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February 6, 2023

What to expect in Washington (February 6)

The State of the Union Address on Tuesday (February 7) night is the main event in Washington this week. As is the case with the FY2024 Budget proposal set for release on March 9, President Biden and his staff face decisions over whether to mention the aspirational policy goals on caregiving and other issues that were enumerated in prior speeches and budgets, whittled down in the House Build Back Better Act (BBBA), then left behind in the Inflation Reduction Act (IRA), with faint hopes at best in the divided Congress.

"President Biden's top economic aides have battled for weeks over a key decision for his State of the Union address on Tuesday: how much to talk about child care, prekindergarten, paid leave and other new spending proposals that the president failed to secure in the flurry of economic legislation he signed in his first two years in office," the New York Times (NYT) reported. "Some advisers have pushed for Mr. Biden to spend relatively little time on those efforts, even though he is set to again propose them in detail in the budget blueprint he will release in March. They want the president to continue championing the spending he did sign into law, like investments in infrastructure like roads and water pipes, and advanced manufacturing … "

A subsequent report said the President would call for bipartisan cooperation, widely considered as a tall order given House Republicans' inclination to challenge the Administration's decisions after two years of Democratic control: "But knowing that any such cooperation is unlikely from a caucus that claims a mandate to resist him at every turn, Mr. Biden's advisers expect him to try to draw a mature contrast … "

Similarly, Politico reported, "President Joe Biden is planning to use his second State of the Union address to paint the broad strokes of a likely campaign ahead, contrasting his notion of steady leadership with the newly elected, likely chaotic Republican House."

Biden "is expected to talk up legislative accomplishments and ways of moving his agenda forward while calling on Democrats and Republicans to find common ground … " The Wall Street Journal reported February 5. "The president will likely point to low unemployment and signs of easing inflation, while seeking to reassure the public amid fears of a recession."

In addition to the need to forge an agreement on addressing the debt limit that was hit on January 19, this traditional stretch of State of the Union then Budget proposal provides the President the opportunity to draw political distinctions with Republicans (and vice versa) on the long runway to the pivotal 2024 election, with the White House and control of both chambers at stake. Both the NYT and Wall Street Journal Saturday editions included stories suggesting, as Democratic National Committee members gathered in Philadelphia for a winter meeting, that thoughts of an alternate Democratic nominee in the election have mostly evaporated.

"Mr. Biden has solidified his standing within the party compared to a year ago, when his legislative agenda appeared stalled and Democrats quietly talked about potential primary challenges … " said the Journal. The report suggested some worries were assuaged by Republicans underperforming in the midterms, and that some observers see a 2020 rematch as inevitable.

"After Democrats far exceeded their own expectations in the midterms, and now that they are facing the possibility of a rematch … the bickering about Mr. Biden has subsided … " the NYT reported.

The President took the issue head-on in his remarks before the meeting: "We're just getting started. No, I'm telling you. I don't think many of you believed when I told you we were going get a lot done after the first year … I don't think you really believed that we were going to do as well as we did in the off-year election. But we got a lot more to do. We got a lot more to do. And, by the way, we paid for everything we did … I intend to get it done — more done. So let me ask you a simple question: Are you with me?"

A Post-ABC poll cited low enthusiasm for a 2020 presidential election rematch.

Debt limit — There hasn't been much movement on the debt limit issue since a cordial meeting between President Biden and House Speaker Kevin McCarthy (R-CA) on February 1. The Washington Post February 5 said emerging Republican ideas for demands in exchange for supporting a debt limit increase include:

  • Big cuts to agency spending
  • Changes to Social Security and Medicare
  • Undo Biden's IRS boost
  • Claw back covid aid
  • Border wall funding
  • New work requirements for federal programs
  • Go over the cliff

It said GOP Study Committee Chair and Ways and Means Member Kevin Hern (R-OK) wrote in a memo that the GOP should bring to negotiations a demand to "codify procedures to ensure the federal government honors critical obligations, such as federal debt payments, national security and veterans, Social Security, and Medicare."

Global tax — An EY Alert, "OECD/G20 Inclusive Framework releases Administrative Guidance under Pillar Two GloBE rules," is available here.

An opinion piece in today's WSJ said, "the global minimum tax deal actually gives tax havens an incentive to lower rates even further, and to grab any minimum top-up tax for themselves" and sets the US on a collision course with its international tax treaties, because of new rules on qualified domestic minimum top-up taxes (QDMTTs). The QDMTT, "under which the right to collect a top-up tax goes first to the country in which the undertaxed income is declared … means that tax havens with effective tax rates below the 15% minimum will be first in line to collect top-up taxes … tax havens can continue to cut their corporate tax rates to attract companies … [and] low-tax countries can continue to compete by lowering effective marginal tax rates through higher depreciation allowances, thereby attracting more physical capital investment."

Health — Politico reported on White House plans to highlight a bill by Rep. Andy Ogles (R-TN) to repeal the IRA including Medicare drug negotiation, which would be "one of the biggest Medicare benefit cuts in American history."

Congress — The House and Senate are in session. House business, which resumes at 2 p.m. today (votes postponed until 6:30 p.m.), includes consideration of H.R. 185, to terminate the CDC requirement for proof of COVID-19 vaccination for foreign travelers. The Senate will next convene at 3 p.m. on Tuesday, February 7, with a vote at 5:30 p.m. on the motion to invoke cloture on a US Circuit Judge for the Fourth Circuit nomination. Punchbowl reported, "The Senate continues to ease into 2023. There's one nomination vote on Tuesday. Both Democrats and Republicans will hold their respective party retreats on Wednesday."

The House Ways and Means Committee is holding a "Field Hearing on the State of the American Economy: Appalachia" today, February 6 (11 a.m.) at Allegheny Wood Products in Petersburg, WV. The Committee is holding an additional hearing on unemployment fraud.

The House Energy and Commerce Health and Oversight and Investigations subcommittees will hold a joint hearing on "The Federal Response to COVID-19" on Wednesday, February 8 (10 a.m.), with officials representing the FDA, NIH, CDC, and HHS.

The Senate Banking Committee on Thursday, February 9 holds a hearing on, "The State of Housing 2023."


Contact Information
For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
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   • Heather Meade (
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   • Adam Francis (