Congress will turn its focus to the debt limit and federal spending when it returns next week. The debt limit – also called the debt ceiling – is the maximum amount of debt that the Department of Treasury can issue to the public or to other federal agencies. The amount is set by law and has been increased or suspended over the years to allow for additional borrowing needed to finance the federal government’s operations. The debt limit was last raised to a total of $31.4 trillion on December 16, 2021. On January 19, 2023, that debt limit was reached, and the Treasury announced a “debt issuance suspension period” during which it can take “extraordinary measures” to borrow additional funds without breaching the debt ceiling. 

Treasury Secretary Janet Yellen sent a letter to House and Senate leadership on January 24, 2023 in which she wrote that the extraordinary measures would last through June 5, 2023, and urged “Congress to act promptly to protect the full faith and credit of the United States.” April tax receipts could change this outlook.Wrightson ICAP thinks that the end date is more likely the end of July. And the Congressional Budget Office estimates that extraordinary measures will be exhausted sometime between July and September 2023.

Since then, there have been a few statements from both sides of the negotiating table and an exchange of letters, but no serious discussions on lifting the debt limit. Behind the scenes, there have been a few recent developments. House Republican leaders have begun informally putting together a debt-limit package they intend to socialize with their members when Congress returns next week. Republicans don’t want to lift the debt limit without spending reductions. 

The proposed Republican bill would lift the debt limit until May 2024 in exchange for either a cap on non-defense discretionary spending or a cap on overall discretionary spending after reducing it to FY 2022 levels (i.e. limiting appropriations growth to 1-1.5% annually over the next decade). The Republican proposal also would rescind unspent Covid money, prohibit President Biden’s student loan forgiveness program, repeal some green tax credits that were in last year’s Inflation Reduction Act (P.L. 117-169), institute work requirements for some federal benefit programs (e.g. SNAP), and implement the House Republican energy plan (H.R. 1) and regulation-cutting REINS Act. While Republicans are not planning to touch Social Security or Medicare benefits as promised, Main Street members and others are pushing to include a provision setting up a bipartisan commission to come up with solutions to ensure the long-term solvency of those programs.

The Republican proposal would require action by several House committees making passage a difficult process. While it has no chance of passing the Senate, it could jump start negotiations with the White House and Senate. However, Democrats say they won’t bargain on such conditions and are insisting on a clean bill.

A congressional stalemate over lifting the debt ceiling could have serious consequences for the U.S. military even if a breach never occurs. Swirling economic uncertainty makes it difficult for the Pentagon and defense industry to execute their long-term plans, and questions over military pay and benefits could discourage people from joining the military amid an ongoing recruiting crisis. More broadly, lawmakers argue that risking a never-before-seen breach would project weakness to adversaries like Russia and China as the U.S. races to aid Ukraine in its war against Russia and deter Chinese aggression.

Vantage Point Strategies’ Summary of the Inflation Reduction Act https://drive.google.com/file/d/1yC1jKsmLjX3fHD7btg2vYu4lUmP2uaew/view?usp=sharing 

The Senate just passed H.R. 4346, the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act by a vote of 64 to 33. The bill now goes to the House who could vote on it this week before they leave for their August recess. If the House passes the bill, it would then go to the President for his signature.

The bill is a trimmed-down competitiveness package from a larger bill that passed last year, but stalled in bipartisan, bicameral conference talks. It includes $54.2 billion in five-year grants for semiconductor manufacturing and research, as well as 5G wireless deployment, a 25% tax credit for investments in semiconductor manufacturing facilities through 2026, funding authorization for the National Science Foundation (NSF), and other science-focused measures.

Bill Text

https://www.commerce.senate.gov/services/files/CFC99CC6-CE84-4B1A-8BBF-8D2E84BD7965

Section-by-Section Summary

https://www.commerce.senate.gov/services/files/1201E1CA-73CB-44BB-ADEB-E69634DA9BB9

CHIPS and ORAN Investment Division A Summary

https://www.commerce.senate.gov/services/files/2699CE4B-51A5-4082-9CED-4B6CD912BBC8

NSF, NIST, DOC, NASA Division B Summary

https://www.commerce.senate.gov/services/files/6E687DDA-7AA6-4EA8-B9C8-F25E3A0254ED

Department of Energy Division B Summary

https://www.commerce.senate.gov/services/files/218906F5-60BE-4EEF-A58C-F50CC0A134E6

FY2023 Appropriations

This week the House Appropriations Committee began marking up their 12 fiscal year 2023 (FY23) appropriations bills. They began the process before reaching a bipartisan agreement on discretionary spending levels.

Negotiations have ground to a halt due to differences over defense vs. nondefense spending and a Republican push to strip earmarks out of the bills. Republicans want large defense spending increases to keep pace with inflation, but will only support flat-funding for nondefense agencies.

The first six bills hew closely to President Biden’s FY23 budget request. House Democrats set an overall $1.6T discretionary spending cap for the FY23 bills earlier this month. That is about 9% above the FY22 spending cap. Here is how the House FY23 bills compare with FY22 enacted levels.

Full Committee markups of the House bills will begin next week and wrap up on June 30. The bills will then go to the House floor for consideration in July.

Congress is in recess this week. They will return next week and will be in session for the next three weeks. They will recess again for the weeks of June 27 and July 4.

When they return the week of June 6 their focus will be on FY23 appropriations bills, gun control legislation, January 6^th insurrection hearings, U.S. Innovation and Competition Act conference negotiations, and legislation on mental health, drug pricing and user fee reauthorizations.

Amidst all of this, another thing to keep an eye out for is that the Supreme Court generally releases the majority of its decisions in mid-June.

Here’s an update on some of the biggest issues being discussed and negotiated in Congress right now.

FY2023 Appropriations

The House will begin marking up their 12 FY2023 appropriations bills in June, with the goal of bringing them to the House floor in July. Senate Appropriators aim to mark up all of their bills in committee in July. The fiscal year ends on September 30. While Congress is unlikely to enact all 12 bills before that deadline, Senate Appropriations Committee Chairman Patrick Leahy (D-VT) and Ranking Republican Richard Shelby (R-AL) are both retiring at the end of this Congress and want to complete these bills before they leave DC in December. The chairs and ranking members from the House and Senate Appropriations Committees have met to discuss topline spending figures (defense vs. non-defense spending) with the hopes that this will expedite the appropriations process this year, but they have not yet reached an agreement.

Ukraine

Tomorrow marks the 100^th day of Vladimir Putin’s war in Ukraine. Since the beginning of the war, the U.S. has committed approximately $4.6 billion in security assistance. Yesterday, the Department of Defense announced an additional $700 million focused on meeting critical Ukrainian needs. Capabilities in this new package include:

• High Mobility Artillery Rocket Systems and ammunition;
• Five counter-artillery radars;
• Two air surveillance radars;
• 1,000 Javelins and 50 Command Launch Units;
• 6,000 anti-armor weapons;
• 15,000 155mm artillery rounds;
• Four Mi-17 helicopters;
• 15 tactical vehicles;
• Spare parts and equipment.

The United States continues to work with its Allies and partners to identify and provide Ukraine with capabilities to meet its evolving battlefield requirements.

January 6^th Committee Hearings

The House select committee investigating the Jan. 6, 2021, attack on the United States Capitol is expected to begin public hearings on June 9.

The committee aims to tell a more complete story of what happened that day and what led to it. Over two weeks of hearings, they intend to showcase what they uncovered in months of work on the events surrounding the attack, such as the more than 1,000 interviews they have conducted and thousands of documents they received from witnesses.

The committee may not be able to enforce all their subpoenas before the public hearings begin next week.  They are limited by the number of weeks left in the congressional calendar and the outlook that the House will be under Republican control after the midterm elections.

While the committee has not announced the roster of witnesses for the hearing, J. Michael Luttig, a former federal judge and lawyer who advised former Vice President Mike Pence, is expected to testify. Luttig served on the U.S. Court of Appeals for the Fourth Circuit and was a key behind-the-scenes figure in the lead up to January 6. He provided the Vice President with the legal argument Pence used to reject former President Trump’s order to overturn President Biden’s victory.

Gun Control

Today, the House Judiciary Committee is holding a rare recess markup of H.R. 7910, the Protecting Our Kids Act, a large package of gun-control bills. The bill prohibits the sale of certain semiautomatic centerfire rifles or semiautomatic centerfire shotguns to a person under 21, prohibits the sale of “ghost gun” kits without a background check or serial numbers stamped on the parts used in assembling the weapon, boosts penalties for illegal “straw purchases” of guns, makes it a federal offence to import, manufacture or possess large-capacity magazines, creates a grant program to buy back large-capacity magazines, and requires gun owners to store their weapons safely, especially when minors are present. The bill will go to the House floor next week. While the bill has the votes to pass in the House, there is no chance of it overcoming Senate Republican opposition.

Yesterday House Speaker Nancy Pelosi (D-CA) promised to have a hearing and markup of the assault weapons ban at a future date. In the wake of the Uvalde mass shooting, a handful of House Republicans have expressed an openness to banning assault-style rifles.

House Majority Leader Steny Hoyer (D-MD) has set a vote for next week on a “red flag” bill offered by Rep. Lucy McBath (D-GA), H.R. 2377. That bill calls for the removal of guns from those deemed dangerous to themselves or others. It will be paired with a bill, H.R. 3480, from Rep. Salud Carbajal (D-CA) that encourages states to enact their own red flag laws. Nineteen states currently have such laws.

A bipartisan group of senators, led by Sens. Chris Murphy (D-CT) and John Cornyn (R-TX), is negotiating a narrower gun-control package that focuses on state-based red flag programs, school safety, and mental health programs. They met yesterday and hope to have an agreement in place by next week. Sources involved in the negotiations say interest in reaching a compromise remains genuine on both sides. In addition to Murphy and Cornyn, taking part in the discussions were Sens. Richard Blumenthal (D-CT), Bill Cassidy (R-LA), Susan Collins (R-ME), Lindsey Graham (R-SC), Martin Heinrich (D-NM), Joe Manchin (D-WV), Kyrsten Sinema (D-AZ), and Pat Toomey (R-PA).

The House passed the final 2,741-page fiscal year 2022 omnibus appropriations bill late last night sending the measure to the Senate before House Democrats left town for a Democratic retreat. The House first voted 361-69 to back funding for the Pentagon, Department of Homeland Security and other national security items, and then 260-171, with Rep. Tlaib (D-MI) voting “present,” to advance the provisions largely related to domestic programs.

The FY22 omnibus appropriates $1.5 trillion in discretionary funding ($782.5 billion for defense and $730 billion for non-defense) and $13.6 billion in emergency spending to address the crisis in Ukraine. The omnibus also included several reauthorizations – Violence Against Women Act, National Flood Insurance Program, Temporary Assistance for Needy Families, the annual intelligence authorization, a provision to promote the U.S.-Israel relationship and back regional peace initiatives such as the Abraham accords, a livestock reporting program, and more.

Last week, the White House requested an additional $22.5 billion for Covid-19 vaccines, testing, and therapeutics. Senate Republicans responded that the funding level was too high, and that it should be offset by cuts elsewhere. House Speaker Nancy Pelosi (D-CA) agreed to reduce the funding level to $15.6 billion and offset part of it by rescinding some state aid provided in an earlier relief bill. However, a number of Democrats objected to the offset saying that it unfairly penalized some states. To get the omnibus across the finish line in the House, the Speaker stripped the covid funding out of the omnibus. A stand-alone covid relief bill will be considered next week when the House reconvenes, but it faces a dim outlook in the Senate. The White House has warned testing capacity will start declining this month without this additional funding.

The omnibus now goes to the Senate for consideration. In case they don’t complete action on it by March 11 when the current continuing resolution (CR) expires, the House also passed a short-term CR funding the federal government through March 15.

Below are links to the 12 appropriations bills included in the FY22 omnibus as well as the Ukraine supplemental:

Agriculture, Rural Development, Food and Drug Administration, and Related Agencies: Report Language| Summary | One-Pager

Commerce, Justice, Science, and Related Agencies: Report Language| Summary | One-Pager

Defense: Report Language Part 1| Report Language Part 2| Summary | One-Pager

Energy and Water Development, and Related Agencies: Report Language| Summary | One-Pager

Financial Services and General Government: Report Language| Summary | One-Pager

Homeland Security: Report Language| Summary | One-Pager

Interior, Environment, and Related Agencies: Report Language| Summary | One-Pager

Labor, Health and Human Services, Education, and Related Agencies: Report Language Part 1| Report Language Part 2| Summary | One-Pager

Legislative Branch: Report Language| Summary | One-Pager

Military Construction, Veterans Affairs, and Related Agencies: Report Language| Summary | One-Pager

State, Foreign Operations, and Related Programs: Report Language| Summary | One-Pager

Transportation, and Housing and Urban Development, and Related Agencies: Report Language| Summary | One Pager

Ukraine Supplemental: Summary  | One-Pager

This week the Occupational Safety and Health Administration (OSHA) issued an interim final rule to require employers with 100 or more employees to ensure each of their workers is full vaccinated or tests negative for COVID at least once a week and wears a face covering at work. 

Debt Ceiling

The House approved a bill on Tuesday that will briefly lift the debt ceiling until about December 3, 2021 (the same day the current continuing resolution funding the federal government expires). The bill increases the Treasury Department’s borrowing authority by $480B to nearly $28.9T. President Biden is expected to sign the bill into law.

Bipartisan $1.2T Infrastructure Investment and Jobs Act (H.R. 3684) (Infrastructure)

and

$3.5T Build Back Better Budget Act (Budget Reconciliation)

House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer (D-NY) want to send a budget reconciliation package and an infrastructure bill to the President’s desk before November. However, they are no way near reaching a deal on budget reconciliation within their own caucus even on the topline spending number. Progressives are pushing for $3.5T or more, while moderates in the party have suggested $1.5T is a more appropriate topline figure. President Biden has suggested a compromise of $2T. Without a compromise on the overall amount, the rest of the details for the reconciliation package can’t be ironed out. Once an overall spending level is agreed on, Progressives will have to determine what social spending or climate programs they are amenable to cutting to get to that spending level. Another option is to trim the duration of the programs instead of cutting them. However, the New Democratic Coalition (the House’s biggest moderate caucus) is arguing that a smaller package should focus on long-term certainty for a handful of priority programs. It may take until the end of the calendar year for Democrats to reach an agreement within their caucus. If that’s the case, then a longer-term lift of the debt ceiling could be included in a final budget reconciliation bill.

Upcoming Deadlines

Highway Authorization – October 31, 2021

FY2022 Appropriations Bills – December 3, 2021

Debt Ceiling – Approx. December 3, 2021 (Some forecasters say this latest increase in borrowing authority could allow Treasury to keep paying its bills through the end of the calendar year or even slightly into 2022.)

The Senate passed a $1.2 trillion bipartisan Infrastructure Investment and Jobs Act (H.R. 3684) by a vote of 69 to 30 today. While this marks a major milestone for getting the bill enacted into law, there are a few more hurdles to overcome.

The bill now goes to the House for consideration. If the House passes the bill without any changes it would go directly to the President for his signature. The White House has privately cautioned House Democrats about making any changes to the bill saying it would risk delaying or blowing up the deal.

A group of Senate Republicans lead by Sen. Shelley Moore Capito (R-WV) unveiled a $568B infrastructure proposal today. This is their counteroffer to President Biden’s proposed $2.3T American Jobs Plan.