Welcome back. Below is an outline of what to expect in the upcoming congressional work period and the major legislative priorities that await the start of the Second Session of the 118th Congress.
Fiscal Year 2024 Appropriations
- Majority Leader Chuck Schumer and Speaker Mike Johnson announced a topline spending agreement today ahead of the looming January 19 and February 2 government funding deadlines, the details of which largely mirror the contours of the Fiscal Responsibility Act (FRA) plus some new accounting maneuvers, including additional rescissions of unspent COVID relief funds. Even with this topline agreement in hand, appropriators will still need time to turn the agreement into full year appropriation measures in order to avoid a government shutdown.
- When Congress returns on January 8, it will have nine legislative days to address the expiring Agriculture, Energy & Water, Military Construction/Veterans Affairs (Milcon/VA), and Transportation Housing and Urban Development (THUD) spending bills. On February 2, the remaining eight appropriations bills expire, plus several programs including flood insurance (NFIP) and welfare benefits (TANF). As of today, there is hope that the first four bills can be written and passed by the January 19 deadline-but time remains tight. Drafting and then processing agreements always tends to run longer than anticipated.
- The House Freedom Caucus (HFC) issued a statement on Sunday afternoon decrying the topline agreement, characterizing it as a “total failure” that relies upon “disingenuous gimmicks.” Further complicating matters, certain influential conservative House Republicans have begun to insist that strict border security provisions be inserted into any government funding vehicles that could become law (more on that below). This same group of conservatives has also recently warmed to a full-year continuing resolution (CR) in order to trigger the automatic discretionary spending cuts that were prescribed in the FRA as a penalty for Congress failing to enact full year appropriation measures by January 1. The one percent cut, or sequester, would take effect on May 1, 2024, and would apply to the entire fiscal year.
- On the flip side, Democrats and national defense-oriented Republicans oppose a full-year CR, worried about the impact of automatic budget cuts on domestic programs and national security. To ease the pain of a year-long CR on federal agencies, Congress could seek to include a litany of “anomalies,” but Democrats and Republicans would likely disagree on which funding programs should receive special treatment in a CR. Negotiation over the long list of anomalies necessary for a full year CR would itself take at least several weeks.
Immigration and Border Security
- House Republicans and a few Senate conservatives, buoyed by Speaker Johnson’s recent trip to the Southern Border with over 60 House Republicans, are demanding that border security policy changes be attached to government funding legislation. This ups the ante from their previous demand of linking border policy changes to President Biden’s supplemental spending request for Ukraine (which also includes aid requests for Israel and Taiwan).
- The House Republican position on immigration is H.R. 2, a strict enforcement bill that passed late last spring with Republican-only votes. As such, the Speaker and the House Republican Conference will judge any agreement reached by the bipartisan Senators relative to the House bill. However, an attempt to pass a Republican-only CR paired with deep spending cuts and all of H.R. 2 (negotiated by Reps. Chip Roy, Scott Perry, Byron Donalds, Stephanie Bice, Dusty Johnson, and Kelly Armstrong) was defeated last September with 21 House Republicans voting no. This recent history-and House Republicans’ historically small majority-calls into question just how much leverage Speaker Johnson and House Republicans truly have. Moderate House Republicans for their part remain loathe to plunge into a government shutdown, particularly without a House-passed position to show for themselves, though border security remains one of the few uniting issues across the ideological spectrum.
- Meanwhile, the bipartisan “gang” of Senators negotiating a deal on immigration and border security hopes to announce an agreement to present to the respective Senate caucuses as soon as this week-although this timeline could continue to slip. If a deal on border security were to move, it would likely be tied to the Ukraine/Israel/Taiwan/domestic supplemental and separate from an FY24 spending bill. While a deal like this could potentially reach 60 votes in the Senate, it would undoubtedly face criticism from progressives on the Left, conservatives on the Right, and former President Donald Trump. That reality coupled with the Speaker’s insistence on H.R. 2 makes the viability and durability of a Senate immigration and border security deal questionable. With that as a backdrop, pro-deal Senators are taking it one step at a time.
- Adding to the drama, and fresh off his visit to the border, Speaker Johnson has now publicly raised the specter of a direct one-on-one negotiation between himself and President Joe Biden on border security. Even some Senate Democrats have voiced support for such an approach given the above difficulties already noted.
Tax Extenders
- Senate Finance Committee Chairman Ron Wyden and Ways & Means Committee Chairman Jason Smith continue to discuss a possible deal to expand the Child Tax Credit (CTC) in exchange for addressing expired Tax Cut and Jobs Act (TCJA) provisions like research and development (R&D) expensing, the limitation on net interest deduction of earnings, and bonus depreciation, likely along with additional expired tax “extenders.”
- Although there is significant interest from Members (especially tax writers, led by Chairs Jason Smith and Ron Wyden) and the business community for a deal like this, the path forward for a tax deal this work period remains murky owing to policy and political differences. Outside the political hurdle of the CTC itself, the cost of the package (expected to be in the range of $100 billion), the likely exclusion of geographically-sensitive provisions like TCJA’s limitation on the deduction of state and local taxes (SALT), and overall deficit concerns-particularly among some House Republicans-will continue to create headwinds for a tax bill this Congress. If a tax bill is to be enacted in the coming weeks, it will be due to the tenacity of Smith and Wyden who continue to push forward against those obstacles, which are significant.
Other Possible Items This Work Period
Senate
- Nominations, beginning with some of those that received UC to remain on the Senate calendar at the conclusion of the first session of Congress
- S.J.Res.49: NLRB Joint Employer CRA
- S.J. Res. 52: EPA aircraft emissions CRA
- S.J.Res. 47: DOJ CARES Act CRA
- Resolutions of disapproval relating to arms sales to foreign countries
House
- H.R. 788: Stop Settlement Slush Funds Act
- H.J.Res. 98: NLRB Joint Employer CRA
- S.J.Res. 38: Foreign EV Charger Waiver
- Pro-Life legislation in conjunction with that annual “March for Life”
- Continued Biden Administration oversight, including Hunter Biden contempt of Congress vote
OUTLOOK/ANALYSIS
While the quickly approaching funding deadlines and politically treacherous issues of immigration, border security, and Ukraine funding all present nearly impossible legislative boxes for the Congress and the White House to manage their way out of, there are noticeable glimmers of hope. Speaker Johnson and Leader Schumer reaching an overall discretionary topline number provides an opportunity for appropriators to finally begin crafting full year measures that could become law. The Speaker also suggested negotiating directly with President Biden on an immigration and border security deal. Taken together, this is the most bicameral legislative progress around issues of government funding since enactment of the FRA. Nevertheless, the reality of a narrow House majority that will soon be down to just 219 House Republicans-and possibly fewer given Leader Steve Scalise’s medical leave for January and a competitive February special election to fill former Rep. George Santos’ seat-leaves Speaker Johnson with an incredibly small policy and political needle to thread. A partial government shutdown is not out of the question as we approach January 19, with the February 2 deadline even more daunting. The longest government shutdown in history was waged over the issue of border security for 35 days in January 2019, and the issue remains no less politically charged today. Finally, the Speaker extended President Biden an invitation to deliver the State of the Union on March 7-the latest such date for an address in a century-in what can be interpreted as a tacit acknowledgement of the difficult two months that lie ahead.
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