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March 3, 2023

What to expect in Washington (March 3)

President Biden told House Democrats at their retreat in Baltimore March 1 that he won't let Republican leaders portray themselves as fiscal conservatives that are blameless in amassing the nation's debt, and Democrats as spendthrifts. "We're not going to sit here and be lectured by those folks about fiscal responsibility. Nearly 25% of the entire national debt, which took over 200 years to accumulate … was added by my predecessor in four years," he said.

The President repeated previous comments that his FY2024 Budget to be released on Thursday, March 9 would reduce the deficit by $2 trillion through proposals that will stand in contrast to Republicans' unspecified spending cuts. House Speaker Kevin McCarthy (R-CA) "says he won't raise taxes on anyone, on the wealthy or big corporations, he just wants to cut programs, and what I suggested was, instead of making threats about the debt, which would be catastrophic, let's just lay out our budgets," the President said. Punchbowl has reported that House Republicans are releasing their Budget Resolution in April, but that McCarthy met with House Budget Committee Chairman Jodey Arrington (R-TX) this week. "It would be interesting to see what they want to cut and what their numbers add up to," President Biden said.

Not all Democrats agree on holding a confrontational posture with Republicans on the debt ceiling without a conversation about the deficit. Senator Joe Manchin (D-WV) took to the Senate floor March 2 to say, "My Democratic friends don't want to say a word about our out-of-control spending and are outright refusing to even talk to Republicans about reasonable, responsible reforms. They want to pass a 'clean' debt ceiling bill without a commitment to fix anything. My Republican friends refuse to offer any specifics, and some have recklessly threatened default, which is something that absolutely has to be off the table. We will never solve this problem by each party running in the opposite direction."

He said on Fox News: "I can assure you can't basically just tax your way out of debt. You can't borrow your way out of debt, and you can't cut your way out of debt. You can do a combination of all of those to a certain extent and manage your debt."

The Senate Finance Committee approved the nomination of Daniel Werfel to be IRS Commissioner on March 2. The vote was 17-9, with three Republicans voting with Democrats in support: former Chairman Chuck Grassley (R-IA) and Senators Bill Cassidy (R-LA) and Todd Young (R-IN). Senator Thom Tillis (R-NC) supports the nomination but missed the Committee vote.

The nomination, with bipartisan backing, is expected to be considered on the floor soon and not impeded by attendance challenges. This week, VP Harris has had to break 48-48 ties due to medical absences of Senator John Fetterman (D-PA) and Dianne Feinstein (D-CA) and the death of Senator Jeff Merkley's (D-OR) mother. On the GOP side, Senator Michael Crapo (R-ID) has been out. The Senate is done voting for the week, with a procedural vote on a judicial nomination set for 5:30 p.m. on Monday, March 6.

Senator Chris Van Hollen (D-MD) and 10 other Democrats March 2 introduced the Disclosure of Tax Havens and Offshoring Act (S. 638) to amend the Securities Act of 1934 to require public companies to disclose their financial reporting on a country-by-country basis. "Ensuring public access to this information would both provide investors the tools they need to understand the tax structures and risks of the businesses in which they invest and give Americans insight into the extent to which the tax system is incentivizing the outsourcing of American jobs or enabling corporations to dodge U.S. taxes," a press release said.

Today is the start of the Federal Bar Association 2023 Tax Law Conference, including a legislative panel and keynote remarks by Tom West, Deputy Assistant Secretary, U.S. Department of the Treasury. Additional sessions are being held virtually next week.

ESG — The Senate March 1 passed, 50-46, a Republican-backed resolution (H. J. Res. 30) rolling back a new Department of Labor (DOL) regulation clarifying that retirement plan managers can consider environmental, social and corporate governance ("ESG") factors when making investment decisions for those plans. The resolution, sponsored by Mike Braun (R-IN) in the Senate and Rep. Andy Barr (R-KY) in the House, uses the mechanism of the Congressional Review Act (CRA), which allows repeal resolutions to pass the Senate under an expedited process that requires only a simple majority for passage. President Biden has said he will veto the measure, making it the first veto of his presidency.

Financial Services — The House Financial Services Committee on Tuesday (February 28) held its first markup of the 118th Congress, approving Chairman Patrick McHenry's (R-NC) financial data privacy bill along party lines, along with two bills to expand the president's powers to secure critical medical supplies during health emergencies and a number of bills related to China and Taiwan. While Chairman McHenry has identified financial data privacy as an area where he hoped for bipartisan accomplishments, the partisan divide over his Data Privacy Act, which was partly attributable to its preemption of more aggressive state laws such as California's, casts doubt on its prospects for success in the Democratic-controlled Senate.


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Washington Council Ernst & Young
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