Category: Policy Landscape

Partial Government Shutdown Would Impact Policies Important to CRE

Posted on by Abigail Grenadier

Capitol side with sun and clouds

A partial government shutdown looks likely to begin after midnight on Sept. 30 as House and Senate policymakers pursue different short-term funding bills amid hardened resistance from conservative Representatives to pass any continuing resolution (CR) without certain concessions. (The Hill’s live updates and ABC News Sept. 29)

Lapse in Program Funding

  • A lapse in funding could impact the industry by suspending the National Flood Insurance Program (NFIP), the Securities and Exchange Commission’s (SEC) rulemaking on climate disclosure, and the Treasury Department’s expected guidance on the energy efficient commercial buildings deduction under section 179D. (New York Times, Sept. 28 – “Government Shutdown May Hurt Home Sales in Flood-Prone Areas”)
  • Additionally, Senior White House Adviser John Podesta on Sept. 26 said a shutdown would delay billions to implement the Inflation Reduction Act, including Treasury guidance on how to distribute the measure’s tax credits. (Bloomberg, Sept. 26 | Roundtable Clean Energy Tax Incentives Fact Sheet, July 31 | Roundtable Weekly, July 28)

Shutdown Uncertainty

SEC Chairman Gary Gensler
  • Government agencies are preparing to furlough employees for an uncertain amount of time. The most recent shutdown lasted 34 days from December 2018 to January 2019, and cost the economy approximately $3 billion (equal to 0.02% of GDP) according to the Congressional Budget Office. (Government Executive, Sept. 29 and Reuters, Sept. 25)
  • The shutdown would also come amidst a flurry of regulatory rulemakings impacting commercial real estate capital markets. During a House Financial Services Committee hearing on Sept. 27, Rep. Andy Barr (R-KT) questioned SEC Chairman Gary Gensler (above) on the “perfect storm of regulations” that could further impair liquidity for commercial real estate capital markets. (Watch 1:27 video clip of the exchange | Committee Hearing Memorandum, Sept. 22)

The Roundtable’s Fall Meeting on Oct. 16-17 (Roundtable-level members only) will address numerous regulatory proposals impacting CRE, and assess the state of the economy and capital markets in the wake of a potential shutdown.

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Congress Faces Short-Term Funding Measure to Prevent Government Shutdown by Sept. 30

Posted on by Abigail Grenadier

Funding for the government will expire Sept. 30 if Congress cannot muster a short-term stopgap patch to keep federal agencies open and avoid a partial government shutdown. House Speaker Kevin McCarthy (R-CA) faces strong opposition from members of the conservative House Freedom Caucus to strike a deal with the Biden administration, which has submitted an additional $44 billion request for disaster relief, border security, and Ukraine. (CQ, Sept. 5 and AP, Aug. 21)

Flood Response Funding

  • An uncertain funding landscape dominates the prospects for legislative developments for the remainder of the year. If policymakers manage to pass a short-term “continuing resolution,” it could require a follow-on “omnibus” budget package for 2024 that may serve as the only must-pass vehicle to move other policy changes through Congress.
  • As the hurricane season picks up momentum, one government program affecting commercial real estate that is subject to the Sept. 30 funding deadline is The National Flood Insurance Program (NFIP). Congress has enacted 25 short-term NFIP reauthorizations since 2017.
  • A new flood rating methodology (Risk Rating 2.0) in 2021 established by the Federal Emergency Management Agency (FEMA) has attracted additional disagreement among policymakers after it was reported that resulting rate hikes could cause the loss of coverage for hundreds of thousands of policyholders. (Associated Press, July 22)
  • The Roundtable is a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms that create long-term stability for policyholders, improved accuracy of flood maps, mitigation reforms, enhanced affordability, and the acceptance of non-NFIP policies for commercial properties. (Roundtable Weekly, June 30)

Tax and Other Policy

  • House Republican leaders hope to break an impasse in the GOP caucus over a tax relief package passed by the Ways and Means Committee that includes measures affecting commercial real estate. Committee Chairman Jason Smith (R-MO), above, spoke about his efforts to advance the tax measure during The Roundtable’s recent Annual Meeting. (Roundtable Weekly, June 16 and June 9) 
  • The committee bill has not reached the House floor for a vote due to opposition by members from high-tax states who want the package to include relief from the $10,000 cap on state and local tax deductions (SALT), enacted in the GOP’s 2017 tax law. (Washington Post, July 24 and  Roll Call). 
  • The tax package would extend expired business interest deductibility rules and 100% immediate expensing (bonus depreciation) for qualifying capital investments. Bonus depreciation is 80% in 2023 and gradually phasing down.
  • Two other tax issues with bipartisan support that may be folded into a negotiated end-of-year tax package are the expansion of The Roundtable-supported low-income housing tax credit and technical corrections to SECURE 2.0, a package of retirement provisions. (Tax Notes, Sept. 5)

Hearings & Climate Disclosure Rule

SEC Chair Gary Gensler
  • Securities and Exchange Commission (SEC) Chair Gary Gensler will testify before the Senate Banking Committee on Sept. 12, followed by an expected appearance before the House Financial Services Committee on Sept. 27. (PoliticoPro, Aug. 28)
  • Committee members are likely to question Gensler about a highly anticipated climate disclosure rule and SEC proposals impacting advisory client assets and cybersecurity risk management. (Thomson Reuters, Aug. 22, “SEC Plans to Finalize 30 Proposed Rules in Near Term”)

The policy issues above and many more will be the focus of discussions during The Roundtable’s Fall Meeting (Roundtable-level members only) on Oct. 16-17 in Washington.

Debt Ceiling Compromise Passed Days Before National Default Deadline

Posted on by Trey Jackson

Capitol side view

Congress passed compromise legislation this week to suspend the debt ceiling for two years and restrain government spending, sending it to President Biden for his signature and calming world financial markets days before a US government default. (CQ and Wall Street Journal, June 2)

After the Debt Ceiling

  • The House on Wednesday night passed the Fiscal Responsibility Act (H.R. 3746)—forged by President Joe Biden, House Speaker Kevin McCarthy (R-CA), and their negotiation teams—to suspend the nation’s $31.4 trillion debt limit until Jan. 1, 2025 and cut spending by at least $1.5 trillion. The Senate approved the bill last night by a bipartisan vote of 63-36. (Congressional Budget Office, May 30 and Associated Press, May 26)
  • “No one gets everything they want in a negotiation, but make no mistake: this bipartisan agreement is a big win for our economy and the American people,” President Biden stated last night. “I look forward to signing this bill into law as soon as possible…” (White House statement, June 1)
  • House policymakers have signaled they may follow the debt ceiling crisis with a legislative tax proposal that could include significant measures affecting commercial real estate. (Roundtable Weekly, May 26)
  • Congressional action on such measures would come at a time when the office sector faces difficult conditions, including asset price discovery and tighter liquidity. (Wall Street Journal, May 30 Financial Times, May 29 | GlobeSt, May 26) 

Economic Conditions & CRE

Ross Perot, Jr. on Bloomberg TV

  • Real Estate Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) explained the economic conditions facing CRE and the office market, along with other pressures such as remote work and a shortage of labor, in a May 26 Boston Globe interview. “We’re in a very precarious situation,” Fish said.
  • Roundtable Board Member Ross Perot, Jr., above, (Chairman, The Perot Companies and Hillwood) discussed the financing challenges faced by some CRE sectors in an interview with Bloomberg TV on Wednesday. “If the industry can’t get a construction loan, real estate will have a recession,” Perot said. “The key to commercial real estate today will be banking.”
  • The Federal Reserve’s “Beige Book” issued this week also reported on the nation’s current overall economic activity, noting, “Commercial construction and real estate activity decreased overall, with the office segment continuing to be a weak spot.” (GlobeSt, May 31)
  • Additionally, Trepp’s CMBS Delinquency Report issued this week showed the nation’s overall CMBS delinquency rate hit a 14-month high, topping 4% for the first time since 2018. Although May’s delinquency rate jumped to 3.62%, up 53 basis points for the month, the all-time high registered 10.34% in July 2012 and the COVID-19 high reached 10.32% in June 2020.
  • Federal Reserve monetary policies, congressional fiscal policy, potential tax measures, and other issues impacting CRE will be discussed during The Real Estate Roundtable’s Annual Meeting on June 13-14 in Washington, DC.

The Roundtable meeting includes policy advisory committee meetings—open to all members—that will feature prominent policymakers, including Senate Banking Committee Member Bill Hagerty (R-TN); House Ways and Means Committee Chairman Jason Smith (R-MO); David Crane, the US-DOE’s Director of the Office of Clean Energy Demonstrations; and Alejandra Nunez, US-EPA Assistant Administrator overseeing climate policy.

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House Tax Package Expected to Follow Debt Ceiling Resolution

Posted on by Trey Jackson

US Capitol sunsetThe House Ways and Means Committee may release a tax-focused economic growth package in June after a final resolution is reached between President Joe Biden, House Speaker Kevin McCarthy (R-CA), and their negotiation teams on the debt ceiling. The intense talks on federal spending limits have less than a week before the Treasury Department estimates the nation may default on its debt obligations. (Wall Street Journal, May 25 | PoliticoPro, May 23 | Roundtable Weekly, May 19) 

Tax Measures & CRE 

  • The House Republican tax package is about 90% complete and “buttoned up pretty tight,” according to Ways and Means Member Kevin Hern (R-OK). “We’re making sure that we don’t disrupt any of the debt limit conversations and distract from that, but it would be ready to go very quickly,” Hern said. (Tax Notes, May 24)
     
  • Ways and Means Committee Member Randy Feenstra (R-IA) commented that the package will likely include measures that expired last year, including full bonus depreciation and certain taxpayer-favorable rules related to the deductibility of business interest under Section 163(j)—both supported by The Real Estate Roundtable. (PoliticoPro, May 23 and BGov, May 25)
     
  • Under the Tax Cuts and Jobs Act (TCJA) of 2017, 100% bonus depreciation applies to capital investments made between 2018 and 2022 (as well as capital improvements made to the interior of nonresidential buildings). However, the bonus depreciation benefit began phasing down this year. In addition, real estate businesses that elect out of TCJA’s limits on business interest deductibility do not qualify for the bonus depreciation benefit.
     
  • The House tax package is expected to extend 100% bonus depreciation through at least 2025, allowing many taxpayers to continue immediately expensing qualified interior improvements. Moreover, by reinstating certain expired provisions from section 163(j), the tax bill would allow more real estate businesses to avail themselves of the bonus depreciation benefit without inhibiting their ability to deduct their business interest expense. 

Additional Provisions and TCJA Permanency 

House Ways and Means Committee doorway

  • The economic growth package could also include provisions extending the enhanced child tax credit and the deductibility of R&D expenditures.  Housing-related measures, such as an expansion of the low-income housing tax credit, are also under consideration. 
  • Separately, the Ways and Means Committee may also consider the TCJA Permanency Act (H.R. 976), reintroduced by Committee Vice Chairman Vern Buchanan (R-FL) in February. The bill would permanently extend TCJA provisions scheduled to sunset at the end of 2025, including the 20 percent deduction for qualified pass-through business income (Section 199A). (Tax Notes and Roundtable Weekly, Feb. 24)
  • While a TCJA permanency bill is likely dead on arrival in the current Senate, the House economic growth tax package could be the starting point for bipartisan negotiations with congressional Democrats on a limited number of tax and economic priorities as the year further unfolds. 

House Ways and Means Committee Chairman Jason Smith (R-MO) will be a guest at The Roundtable’s June 13-14 all-member Annual Meeting and policy adivisory committee meetings will include discussions on a debt ceiling agreement and potential tax legislation. 

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Administration Unsuccessfully Seeks to Add Like-Kind Exchange Restrictions to Debt Ceiling Talks

Posted on by Trey Jackson
LKE form 8824 held by business person

President Joe Biden and House Speaker Kevin McCarthy (R-CA) signaled progress this week on debt limit and federal spending talks after they assigned teams of negotiators to bang out an agreement before a looming national default “x-date” is reached in June. (BGov and CQ, May 18)

LKE Restrictions Rejected

  • One cost-cutting measure proposed by the administration’s team, and rejected by Republicans, would have imposed limitations on the use of Section 1031 like-kind exchanges. (Washington Post, May 15)
  • President Biden has consistently proposed limiting the use of LKEs, most recently as part of his FY2024 budget proposal submitted earlier this year. (Roundtable Weekly, March 10)
  • “The administration’s proposal to severely limit the use of section 1031 would destroy jobs, lock properties into unproductive uses at a time when a realignment of real estate assets is needed, harm housing supply, and end a mechanism used by environmental groups to conserve land and natural spaces,’ said Real Estate Roundtable President and CEO Jeffrey DeBoer.
  • “It is an idea that has been debated by Congress numerous times and always rejected, most recently in a unanimous vote on the Senate floor,” DeBoer continued. “Perhaps most importantly, the proposal would eliminate one of the only real estate market liquidity tools available at a time when credit markets and banks are tightening, as they are today.”
  • Academic and other economic research has repeatedly demonstrated the positive economic contribution of LKEs and their importance to the US economy. (Roundtable Weekly, July 1, 2022 and EY report—“Economic Contribution of the Like-Kind Exchange Rules to the US economy in 2021: An Update”)

Looming Deadline

US Capitol
  • President Biden and Speaker McCarthy assigned five Washington insiders on May 16 to the immense negotiation task, in hopes that an “agreement in principle” can be reached this weekend, which would allow the House and Senate to vote before June 1. (The Hill and BGov, May 17 | Associated Press, May 18)
  • “I’m confident that we’ll get the agreement on the budget and America will not default,” Biden said before departing this week for a meeting of world leaders at the G-7 annual summit in Japan. (CBS News, May 17)
  • McCarthy said yesterday, “I see the path that we can come to an agreement. And I think we have a structure now and everybody’s working hard.” (Politico, May 18)

House Democrats this week began preparing an emergency “discharge petition” to raise the debt ceiling if negotiators are unable to reach an agreement, though its odds of passing are uncertain. (Wall Street Journal, May 17)

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Debt Ceiling Talks Inch Forward as Republicans, Democrats Prioritize Permitting Reform for Energy Projects

Posted on by Trey Jackson

Big Four with President Biden

A May 9 meeting between President Joe Biden and the “Big Four” congressional leaders about the debt ceiling and federal spending ended with little progress—yet the policymakers agreed to meet early next week as their respective staffs begin separate budget discussions. (The Hill, May 11 and Axios May 9 | Roundtable Weekly, May 5)

 Talks Begin 

  • As the “X date” for defaulting on the national debt looms in June, House Speaker Kevin McCarthy (R-CA), Senate Minority Leader Mitch McConnell (R-KY), Senate Majority Leader Chuck Schumer (D-NY), and House Minority Leader Hakeem Jeffries (D-NY) met to discuss raising the $31.4 trillion U.S. debt limit with President Biden, who described the gathering as “productive.” (Associated Press and Reuters, May 10)
  • McCarthy commented he “didn’t see any new movement,” but added he was willing to discuss spending cutbacks such as clawing back funding for pandemic programs. He added that Biden may also be open to discussing permitting reform for energy infrastructure projects, though the two parties are far apart on the specifics of their legislative proposals. (Washington Post and CNN, May 10 and BGov, May 9)

Energy Infrastructure Priorities 

White House Senior Advisor John Podesta

Related Energy News  EPA logo

  • The Environmental Protection Agency released a proposed rule today to cut carbon emissions by 90% from the nation’s power plants, drawing a “counterattack from Republicans and coal-state Democrat Sen. Joe Manchin” (D-WV), chairman of the Senate Energy Committee. (New York Times, May 11 and POLITICO, May 11)
  • De-carbonizing the electric grid, and moving utilities away from combusting coal and natural gas, would help building owners and commercial tenants reduce their “indirect” Scope 2 GHG emissions attributable to the electricity they purchase.
  • Meanwhile, the General Services Administration (GSA) announced yesterday it will leverage $3.4 billion it received under the IRA to pursue new public-private partnerships that will improve energy efficiency, reduce onsite emissions, and encourage electrification in federal buildings. (GSA news release, May 10)
  • The GSA will advance the White House’s  Climate Smart Buildings Initiative. It aims to modernize 41 federal facilities in DC and the Midwest through long-term “performance contracts” with private sector companies that guarantee projects will pay for themselves over time through energy savings that accrue from retrofit installations. (BGov, May 10). See GSA’s National Deep Energy Retrofit program. 

The Roundtable will focus on the impact of the debit ceiling and federal energy policy priorities during its all-member Annual Meeting on June 13-14 in Washington. 

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Policymakers Face Debt Ceiling Crunch After Treasury Forecasts June “X Date”

Posted on by Trey Jackson

Capitol building

Pressure on Congress and the White House ratcheted up this week after Treasury Secretary Janet Yellen warned that the U.S. could default on its $31.4 trillion debt as early as June 1. President Joe Biden will meet on May 9 with House Speaker Kevin McCarthy (R-CA), Senate Minority Leader Mitch McConnell (R-KY), Senate Majority Leader Chuck Schumer (D-NY), and House Minority Leader Hakeem Jeffries (D-NY) to discuss raising the US debt limit and Republican concerns about federal spending levels. (Treasury letter, May 1 | Bloomberg and New York Times, May 2)

Looming Deadline

  • The estimated date that Treasury will run out of money to pay its bills is called the “X date.” Moody’s Analytics Chief Economist Mark Zandi told the Senate Budget Committee yesterday that the best case scenario for hitting the X date is August 8 and the worst is June 1. (BGOV, May 5)
  • Zandi testified, “The Treasury debt limit drama is heating up and is sure to get much hotter in coming weeks as we have a better understanding of the 2023 tax filing season and the actual X-date.”
  • Zandi also noted how a debt ceiling extension could be combined with annual budget talks. “If the X-date is as soon as early June, it seems a stretch for lawmakers to come to terms fast enough, and they instead will decide to pass legislation suspending the limit long enough to line the X-date up with the end of fiscal 2023 at the end of September. This will buy time and combine the debt limit decision with the federal government’s fiscal 2024 budget, which is also must-do legislation for lawmakers to ensure the government is funded and avoids a shutdown,” Zandi stated. (Senate Budget Committee hearing, May 4)
  • Office of Management and Budget Director Shalanda Young suggested this week that the White House may be open to a short-term debt ceiling extension. “I’m sure one of the things on the table we will have to work through is how long. I’m not going to take anything off the table,” Young said. (Reuters and The Hill, May 4)

Policy issues related to raising the debt ceiling and CRE market conditions will be discussed be during The Roundtable’s all-member meeting on June 13-14 in Washington, DC.

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House Republicans Pass Debt Ceiling Bill

Posted on by Trey Jackson

House Passes Debt Ceiling Bill

House Republicans this week narrowly passed legislation—the Limit, Save, Grow Act (H.R. 2811)—that would slash government spending and rescind much of the Biden administration’s climate-related incentives in an effort to spur bipartisan talks on raising the nation’s $31.4 trillion debt ceiling. (Roll Call, April 26 and Reuters, April 27)

Avoiding Default

  • The White House issued an April 25 Statement of Administration Policy that the GOP bill would be vetoed if it ever made it to President Biden’s desk. Biden added he is willing to meet with House Speaker Kevin McCarthy (R-CA), but that extending the debt limit is “not negotiable.” Senate Majority Leader Chuck Schumer (D-NY) responded to passage of the House bill by stating it “has no hope of ever becoming law.” (Schumer Floor Remarks, April 27)
  • The Congressional Budget Office released an analysis this week showing that H.R. 2811 would reduce $4.8 trillion from the deficit by setting caps on federal spending over the next 10 years—with an additional $570 billion in savings coming from rescinding energy tax provisions passed in the Inflation Reduction Act. (Tax Notes, April 27 and Roundtable Weekly, Aug. 12, 2022)
  • Mark Zandi, the chief economist at Moody’s Analytics testified before Congress last month that if no resolution to the debt limit is reached before mid-August, “a default would be a catastrophic blow to the already-fragile economy.” (Zandi’s written testimony, March 7)
  • A previous standoff over the debt limit in 2011 led to a downgrade of the government’s credit rating, which pushed borrowing costs higher. (ABC News, Jan. 24)

Roundtable ResponseRER's Jefrey DeBoer and John Fish

  • The Roundtable and 13 other national real estate organizations sent a joint letter last month urging congressional leaders to raise the debt limit to avoid agitating the stability of U.S. financial markets and roiling significant sectors of the American economy unnecessarily. (Coalition letter, March 29)
  • Real Estate Roundtable Chair John Fish, right above, (Chairman and CEO, SUFFOLK) and President and CEO Jeffrey DeBoer, left, have also called on Roundtable members to contact both policymakers in Congress and the White House to raise the debt ceiling. (Roundtable Weekly, Jan. 20)
  • DeBoer said, “Some threats to the U.S. economy are unavoidable, others are ones of our own making and entirely unnecessary. The potential for a default on the federal debt is a needless and inexcusable risk with potentially dire consequences for U.S. real estate, workers and retirees, and the entire economy. The full faith and credit of the United States government should not be open to negotiation.”

The impact of negotiations over federal spending and raising the debt ceiling on the national economy and CRE markets was a focus of discussion during The Roundtable’s Spring Meeting this week (see story above). It is possible that intense discussions among DC policymakers on these issues will be underway during The Roundtable’s all-member meeting on June 13-14 in Washington, DC.

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Looming Debt Limit Expiration Dominates Congressional Agenda

Posted on by Trey Jackson
U.S. Capitol at dusk

House Republicans this week proposed the Limit, Save, Grow Act to cut federal spending and spur negotiations to raise the nation’s $31.4 trillion debt ceiling for approximately one year. President Joe Biden and Senate Democrats oppose the bill and propose lifting the debt ceiling without conditions. (The Hill, April 19 and Committee for a Responsible Federal Budget, April 20) 

X Date Approaches 

  • House Speaker Kevin McCarthy (R-CA) stated he aims to schedule a vote next week on the bill and begin negotiations with Democrats over raising the debt limit. McCarthy needs approval from 218 House members to pass the legislation, meaning he can only afford to lose four votes from his conference to pass it without Democratic support. (NBC News, April 19 and CBS News, April 18)
  • On Wednesday, the Problem Solvers Caucus—comprised of 32 moderate Democrats and 31 Republicans in the House—proposed their own plan to raise the debt ceiling. (Caucus news release and Axios, April 19)
  • The nonpartisan Congressional Budget Office estimated that Treasury will run out of money sometime between July and September, a point referred to as the “X date” (CBO analysis, Feb. | ABC News, April 15)
  • Mark Zandi, the chief economist at Moody’s Analytics testified last month before Congress that if no resolution is reached before mid-August, “a default would be a catastrophic blow to the already-fragile economy.” (Zandi’s written testimony, March 7) 

Congressional Hearings 

  • A House Ways and Means Committee hearing on Wednesday focused on the Limit, Save, Grow Act’s proposal to strike the package of clean energy tax incentives that Democrats passed last year in their signature climate law, the Inflation Reduction Act (IRA). (Roundtable Weekly, Aug. 12, 2022) 
  • The Republicans’ proposed repeal is unlikely to pass the Senate’s Democratic majority and President Biden has stated he would veto if it ever reached his desk. A Joint Committee on Taxation (JCT) report summarized the IRA’s incentives—and The Roundtable has prepared fact sheets on the credits and deductions relevant to CRE.
  • The day before the hearing, Rep. Bill Pascrell (D-NJ), Ranking Member of the Ways and Means Subcommittee on Oversight, introduced the Ending Wall Street Tax Giveaway Act, which would eliminate the current tax treatment of carried interest. (Pascrell news release, April 18)
  • On Tuesday, a House Financial Services Committee hearing on “Oversight of the Securities and Exchange Commission” featured testimony from SEC Chairman Gary Gensler, above. A final SEC rule on climate reporting, which derives from a proposal for sweeping disclosures on Scope 3 GHG emissions, is anticipated this spring. (Roundtable Weekly, March 25, 2022 and Roundtable Comments on the SEC Proposal, June 10, 2022)
  • Gensler testified that the agency is not interested in capturing emissions from all sources and small businesses in a reporting company’s Scope 3 “value chain.” He stated, “We only oversee seven or eight thousand public companies … It is not a rule about the rest.” 

The importance of the nation’s supply chains to the economy was also addressed when Commerce Secretary Gina Raimondo testified before a House appropriations panel this week on the department’s 2024 budget. Secretary Raimondo will discuss national economic conditions during The Roundtable’s Spring Meeting next week in Washington. (Roundtable-level members only) 

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118th Congress Faces Looming Debt Ceiling and Funding Deadlines

Posted on by Trey Jackson

Janet Yellen testifying

Today, Treasury Secretary Janet Yellen notified Congress that the federal government is expected to reach its $31.4 trillion debt limit by Jan. 19, officially triggering the start of a potential standoff between House Republicans, the Democratic-controlled Senate, and the White House about how to increase the debt ceiling. (New York Times and Politico Playbook PM, Jan. 13)

Looming Standoff

  • Yellen wrote, “Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.” (Yellen letter, Jan. 13)
  • Yellen noted that while the Treasury will take steps to preserve cash, the government may only be able to pay its financial obligations until early June. Treasury’s “extraordinary measures” could include halting pension fund contributions and prematurely redeeming federal bonds. (New York Times, Jan. 13 | Committee for a Responsible Federal Budget, Oct. 28, 2022)
  • The 118th Congress will eventually need to raise the debt limit to avoid a first-ever national default and global recession. (Politico, Jan. 12)
  • Some Republicans have discussed achieving spending cuts by setting caps on discretionary government funding at FY 2022 levels. This approach would result in a cut of approximately $130 billion from current levels appropriated in the omnibus spending law enacted last month—a non-starter for Democrats. (The Hill, Jan. 10 | Roll Call,  Jan. 9 | Roundtable Weekly, Dec. 22)
  • Rep. Kevin McCarthy (R-CA) secured his new position as House Speaker on Jan. 7 by appeasing a small group of hardline Republican conservatives with concessions, which included unspecified spending cuts in exchange for raising the national debt ceiling. (Reuters, Jan. 7 and AP, Jan. 11)
  • White House officials are mounting an outreach campaign to freshman lawmakers and moderate Republicans in an attempt to attract enough votes to avoid a fiscal cliff vote over the debt ceiling. (Politico, Jan. 12)

Government Funding Deadline

Rep. French Hill

  • Another deadline on the financial horizon is Sept. 30, when funding for the federal fiscal year expires. A legislative standoff on spending priorities could lead policymakers to vote on a “Continuing Resolution (CR)” to fund the government programs at current levels or allow a partial government shutdown. (CQ, Dec. 29, 2022)
  • Rep. French Hill (R-AR), above, one of Speaker McCarthy’s allies who helped negotiate with the hardline GOP faction, said Republicans were seeking to design an automatic trigger for a CR in the event that the Senate does not act on House spending proposals.
  • Hill said, “It would be a way for all members of Congress to say, look, we want to fund our government, we want to rein in spending. But if the Senate doesn’t act in the right way, we’ve agreed on this CR that would be triggered by the lack of certain bills not being passed on Oct. 1.” (CQ, Jan. 9)

Rep. Hill will address policymaking in the 118th Congress and capital markets during The Roundtable’s State of the Industry Business Meeting on Jan. 24 in Washington.

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