Legislative Update: Congress Seeks to Avoid a Government Shutdown with a Third Continuing Resolution

Congress Seeks to Avoid a Government Shutdown with a Third Continuing Resolution

Congressional leaders are in a race against time and a potential D.C. snowstorm as they work to reach an agreement for a stopgap bill to prevent a government shutdown.   The Senate leaders agreed to a vote Thursday on a new continuing resolution (CR) (H.R. 2872), pushing government spending deadlines into March.  However, there is uncertainty about how many amendments Republicans may require in exchange for expediting the bill’s passage.

This will be the third continuing resolution since September.   The CR would extend the previous Jan. 19 deadline for four appropriations bills–Agriculture, Transportation, Veterans’ Affairs, and Energy–until March 1.  The remaining eight appropriations bills, set to expire on Feb. 2, would be extended until March 8.

The agreement reached by Senate leaders is crucial to ensure a quick clearance of the measure before federal funding expires for various departments at Midnight on Friday.  Senate GOP Leader Mitch McConnell (R-KY) emphasized the need to pass a continuing resolution this week while urging his Republican colleagues not to hold up the bill.

House leaders plan to swiftly consider the legislation under suspension of the rules after it clears the Senate.  This move will avoid opposition from the far-right Republicans on the Rules Committee, pushing for steeper spending cuts and opposing stopgap bills, by avoiding the need to adopt a rule for floor debate. Instead, the bill will require a two-thirds majority for passage.  Given the Republicans’ slim majority, Speaker Mike Johnson (R-LA) will have to rely on substantial Democratic support to pass the legislation.

Upon returning from the holiday recess, Speaker Johnson and Majority Leader Schumer announced an agreement on a topline spending deal for FY 2024 appropriations, but the stopgap is needed to give House and Senate appropriators the time to agree on subcommittee allocations and prepare the bills for passage.  The topline agreement adheres to the total spending level outlined in the previous year’s debt limit agreement, with $886.3 billion allocated for defense and $772.7 billion for nondefense programs, including spending agreed upon but not included in the legislative text of the debt limit law.

Lawmakers adjusted offsets and budgetary accounting to reach the target of a $69 billion nondefense “side deal” on top of a “base” funding level of $703.7 billion. Notably, the $10.5 billion designated as “emergency” spending and the $10 billion offset by caps on “mandatory” funds were removed. Speaker Johnson secured $16 billion in additional rescissions of previously appropriated funds, including $6.1 billion in pandemic aid clawbacks and $20.2 billion in IRS funding rescissions, doubling the earlier agreement.  House Republican leadership intends to pursue additional IRS rescissions in future negotiations. Additionally, $1.4 billion will be taken from the Commerce Department’s “nonrecurring expenses fund,” and extra funds have been identified through housing-related receipts.

The final deal excludes the $13.7 billion in emergency spending from Senate Appropriations Chair Patty Murray (D-WA) and ranking member Susan Collins (R-ME), and it allows for a slight overall increase in nondefense funding by approximately 0.2 percent, while defense and security-related spending would rise by over $28 billion.

Despite this progress, contentious policy riders still need to be addressed before a final appropriations package can be assembled.

Lawmakers Attempt to Send Bicameral Tax Package Through the House

The House Ways and Means Committee is set to markup a bipartisan $78 billion tax package (H.R. 7024) on Friday that would reinstate a trio of business tax credits, boost low-income housing, provide disaster aid, and expand the child tax credit. House and Senate tax leaders hope to pass the package before Jan. 29 to avoid disruptions in the filing season.  Chairman Jason Smith (R-MO) and Senate Finance Chairman Ron Wyden (D-OR) announced the tax deal on Jan. 16 but it faces challenges from members of their respective parties.

The proposal aims to revive business tax incentives that were phased out to lower the cost of the 2017 tax law. Under this plan, businesses could immediately deduct their domestic research and development investments instead of spreading them out over five years. However, deductions for foreign research and development investments would still be spread over 15 years.

Additionally, the package would reintroduce a more generous limit on deductions for interest payments, a provision that was implemented by the 2017 tax law but phased out in 2022. It would also extend a provision from the 2017 law that allows businesses to deduct the full amount of their investments in short-term assets, such as machinery and equipment. This deduction had decreased to 80 percent of the purchases last year and was set to phase out entirely by 2027 without congressional intervention.

Furthermore, the agreement would increase the deduction limit for small businesses, allowing them to deduct up to $1.29 million in investments, up from the previous limit of $1 million.

Retroactive to 2023, the deal would incrementally make more of the child tax credit refundable but would maintain the $2,500 income threshold families need to meet to qualify for it in the first place. It would also leave provisions that award the maximum credit to households earning up to $400,000, after which the value begins to phase out.

Republicans, led by Smith, have shown some support, with Smith highlighting the significance of achieving bipartisan agreement. However, Democrats in the Ways and Means Committee, particularly Richard Neal (D-MA), believe that the bill could be improved and are pushing for a more substantial expansion of the child tax credit.

The Senate side is watching the package’s progress in the House before making a final decision. Senate Minority Whip John Thune has expressed concerns about certain aspects of the package, including the child tax credit expansion.

According to Wyden, the plan is for the House to pass the package first. Supporters aim to pass it as a stand-alone bill in the House under suspension of the rules, which limits debate and amendments but requires a two-thirds majority vote.  The House is scheduled for recess next week, making passing the bill by Jan. 29 even more challenging.

Supreme Court Weighs Chevron Deference: Potential Impact on Agency Authority

The Supreme Court’s conservative majority on Jan. 17 appeared ready to scale back the long-standing Chevron doctrine, which could have far-reaching implications for how agencies interpret Congress’ words and implement regulations. The Chevron deference, a 40-year-old precedent established in 1984, dictates that when statutes are ambiguous, judges should defer to an agency’s interpretation as long as it is “reasonable”. This principle has allowed agencies to make policy decisions based on their expertise, reducing the need for judicial interference in administrative matters.

However, the ideological debate surrounding the Chevron deference has evolved over the years, in no small part because of congressional disfunction. As Congress has been less and less effective in passing laws to shape policy, presidents from both parties have turned to dusting off old statutes and “reinterpreting” them to further their ideologies. President Obama turbocharged this trend after losing both houses of congress halfway through his first term in office when he repeatedly announced; “We are not just going to be waiting for legislation… I’ve got a pen, and I’ve got a phone. And I can use that pen to sign executive orders and take executive actions and administrative actions that move the ball forward…” Many  legal scholars argue that in the absence of congressional action, the executive branch has gone too far in filling the void when it comes to policy and “finding ambiguities” in long passed and settled legislation that just isn’t there (or if it does exist, it’s up to Congress to fix).

The Supreme Court’s decision in this case has the potential to reshape the balance of power between the administrative state and federal courts. While the Court may be inclined to restrict or modify the Chevron deference, how far they’ll go remains uncertain. The court will likely decide the cases on the Chevron doctrine before the end of its term in June.

House Republicans Urge EPA to End Efforts to Circumvent Congress to Implement Biden’s Climate Agenda

House Energy & Commerce Committee Chairwoman Cathy McMorris Rodgers (R-WA)  and environment panel Chairman Bill Johnson (R-OH) wrote a letter Jan. 12 letter to Environmental Protection Agency (EPA) Administrator Michael Regan criticizing the Biden administration for prioritizing its “rush-to-green agenda” in its environmental enforcement program. They argue that the EPA’s climate enforcement policy exceeds its authority and represents an unconstitutional overreach.

The EPA’s directive, issued in a September 28, 2023  memo, instructs enforcement staff to prioritize actions that mitigate climate change and incorporate climate adaptation considerations when appropriate. This strategy aligns with the agency’s top priority in its enforcement plan for fiscal years 2024-2027, aiming to address greenhouse gas emissions and mitigate climate change impacts across various sectors. Industry attorneys have cautioned that this policy could have significant and far-reaching effects on businesses, including increased scrutiny and climate-focused audits and inspections by the EPA.

The Republican Chairs expressed deep concerns about the EPA’s approach, saying that the memorandum appears to direct the use of EPA enforcement authorities in a way that expands them to target disfavored industries or businesses.  They note that Congress did not authorize the EPA to “sanction economic sectors for merely operating, nor does it suggest the EOA use the law to remedy matters not state in the statute.”

The EPA’s directive covers various sectors, including gas flaring, emissions from storage tanks, wastewater treatment systems, incineration/combustion operations, and compliance with the Greenhouse Gas Reporting Rule. The memo also calls for consistent consideration of climate change throughout the case development process and in various administrative actions and referrals for criminal prosecution.

Industry stakeholders are advised to be prepared for increased scrutiny and potential enforcement actions related to greenhouse gas emissions and climate change impacts. The EPA’s shift towards prioritizing climate enforcement could have significant implications for businesses in terms of compliance and regulatory requirements.