and Data Security  – Protecting Kids Online: Facebook, Instagram, and Mental Health Harms.
• 10:30 a.m. House Energy and Commerce  – A Level Playing Field: College Athletes’ Rights to Their Name, Image and Likeness.
• 2 p.m. House Homeland Security Subcommittee on Oversight, Management and Accountability  – 20 Years after 9/11: Transforming DHS to meet the Homeland Security Mission.

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Thanks for your interest in Washington, D.C., and thanks for reading This Week in Washington. 

There was a flurry of last-minute activity in the Senate over the last few days, and I summarized what happened this week – and what happens next – in this week’s Heard on the Hill.

My colleague  was a member of the House Ways and Means Committee and served as Chairman of the Joint Economic Committee. He has written a series of articles this year about the economy, and his latest is about President Biden’s proposed 15% global tax and how it could hurt American workers.

We’re going to kick back for a few days, and then start planning the next editions of This Week and Total Spectrum Spotlight. Trust, however, that we’ll provide you with immediate updates and analysis on anything you need to know between now and then.

Stay cool and stay safe.

, Managing Partner

Heard on the Hill

By Steve Gordon, Total Spectrum Strategic Partner

One of the best – and most accurate – lines of the 40-plus years I’ve been in Washington is that staff and consultants never want to stand in the way of Senators and Congressmen heading to Washington National Airport on the way home for August recess. 

Washington National Airport has since been renamed to Ronald Reagan Airport, but the rest of that line is still correct. 

The Senate’s August recess was tentatively scheduled to begin late last week. But Majority Leader Schumer told his Senate colleagues that they would stay in Washington until the Bipartisan Infrastructure Framework bill passed and the budget resolution for the next fiscal year was approved.  

Both these bills passed, and the Senate left for the airport early this morning. They joined members of the House of Representatives, who had already left town for their August recess.  

Infrastructure Bill

It is often said that spending money on infrastructure is like the old Irish saying: everybody wants to go to heaven, but nobody wants to die. Everybody wants new roads, new bridges, and more infrastructure like broadband, but nobody wants to pay for them – and the best example is the highway gas tax, which hasn’t been raised since the 1970’s and never was indexed to account for inflation. 

We must give a lot of credit to the Gang of 10, but especially their leaders, Senators Kyrsten Sinema (D-AZ) and Rob Portman (R-OH), for getting this legislation over the goal line. They put the gang together, comprised of five Democrats and five Republicans, and then got buy-in from 10 additional Senators. They also got buy-in from President Biden, who campaigned on rebuilding the bipartisan legislating process, and who from all indications negotiated with both Senators in good faith. 

Passing this bill was never a forgone conclusion. Committee Chairmen were not pleased to have been cut out of the process. Progressives were not pleased that Democrats were working with Republicans on the bill, and it’s certainly true that progressives are far more interested in the social infrastructure part of the President’s program. It’s also true that former President Trump opposed the bill, and he encouraged his supporters around the country to do the same. 

The final vote was 69 for the bill and 30 opposed. (Senator Rounds (R-SD) missed the vote spending time with his ailing wife, but he said that he would have voted against the bill). Minority Leader McConnell supported the bill, saying that Republicans can’t be against everything the President supports. 

The total cost of the bill is over $1 trillion, but much of the bill was paid for by making use of unspent funds already appropriated by COVID legislation. (They call that reappropriating). Other offsets to the spending came from the sales of future spectrum auctions, petroleum from the nation’s oil reserve, and a provision that will ensure that cybercurrency investors pay taxes on their profits. 

The Congressional Budget Office said that the legislation would add $256 billion to the federal budget deficit over the next 10 years. Senator Kevin Cramer (R-ND), a member of the Senate Budget Committee, said that the CBO didn’t give the bill enough credit for reappropriating unused funds. 

The main categories of the bill include:

• Highways – highway programs, bridge investment, tribal, territory, and federal lands,
• Climate Change and Alternative Vehicles – programs to make infrastructure more resilient to storms and natural disasters, carbon reduction, electric charging stations and alternative fuel infrastructure,
• Regulatory – codifying the Trump Administration’s policy to force federal agencies to coordinate their review and authorization decisions,
• User Fees – sets aside funds to study a national motor vehicle per mile user fee to supplement the Highway Trust Fund,
• Emergency Appropriations for highway programs from the general fund instead of the Highway Trust Fund,
• Amtrak and Other Rail Grants,
• Aviation emergency appropriations,
• Drinking water and water infrastructure,
• Energy Grid Security, and
• Broadband,
• as well as many other sections. 

President Biden proposed spending over $2.3 trillion for customarily defined infrastructure and broadband. The bipartisan legislation spent about $550 billion in new money not previously appropriated. 

The bill now goes to the House of Representatives, where the Speaker has a very narrow majority. It’s presumed that many Republicans will follow former President Trump’s lead and vote against the bill when it comes up in the House, so the Speaker will have to couple the bipartisan infrastructure bill with something her Progressive members want to bring her Democratic caucus into line. 

Senate Budget Resolution on Social Infrastructure

The Senate Budget Committee passed President Biden’s infrastructure bill on a party-line vote. The Budget Committee approved a bill that would spend $3.5 trillion, and early Wednesday morning, the full Senate passed the budget resolution on a party line vote of 50-49. Now the resolution goes over to the House, where the Speaker is bringing Members of Congress back to Washington the week of August 23^rd to consider it. After the resolution is passed by both the Senate and the House, it will go to committees to build a legislative agenda that can be passed in the Senate using the reconciliation process, which allows some types of legislation to be passed with a simple majority. 

In a  dated August 9, Majority Leader Schumer describes the content of the budget resolution, which President Biden proposes to pay for by raising corporate tax rates, individual tax rates for some people, and estate taxes. 

My colleague  has written a series of articles on how raising taxes will impact individuals, businesses, and our economy.

At the end of the day – which probably will be near Christmas – the actual size of this social infrastructure bill will be decided by Senator Sinema and Senator Joe Manchin (D-WVA). 

In a  shortly after this morning’s vote on the resolution, Senator Manchin offered this reflection:

Over the past year, Congress has injected more than $5 trillion of stimulus into the American economy – more than any time since World War II – to respond to the pandemic. The challenge we now face is different: millions of jobs remain unfilled across the country and rising inflation rates are now an unavoidable tax on the wages and income of every American. These are not indications of an economy that requires trillions in additional spending. Every elected leader is chosen to make difficult decisions. Adding trillions of dollars more to nearly $29 trillion of national debt, without any consideration on the negative effects on our children and grandchildren, is one of those decisions that has become far too easy in Washington. 

The Biden 15 percent global tax puts foreign companies ahead of American workers

By Congressman Erik Paulsen, Total Spectrum Strategic Consultant

President Biden recently spearheaded an agreement among the G-7 nations to implement a global minimum corporate tax rate of 15 percent. The agreement has received the support of 130 other countries including China, Russia, and India. Notably withholding their support are several major tax havens, including Ireland, Hungary and others. 

The agreement, if fully implemented, would reduce competition among the world’s major economies and secure a tax funding base for financially strapped nations, particularly those in Europe, with bloated social spending budgets. President Biden says the agreement shows that “America’s back.” However, the agreement would surrender America’s tax sovereignty to a coalition of nations who believe in high taxes and huge government spending. The tax is an essential part of President Biden’s plan to greatly expand the role of the federal government in America’s economy at a level not seen since World War II.  

The Tax Cuts and Jobs Act that was passed in 2017 created economic growth in America that eclipsed the economies of most of the G-7 countries. This tax reform eliminated the minimum corporate tax and reduced the top corporate tax rate to 21 percent, incentivizing U.S. companies to invest here at home instead of overseas. The United States hung out an “Open for Business” sign which attracted billions of dollars of investment and generated explosive job growth not seen in decades. 

President Biden and many Democrats in Congress are working vigorously to reverse this growth. Their support for a global minimum tax is one of at least 30 proposed tax increases on American families and businesses that will total around $2.975 trillion over the next 10 years. These tax increases include raising the top corporate tax rate to 28 percent, which, when state taxes are included, balloons to an average rate of 32 percent. This is significantly higher than the average corporate tax rate of most nations in Europe (23 percent) as well as China (25 percent). 

The global minimum tax is also subject to significant manipulation by nations seeking to gain an edge through offsets and work arounds. China’s state-controlled media already is calling for massive exemptions. Russia and India are likely to follow suit. Most significantly, many tax haven countries like Ireland who have seen their economies grow rapidly due to their low tax regimes .  

Treasury Secretary Yellen calls the current tax policies of China, Russia, India, Ireland, and other nations a “race to the bottom” to attract business at the expense of their budgets. Another term for this is competition, so it is easy to predict that that even if the global corporate tax agreement is ratified, many of these nations will find a way to undermine it to better compete.   

President Biden’s tax policies amount to a surrender in this race for business. He is not only pressing for the global minimum tax, but he is basing its implementation in the United States on book income rather than taxable income, further disadvantaging American companies over foreign workers and companies.  

Should the Biden global minimum corporate tax go into effect, those losing most will be American consumers and workers. By eliminating competition, this tax, on top of his other tax increases, will make America even less competitive and drive jobs, manufacturing, innovation and investment overseas. It will encourage the flight of business to those nations, like Ireland, who do not sign on or to countries like China, who will effectively ignore the tax while making a show of agreeing to it. 

The American economy is just beginning to emerge from the damage wreaked by the pandemic. We are also engaged in fierce competition with China, which is seeking to become the world leader in technology and other critical industries. Instead of restricting competition with a 15 percent global minimum tax that is nothing more than a gift to China, the United States should be pursuing low tax policies that welcome investment and will secure our nation’s position as the leading economy in the world.  

 represented Minnesota’s 3rd District from 2009 to 2019. He was a leading member of the chief tax writing Ways and Means Committee. He was also the Chairman of the Joint Economic Committee, which focuses on innovation, entrepreneurship, digital trade, and economic issues.

This  originally appeared in The Hill on July 26, 2021. The views expressed in this article are the writer’s own.

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Congressional Calendar

All times EDT

Tuesday, August 10

• 10 a.m. Senate Foreign Relations Near East, South Asia, Central Asia and Counterterrorism Subcommittee  to examine U.S. security assistance in the Middle East.

Wednesday, August 11

• 10 a.m. Senate Judiciary Committee  to examine pending nominations.

Thursday, August 12

• 9 a.m. Senate Judiciary Committee  to consider S. 1787 (117), which would prevent antitrust cases filed by states from being transferred to other states, and S. 2502 (117), which would grant first-time, low-level, nonviolent simple drug possession offenders an opportunity to expunge their conviction by completing a court-imposed probation.

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Latest news from Washington, D.C. produced by Total Spectrum/SGA exclusively for members of the Arizona �鶹��ýӳ�� of Commerce & Industry

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Heard on the Hill covers the continuing and changing-by-the-minute story of the President’s traditional and social Infrastructure agenda. We also wade into the President’s 20-page executive order on competition.  writes about six tax incentives that will play a major role in the President’s agenda.  brings us up to speed on the appropriations process for the 2022 fiscal year.  reviews a recent House Small Business Agriculture and Rural Development Subcommittee hearing on economic recovery in rural America.

We will return on in two weeks on July 28^thfor the next issue of This Week. Stay well.

, Managing Partner

Heard on the Hill

By Steve Gordon, Total Spectrum Managing Director

The most important thing that happened in Washington over the July 4^th recess was that nothing important happened. 

Tourists took over the town.  Most of us in Washington who spend our time on policy, politics, or both shut down our minds for a while and kicked back. Local restaurants were not busy because most Washingtonians left town, but the important thing was that restaurants, bars, and museums were open. 

The 15-month pandemic was a confining and confusing time for most of us, and a terrible time for those who became a COVID statistic.  Maybe we will not snap back immediately to the normal life we had before the pandemic. Maybe we find a new normal, maybe we are already there. Whatever it was and whatever you call it, kicking back a little felt pretty darn good.

President Biden’s leadership and legacy are on the line this summer.

As a candidate in the 2020 election, Joe Biden was projected as an experienced legislator who was used to working with his Republican and Democratic Senate colleagues. He stressed his knowledge of foreign affairs as the former chairman of the Senate Foreign Relations Committee, and he committed to getting COVID vaccines into Americans’ arms.

But in today’s base politics, those things are a good start – but only a start. The enthusiasm of the liberal and progressive base provided the energy for the campaign.

Now, President Biden is trying to project steadiness and calm while proposing a very expansive legislative agenda that plays to the base of his party. A midwestern Democrat told me recently that “Senator Biden watched both President Carter and President George H. W. Bush lose their base and then their reelection. There is no education in the second kick of the mule… and even less the third time.”

Working on traditional infrastructure through a bipartisan approach plays to the calm, steady, and predictable President. Working on social infrastructure plays to his base. Senate Majority Leader Schumer sent a Dear Colleague  to his Democratic Caucus on July 9^th in which he spoke about a two-track approach in July – a bipartisan traditional infrastructure bill and a resolution out of the Senate Budget Committee – setting the table for a social infrastructure bill which Democrats could try to pass this fall through the reconciliation process.

Some people on Capitol Hill will tell you that a traditional infrastructure bill costing somewhere between $600 billion and $1 trillion can be written by the bipartisan group of senators, and can get the votes of every Democrat and ten Republican senators.  Just as many people on Capitol Hill will tell you why it will not happen. For example, some Senate Republicans – including a few of the moderates who negotiated the bill – are concerned about the fuzzy revenue numbers proposed to fund the bipartisan bill, others are concerned about raising taxes to help pay for the bill. Still others are torn between passing a traditional infrastructure bill that we certainly need that is part of the President’s agenda. Senate Minority Leader McConnell has not commented publicly on the bipartisan proposal.

Senator Bernie Sanders, Chairman of the Senate Budget Committee, proposed a budget resolution of $6 trillion for social infrastructure. Senator Mark Warner (D-VA), a moderate member of the Senate Budget Committee, felt that $3 trillion would be more like it. Senator Joe Manchin (D-WV) said Tuesday that the social infrastructure bill – whatever the number – must be paid for and should not be put on the country’s credit card.

Tuesday night, the Senate Budget Committee passed a resolution that included $600 billion for traditional infrastructure and $3.5 trillion in new spending for social infrastructure. Budget Committee Democrats propose to pay for their program in large part by raising taxes on corporations and individuals.

The budget resolution passed Tuesday night by the Budget Committee has not yet been written, but early details came out Wednesday. Included is a significant climate provision and funding to provide universal prekindergarten, childcare, and community college. The proposal also increased funding for historically black colleges and universities, paid family and medical leave, and new Medicare provisions. The revenue to pay for this agenda would come from three ‘buckets’: increasing corporate and international taxes, health savings by lowering prescription drug costs and by repealing the Trump Administration’s rebate rule, and from new taxes to be generated by anticipated long-term economic growth. 

Again, the budget resolution has not been formally written yet, and it will take some time for it to go from bullet points to legislative language. Democrats can and ultimately will pass the resolution out of the Budget Committee on a party line vote, but the real work will be writing a budget resolution for social infrastructure that can be agreed to by each of the 50 Senate Democrats and House Democrats. 

Senate Democrats are a long way from agreement and in an evenly divided Senate, every Democratic senator is a king or a queen – and every senator has leverage.

The calendar also counts. The legislative packages need to be written and vetted. A budget resolution will require about a week of Senate floor time, and any infrastructure bill will require two weeks of floor time. The target start date for the summer recess is August 9^th, though Majority Leader Schumer is threatening to keep the Senate working beyond that date.

Majority Leader Schumer surprised many people this week by scheduling for next week the first procedural votes – technically a motion to proceed – on the bipartisan traditional infrastructure proposal. It is surprising because he knows full well that the bipartisan group of senators led by Senators Rob Portman (R-OH) and Kyrsten Sinema (D-AZ) have not finished agreeing to their proposal and then writing the bill.

The President’s legislative agenda and legacy hangs on how these two infrastructure bills do in Congress. I cannot see any Democratic senator being willing to be a final no vote on the social infrastructure bill that will be brought up through reconciliation, so I have four questions in my mind:

1. Will the bipartisan group of Senators find a way to pay for their traditional infrastructure bill? The good news is that they are still talking, but they must agree on how they will pay for the program, and that is always a rocky road.
2. If the bipartisan group of senators can find a way to pay for their traditional bill, will their proposal get the support of all 50 Democrats and 10 Republicans in the Senate? (Odds are less than 50-50.)
3. If the bipartisan infrastructure bill fails in the Senate, Democrats will include traditional infrastructure in their final budget resolution, thereby recoupling the President’s original proposal. The amount to be spent in that resolution will be decided through the push and pull of party moderates and party progressives and liberals. (The end number will almost assuredly more than $2 trillion, and will go up to the point where moderate Democrats will not spend any more.)
4. Congress has about four weeks and change until the scheduled start of the August recess. The Budget Act will take up a lot of time on the Senate floor, and there will be amendments aplenty. Look for a vote on the budget right before the start of the August recess, committee activity in the fall, and a final reconciliation bill sometime this fall.

The Debt Ceiling

The COVID relief legislation of the last two years has put additional pressure on raising the debt ceiling, which will need to be raised around August 1^st. But the Treasury Secretary traditionally finds loose change between the sofa cushions that will delay a vote to sometime in September. Most if not all Republicans will not vote to raise the debt ceiling, so it will be up to Majority Leader Schumer and Senate Democrats. 

The President’s Executive Order on Promoting Competition in the American Economy

On July 9^th, the White House issued a 20-page  designed to foster competition in labor, healthcare, transportation, agriculture, internet, technology, and banking/finance. It is a lengthy document, and an important one. But what is not clear is why the package was released on Friday – a traditionally bad day to release press releases if you want maximum exposure. 

The White House’s fact sheet on the executive order is available .  We will review the details of the executive order and provide more information in an upcoming Heard on the Hill.

Appropriations Update

By Steve Ruhlen, Total Spectrum Partner

Congress is marching through its annual appropriations process, putting together the dozen bills that provide for federal spending for fiscal year 2022, which starts October 1.  The House Appropriations Committee this week considered several of these bills, hoping to meet the goal of House Democratic leadership to pass all twelve government funding bills before the August recess.

Two factors complicate the outlook for the appropriations process:  the $600 billion infrastructure bill being considered in the Senate, and Democrats’ efforts to approve trillions in additional spending via a partisan legislative strategy.  

Given the jockeying over the infrastructure deal and the possibility of trillions in additional spending outside of the appropriations process, the House postponed consideration of its annual budget resolution – which spells out specific categorical spending limits – and instead passed in June a general topline spending limit of $1.5 trillion for FY2022.  This was a $200 billion increase from the FY2021 topline. 

The Senate appropriations timeline is more delayed.  With a 50-50 Democrat-Republican split in the Senate, it will be hard to get approval for many of the funding levels and policy initiatives that are expected to be included in the appropriations bills that pass in the Democrat-controlled House.  For example, House Democrats are expected to remove several bans on federal funding for abortions, increase the Education Department spending by over 40%, increase Labor Department spending by nearly 20%, and keep defense spending essentially flat.  

Keep in mind, however, that while the Democrats control the House, they only have a five-vote margin over the Republicans, so passage of any highly controversial spending bills is not assured.  

The outcome of the still ongoing infrastructure negotiations in the Senate and the potential of Democrats to push through several trillions in additional spending through the reconciliation process are muddying the appropriations outlook.

While House appropriators are looking to boost transportation spending by $17 billion over the Biden Administration’s budget recommendation, it is still not clear how much of the total transportation appropriations would be covered in the infrastructure package – a deal for which details are currently being hashed out in the legislative process.  And although 11 Republican senators previously signaled support for the framework of the infrastructure agreement, some have said they won’t be on board if the President and congressional Democrats try to ram though trillions in additional spending on a separate reconciliation bill through a party line vote. 

Reconciliation is a legislative procedure that could allow congressional Democrats to pass massive increases in social spending on their own. Reconciliation cannot be filibustered in the Senate, meaning it – as opposed to other bills that come before the Senate – would only need a majority of 51 votes to pass, with Vice President Harris casting the tie-breaking 51^st vote.

The first step in the reconciliation process requires both the House and Senate to pass a budget plan for FY2022.  This week, the Senate Budget Committee introduced a $3.5 trillion spending plan that Democratic leadership believes will fund their social spending priorities.  It is not the $6 trillion plan that many Democrat progressives, including Senate Budget Committee Chairman Bernie Sanders, wanted.  It is expected that the President’s calls for two years of free community college, increasing the child tax care credit, subsidies for childcare, and paid leave will be in the budget proposal.  The House is expected to follow suit, with both bodies looking to pass a final budget resolution before the August recess.

Senate Majority Leader Schumer still needs to ensure the support of all his Democratic senators.  With an evenly divided Senate, passage of the $3.5 trillion reconciliation package is not a done deal.  Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have expressed concerns about using the reconciliation process to pass any massive controversial spending plan on a party line vote, and Sen. Manchin said that the budget proposal will need to be paid for and not rely on deficit spending. 

Senate Majority Leader Schumer announced this week that he wants to move forward with the infrastructure bill and hold a necessary procedural vote next Wednesday.  Republicans question how Leader Schumer can expect to advance a bill when there is no legislative language and no firm agreement on the specifics of the bill.  Seeing that it would require 60 votes to clear the procedural hurdle – needing at least ten Republicans to join in support – many Republicans see Schumer’s maneuver as a deliberate attempt to sink the bill, blame Republicans for its demise, and then wrap it into a reconstituted reconciliation bill which they hope to pass on a party line vote. 

Democrats enjoy control of the White House, the House, and the Senate, but they must reconcile the strong push for additional spending from their considerable progressive base with extremely slim majorities on both sides of Congress.  The implications of this year’s appropriations process, the infrastructure negotiations, and the potential of huge social spending through the reconciliation process will almost certainly reverberate into next year’s midterm elections.

President Biden’s Proposed Clean Energy and Community Development Tax Incentives Will Play a Major Role in his Infrastructure Plan

By Congressman Erik Paulsen, Total Spectrum Strategic Consultant

President Biden’s $2.3 trillion American Jobs Plan released in March includes a number of community development and clean energy tax incentives which build upon existing incentives that have traditionally enjoyed bipartisan support. Examples of these include an expansion of the low-income housing tax credit, creation of a neighborhood homes investment tax, permanence for the new markets tax credit, authorization of new tax-exempt bonds for schools and infrastructure, extensions and enhancements of the renewable energy production and investment tax credits, and extensions and modifications of the energy efficiency tax incentives.

President Biden also proposes in the American Jobs plan to repeal all tax credits, deductions and other special provisions that aim to encourage oil, gas, and coal production. Eliminating tax incentives to produce fossil fuels is a fundamental goal of Congressional progressives.

Almost all Republicans in Congress believe in an “all the above” approach to energy production and support incentives to produce both renewable energy and energy from fossil fuels. Any bill put up by Senate Democrats that includes the President’s infrastructure and clean energy tax incentives but eliminates fossil fuel tax incentives will be filibustered by Republicans. 

That is exactly why Senate Democrats will try to unite their caucus and pass this legislation – including the Biden tax rate increases – through the budget reconciliation process, which allows certain bills to be passed with a simple majority and cannot be filibustered.

Below, my summary of the tax credits that will receive the greatest attention:

Expansion of the Low-Income Housing Tax Credit

The Biden Administration proposes to significantly expand this credit to incentivize affordable rental housing development in high opportunity areas. This proposal would create an additional allocation of low-income housing tax credits for these areas, which would be based on a formula that would take into consideration the cost of constructing and operating affordable housing. 

The New Neighborhood Homes Investment Tax Credit

There are currently no federal tax provisions that directly support building or renovating owner-occupied housing. The Biden Administration’s proposal would create the Neighborhood Homes Investment Tax Credit, which would provide approximately $2 billion in credit authority to support new construction and substantial rehabilitation for existing homeowners. It would be allocated to states with an emphasis on populations living in distressed urban, suburban, or rural neighborhoods.

The New Markets Tax Credit

This tax credit is for qualified equity investments made to acquire stock in a corporation, or a capital interest in a partnership, that is a qualified community development entity. The credit totals 39% of the original investment and can be claimed over seven years. The Biden proposal would permanently extend the New Markets Tax Credit and allow community development entities to continue generating investments in low-income communities, but now with greater certainty.  

Schools and Infrastructure

It is generally agreed we need to renovate some older educational facilities and to encourage the construction of new structures. This proposal would create tax-exempt School Infrastructure Bonds, which would be similar to the Build America Bonds that were authorized under the Obama Administration. The proposal would authorize up to $50 billion in these bonds, with $16.7 billion authorized in each of 2022, 2023, and 2024.

The proposal would also expand the category of private activity bonds by allocating an additional $15 billion for use by the Secretary of Transportation. The proposal would allow private activity bonds to be issued for public transit, passenger rail, and infrastructure for zero emissions vehicles. 

Extend and Enhance the Production Tax Credit and the Investment Tax Credit

The Renewable Energy Production Tax Credit would be extended in its entirety for projects that begin construction after December 31, 2021, and before January 1, 2027. Beginning in 2027, the credit rate would begin to phase down to zero over five years.

The Renewable Energy Investment Tax Credit, much like the Production Tax Credit, would be extended for 1) solar and geothermal electric energy property; 2) qualified fuel cell power plants; 3) geothermal heat pumps; 4) small wind properties; 5) offshore wind properties; 6) waste energy recovery properties; and 7) combined heat and power properties. Starting in 2022, the Renewable Energy Tax Credits would be expanded to include stand-alone technology that stores energy for conversion to electricity and has the capacity of not less than five kilowatt hours.

Taxpayers would have the option to receive a cash payment instead of a credit from either the Production Tax Credit or the Renewable Energy Investment Tax Credit. The Department of the Treasury has not specified the amount of the cash payment or how that option might work. This promises to be an area where intense input from policy makers will be needed.

New Electricity Transmission Tax Credit

The proposal would provide a credit equal to 30% of a taxpayer’s investment in qualifying power transmission property placed in service in any given year. Qualifying electric power transmission property would include overhead, submarine, and underground transmission facilities meeting certain criteria, including a minimum voltage of 275 kilovolts and a minimum transmission capacity of 500 megawatts. Qualifying property would also include any ancillary facilities and equipment necessary for the proper operation of the transmission facility. This new credit also has a direct pay option. The New Electricity Transmission Tax Credit would be effective for property placed in service after December 31, 2021, and before January 1, 2032.

The current discussions on potential infrastructure legislation have focused thus far on the definition of infrastructure, its cost, and how it would be financed. But the tax issues related to community development, clean energy, and fossil fuels will soon take center stage. Both the Senate Finance Committee and the House Ways and Means Committee have started assembling the proposed legislation.

I would be pleased to visit with anyone who has questions; I can be reached via email by clicking on my name above.

Hearing Report

By Ramona Lessen, Total Spectrum Executive Director

House Small Business Agricultural and Rural Development Subcommittee hearing on the economic recovery efforts in rural America

Tuesday, July 13, 2021; 1:00 p.m.

To view a livestream of the hearing please .

Congressman Jared Golden (D-ME-2^nd)

Congressman Roger Williams (R-TX-25^th)

Witnesses:

Mr. Nathan Ohle
Chief Executive Officer
Rural Community Assistance Partnership
Washington, DC

Ms. Jessica Campos
Women’s Business Center Director
Center for Rural Affairs
Lyons, NE

Mr. Brett Challenger
Senior Vice President of the Regional Agribusiness Banking Group
CoBank
Greenwood Village, CO

Mr. Alan M. Crawford
Owner and President
Rangaire Manufacturing Company
Cleburne, TX

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Congressional Calendar

All times EDT

Monday, July 12, 2021

• 10 a.m. House Judiciary Courts-IP-Internet Subcommittee virtual  on diversifying the federal judiciary.
• 11 a.m. House Appropriations Labor-HHS-Education Subcommittee  of the Labor-HHS-Education spending legislation for fiscal 2022.
• Noon. House Agriculture Oversight Subcommittee virtual  on SNAP benefits.
• 1 p.m. House Administration Committee virtual  on the Elections Clause of the Constitution. 
• 1 p.m. House Appropriations Energy-Water Development Subcommittee  of the Energy-Water Development budget proposal for fiscal 2022.
• 3 p.m. House Appropriations Commerce-Justice-Science Subcommittee  of the Commerce-Justice-Science budget bill for fiscal 2022.
• 5 p.m. House Appropriations Transportation-Housing-Urban Development Subcommittee  of the Transportation-Housing-Urban Development budget proposal for fiscal 2022.
• 6 p.m. Senate Foreign Relations Committee closed  – S. J. Res. 10: Repeal of the 1991 and 2002 Authorizations for Use of Military Force as well as Discussion of Recent US Military Strikes in Iraq and Syria.

Tuesday, July 13, 2021

• 9:30 a.m. Senate Armed Services Committee  to examine five pending nominations for the Department of Defense.
• 10 a.m. House Judiciary Subcommittee on Crime, Terrorism, and Homeland Security  – Facial Recognition Technology: Examining Its Use by Law Enforcement.
• 10 a.m. House Veterans Affairs Disability Assistance and Memorial Affairs Subcommittee virtual  to discuss efforts to modernize the VA appeals program.
• 10 a.m. Senate Banking Committee  on the nominations of Arun Venkataraman to be assistant secretary of Commerce and director general of the Foreign Commercial Service and Damon Smith to be HUD general counsel.
• 10 a.m. Senate Foreign Relations Committee  to examine four pending nominations for the Department of State.
• 10 a.m. Senate HELP Committee  to examine three pending nominations for the Department of Education.
• 10 a.m. House Appropriations Committee  of the proposed Defense and Homeland Security spending bills for fiscal 2022.
• 11 a.m. House Energy and Commerce Committee virtual  for a member day.
• 11:30 a.m. Senate Small Business and Entrepreneurship  to consider the nomination of Dilawar Syed to be deputy administrator of the Small Business Administration.
• 1 p.m. House Natural Resources National Parks, Forests and Public Lands Subcommittee virtual  to examine five bills, including H.R. 3132 (117), which would reauthorize the Lake Tahoe Restoration Act.
• 1 p.m. House Small Business Agricultural and Rural Development Subcommittee virtual  on economic recovery efforts in rural America.
• 2 p.m. House Judiciary Subcommittee on Immigration and Citizenship – Oh Canada! How Outdated US Immigration Policies Push Top Talen to Other Countries.
• 2 p.m. House Veterans Affairs Oversight Subcommittee virtual  on modernizing the VA police force and boosting accountability.
• 2 p.m. Senate Appropriations Committee  to examine Biden’s proposed fiscal 2022 budget for the USPS Office of Inspector General and USPS service issues. 138 Dirksen.
• 2:30 p.m. Senate Judiciary Antitrust and Competition Subcommittee  on anti-competitive behavior among prescription drug companies. 226 Dirksen.
• 3 p.m. House Armed Services Airland Subcommittee virtual  to discuss provisions in the fiscal 2022 defense spending proposal for the Fixed-Wing Tactical and Training Aircraft Program.

Wednesday, July 14

• 9:15 a.m. Senate Homeland Security Committee  to consider 15 bills, including S. 1917 (117), which would establish a K-12 education cybersecurity initiative.
• 9:45 a.m. Senate Environment and Public Works Committee to consider the nominations of Jane Nishida to serve as assistant administrator for international and tribal affairs of the Environmental Protection Agency, Jeffrey Prieto to be general counsel of the EPA and Alejandra Castillo to be assistant secretary for economic development of the Department of Commerce. The meeting will immediately be followed by a hearing to examine the nomination of Michael Connor to be an assistant secretary of the army for civil works at the Defense Department.
• 10 a.m. Senate Energy and Natural Resources Committee  to consider energy infrastructure legislation by Chair Sen. Joe Manchin (D-W.Va.).
• 10 a.m. Senate Appropriations Labor-HHS-Education Subcommittee  to examine Biden’s proposed fiscal 2022 budget for the Department of Labor. Sec. of Labor Marty Walsh testifies.
• 10 a.m. Senate Judiciary Committee  to examine pending nominations.
• 10:30 a.m. Senate Foreign Relations Committee  to examine Biden’s fiscal 2022 budget request for USAID. USAID Administrator Samantha Power testifies.
• 11 a.m. House Transportation and Infrastructure Water Subcommittee on Biden’s fiscal 2022 budget request.
• 11:30 a.m. House Energy and Commerce Subcommittees on Energy and the Environment and Climate Change  – “Keeping US Safe and Secure: Oversight of the Nuclear Regulatory Commission.”
• Noon. House Financial Services Committee virtual  on monetary policy and the state of the economy. Federal Reserve Chair Jerome Powell testifies.
• Noon. House Agriculture Committee  to consider HR 4374, the Broadband Internet Connections for Rural American Act.
• 2 p.m. House Foreign Affairs Committee virtual  on the Biden administration’s foreign assistance priorities and the fiscal 2022 USAID budget request.
• 2 p.m. House Veterans Affairs Health Subcommittee virtual  on nine bills, including H.R. 913, the Build a Better VA Act.
• 2:30 p.m. Joint Economic Committee virtual  to examine corporate power in the U.S.
• 2:30 p.m. Senate Judiciary Constitution Subcommittee  on restoring the Voting Rights Act after the Supreme Court’s Brnovich and Shelby County decisions.
• 2:30 p.m. Senate Indian Affairs Committee  to consider the nomination of Bryan Todd Newland to be assistant secretary of Indian affairs for the Interior Department. The meeting will be immediately followed by a legislative hearing to consider three bills, including H.R. 1688 (117), which would amend the Indian Child Protection and Family Violence Prevention Act.
• 3:30 p.m. Senate Veterans’ Affairs Committee  on modernizing the VA’s electronic health records.
• 4 p.m. House Armed Services Subcommittee on Readiness  – FY22 Budget Request for Military Construction, Energy, and Environmental Programs. 

Thursday, July 15

• 9 a.m. Senate Judiciary Committee  to consider the nominations of Eunice Lee to be United States Circuit Judge for the 2nd Circuit, Veronica Rossman to be United States Circuit Judge for the 10th Circuit, and David Estudillo, Lauren King and Tana Lin to each be a United States District Judge for the Western District of Washington.
• 9:30 a.m. Senate Aging Committee  on savings opportunities for elderly Americans.
• 9:30 a.m. Senate Agriculture Committee  on the nomination of Jennifer Lester Moffitt to be undersecretary of Agriculture for marketing and regulatory programs.
• 9:30 a.m. Senate Banking Committee  on the semiannual monetary policy report to Congress.
• 10 a.m. Senate Commerce Committee  on supply chain resiliency.
• 10 a.m. Senate HELP Committee  to examine the nominations of David Weil to be administrator of the Wage and Hour Division at the Department of Labor and Gwynne Wilcox and David Prouty to both join the National Labor Relations Board.
• 10:15 a.m. Senate Homeland Security Committee hybrid  to examine the nominations of Robert L. Santos to be director of the census and Ed Gonzalez to be an assistant secretary of Homeland Security.
• Noon. House Homeland Security Committee virtual  on reform efforts within DHS.
• House Financial Services Subcommittee on Oversight and Investment – CDBG Disaster Recovery: States, Cities and Denials of Funding.
• 1 p.m. House Natural Resources Subcommittee on Oversight and Investigations  – Oversight: Are Toxic Chemicals From Tires and Playground Surfaces Killing Endangered Salmon?
• 2:30 p.m. House Climate Crisis Select Committee virtual  on environmental justice.

Friday, July 16

• 9 a.m. House Appropriations Committee  of the Energy-Water Development and Transportation-Housing-Urban Development budget proposals for fiscal 2022.
• 10 a.m. House Homeland Security Subcommittee on Emergency Preparedness, Response, and Recovery  – DHS Management.
• 12 noon. House Financial Services Committee Task Force on Artificial Intelligence : Verifying Identity While Preserving Privacy in the Digital Age.
• 1 p.m. House Judiciary Constitution, Civil Rights and Civil Liberties Subcommittee virtual  on the Supreme Court’s Brnovich v. DNC decision and potential legislative responses.

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