April 5, 2024

Thought of the Week:

Although the cherry blossoms on the Tidal Basin peaked early this year, it’s Spring Break season in Washington. While tour groups poured into the city to take in the monuments and museums, legislators and staff headed out—back to district; on CODELS, like the one a bipartisan congressional delegation took to Israel; and on fundraising junkets. My wife and me? We stayed in town. Outside of August, spring recess is one of the easiest times to get reservations at popular D.C. restaurants. We ate at Gordon Ramsey’s Hells Kitchen. The short review—the risotto is as good any we’ve had, the Wellington is too rich for our taste, and the sticky toffee pudding is even better than advertised. Spring Break has always been a bittersweet time for me. Sure, I’d get an entire week off, maybe even take a trip, but at its end laid the mad dash to class finals and term papers. Nearing the end of this two-week recess, like I used to, members of Congress may be feeling a similar angst about the range of contentious issues they’re certain to face when they return to Washington. In fact, the April-May period will be crucial for a number of issues, and with just a one-vote GOP majority in the House, and the Senate needing 60 votes to avoid filibuster, these are among the close calls House and Senate leadership will have to consider:

  • Ukraine Funding. This is a dangerous issue for Speaker Johnson (R-LA) because he could face a motion to vacate if he moves without shoring up support on his right flank. Regardless, to pass any funding for Ukraine, the Speaker will have to rely on House Democrats, which is why he has little leverage to include other proposals.
  • The Biden [and Mayorkas] Impeachment Inquiry. The House Republican pursuit of the president has fizzled, and the votes aren’t there to impeach the president, and everyone knows it. Still, the Speaker will have to tread carefully so as not to alienate former President Trump and his allies. Facing a criminal trial, Trump wants Biden impeached, and his supporters want a floor vote. But if the vote fails, Biden would be strengthened politically.
  • Foreign Intelligence Surveillance Act (FISA) renewal by April 19. Cutting a deal isn’t going to be easy as a real ideological divide across party lines exists.
  • Francis Scott Key Bridge/Disaster Supplemental. The Biden administration will ask for $1 billion to respond to the FSK emergency and other priorities.
  • Federal Aviation Administration (FAA) Reauthorization.
  • The Wyden-Smith Tax Bill. Although the measure passed the House in true bipartisan fashion, it is on the verge of collapse in the Senate. Republicans are openly encouraging filibuster because, at the very least, they believe they will have a better shot at tax policy next year when the Trump tax cuts are set to expire.
  • Rail Safety. Legislation boosting railway safety standards after the East Palestine, Ohio, train derailment cleared the Senate Commerce Committee nearly a year ago; whether the legislation could pass the full House and full Senate is an open question.
  • Like the tax bill, legislation forcing TikTok to divest from its Chinese parent company passed the House with a big bipartisan margin. Although the bill isn’t in as much danger as the tax bill, there are differences of opinion among top Democrats that could ultimately prevent it from moving forward in its current form. Plus, the jury’s still out on whether this effort carries any political benefits.

Thought Leadership from our Consultants, Think Tanks, and Trade Associations

Eurasia Group Sees Speaker Johnson Sweetening the Bitter Pill of Ukraine Aid for Republicans. House Speaker Johnson (R-LA) has begun to publicly outline a Ukraine aid bill that is likely to eventually pass Congress (80% odds), possibly as soon as the week of April 15. The Speaker has suggested numerous contingencies, including structuring the aid package as a loan, tying aid to a measure that would force the White House to reverse its recent pause on approvals for new LNG exports, and/or using seized Russian assets to pay for some of the aid. All these measures should be seen as efforts by Speaker Johnson to make a Ukraine aid bill palatable to at least a majority of House Republicans. For now, Democrats are balking at Johnson’s asks; the key question for Democrats is whether they need to compromise with Johnson or whether they believe he will ultimately put the bill on the floor if they call his bluff on threats not to advance it without legislative contingencies in place. At the same time, Speaker Johnson will find it difficult to accept Democratic demands for a clean bill, which would imperil his ability to survive a motion to vacate. Such far-apart negotiating positions could, in fact, scuttle the bill entirely in the coming weeks.

Trade Analyst Laura Chasen Notes the Launching of China’s WTO Challenge Against Biden’s IRA. China formally initiated WTO proceedings against the U.S. over tax credits for electric vehicles and renewable energy under the Inflation Reduction Act (IRA). China argues that the discriminatory nature of the IRA’s subsidy policies have “distorted fair competition, seriously disrupted the global new energy vehicle industry and supply chain, and violated WTO rules such as national and most-favored-nation treatment.” In its request for consultations, China estimates climate-related subsidies at $393 billion, and identifies five “measures at issue:” (1) the Clean Vehicle Credit; (2) the Investment Tax Credit for Energy Property; (3) the Clean Electricity Investment Tax Credit; (4) the Production Tax Credit for Electricity from Renewables; and (5) the Clean Electricity Production Tax Credit. In response, USTR Tai issued a statement in which she defended the IRA as a “tool for the United States to seriously address the global climate crisis and invest in U.S. economic competitiveness” and blamed China for continuing its “unfair, non-market policies and practices.” The proceedings begin with a request for consultations and allows 60 days (or more if agreed) for the parties to find a satisfactory solution, in the absence of which the dispute proceeds to litigation. Beijing’s accusation comes with a certain degree of irony as most industrialized countries, including China, have been subsidizing products involved in the energy transition to renewables. What’s more, the Biden administration, for all its complaints about China’s excessive subsidies and the WTO’s failure to rein them in, hasn’t filed a single case against Beijing and hasn’t tested whether the WTO could be effective against unfair subsidies. Now, not the U.S., but China will test the WTO’s utility against industrial subsidies. In fact, Beijing will use the case not just to try to force a change in subsidy rules but also to showcase it as the champion of the rules-based global trading system and protector of WTO rules. Although the WTO may rule in China’s favor, until the Appellate Body is functioning, the U.S. would appeal the ruling to assure the case doesn’t reach a definitive solution in the foreseeable future. Additionally, the U.S. could ignore a negative ruling and defend itself by invoking the national security exception.  

Politico Reports that USTR’s Trade Barrier Report Has Deepened its Feud with the Business Community. U.S. trade officials angered the business community by releasing an annual report on foreign trade barriers that puts less emphasis on the digital trade concerns and local content requirements that have been a major feature of previous reports. The approach is consistent with the Biden administration’s efforts to curb the power of big tech companies and its use of subsidies tied to purchases of domestic goods to fight climate change and compete with China. In a statement, USTR Tai acknowledged this year’s National Trade Estimate Report on Foreign Trade Barriers has received “unprecedented attention” because of changes intended to make the report adhere more closely to Congress’ intention when it created it in 1984; that has led to several barriers that were included in last year’s report being dropped from the current edition. Companies and trade associations also found it harder to get new trade barriers included. While the different tact won praise from advocacy groups who believe past reports too heavily reflected corporate interests, it has riled the business community, who warn that an increasing number of digital trade barriers pose a threat to one of the U.S.’s most successful and innovative sectors (the U.S. exported $626 billion in digital services in 2022, representing 70% of all U.S. services exports, according to the Computer & Communications Industry Association). Business also complained about the dearth of new trade agreements under the Biden administration and USTR’s reluctance to file new trade cases at the WTO or other trade forums. USTR officials justified their streamlined approach by saying it adheres to the type of trade barriers Congress intended to be listed when it created the report in 1984. However, industry argues, by dropping U.S. objections to trade violations, USTR risks giving a green light to foreign governments to raise barriers against U.S. exports or otherwise discriminate against U.S. companies.

 “Off the Record”

 K Street Leaders Think Tim Scott will be Trump’s Running Mate. A majority of K Street leaders—54%—believe Sen. Scott (R-SC) will be former President Trump’s running mate in 2024, according to a Punchbowl News survey of downtowners.* The top Republican on the Senate Banking Committee, Scott is seen as a rising star in GOP politics. A Scott VP pick would indicate Trump is aiming to appeal to as many Black voters as possible at a time when some are souring on President Biden’s performance. Based on the number of MAGA loyalists who’ve been sending all the right signals, Trump has a long list of possible contenders from which to choose. South Dakota GOP Gov. Noem is seen by K Streeters as Trump’s second-most likely running mate, while House GOP Conference Chair Stefanik (NY) came in third in the survey of top lobbyists. Respondents placed Arkansas GOP Gov. Huckabee Sanders and Sen. Vance (R-OH) in the fourth and fifth places respectively. *The Washington office participates in the survey. 

In Other Words

“If there were no offsets, we’d be really disappointed. I think we need to not deficit-spend to fund Ukraine. I also think that we need to have our own border prioritized. And I think Speaker Johnson shares that viewpoint,” Rep. Gaetz (R-FL) on his views on Ukraine aid, signaling potentially shifting goalposts around the Republican right’s asks for a Ukraine aid bill.

Did You Know

Of all the signers of the Declaration of Independence, only two became president—John Adams and Thomas Jefferson.  

Graph of the Week

Despite few new bills becoming law through Congress in 2023, the full-time influence industry had another record year as lawmakers started laying the groundwork for future measures on taxation and AI. Required public disclosures showed $4.27 billion in spending last year, up from $4.14 billion in 2022. The 3.1% increase was posted even as the pace of routine legislative activity slowed as both lawmakers and advocates started looking ahead to the next big things, such as the looming expiration of major provisions of the 2017 Tax Cuts and Jobs Act, work on semiconductor mandates, and preparation for the upcoming AI revolution.

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