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April 19, 2024

What to expect in Washington (April 19)

During the second speech of a three-stop swing through Pennsylvania — widely viewed as a crucial battleground state in the presidential election — President Biden said the Inflation Reduction Act (IRA) was "the most significant law taking on climate change ever anywhere in the world," and, passed only with Democratic votes, includes "billions of dollars in investments in industries of the future, including clean American steel." Speaking in Pittsburgh April 17, he said an investment in clean manufacturing announced last month "included up to $1.5 billion in six clean steel projects across America." [The Energy and Treasury departments March 29 announced $4 billion in tax credits for over 100 projects in 35 states to accelerate domestic clean energy manufacturing and reduce greenhouse gas emissions at industrial facilities.]

Referring to the IRA, the President said Republicans "want to repeal that law," and "it would cut the jobs, if you repeal the law." Democrats have celebrated the IRA as an accomplishment and are increasingly looking to highlight the law ahead of the elections. Republicans have, and are expected to continue to, propose repeal of some of the credits to pay for other priorities, including in 2023 GOP-only debt limit and tax bills that weren't enacted.

In a related development, on April 17, the Biden administration called on the United States Trade Representative (USTR) to consider tripling the existing 301 tariff rate on certain foreign steel and aluminum among actions to respond to foreign trade practices, "including flooding the market with below-market-cost steel, [which] are distorting the global shipbuilding market and eroding competition."

Separately, the Administration is expected to make an announcement today about the recipients of around $2 billion in clean energy tax credits, Bloomberg reported.

Tax — As the House-passed Tax Relief for American Families and Workers Act (H.R. 7024) business tax and Child Tax Credit (CTC) bill remained stalled in the Senate, Tax Notes April 18 reported Finance Committee Ranking Member Mike Crapo (R-ID) repeating a point made by Senator Thom Tillis (R-NC) in March: that the Employee Retention Credit crackdown revenue offset may set a precedent for 2025 tax provisions to have a pay-for. "I just wanted to make sure that if the bill goes, if we were able to work out our differences and get something done, I'm trying to be sure that it's very clear that this is not a precedent … " Crapo said. "There was concern, and I expressed this, that a precedent would be set that pro-growth, which is my descriptive of it, pro-growth tax policy requires an offset," Crapo said. At least one Democrat dismissed the argument. "'It's remarkable that Republicans actually say this,' House Ways and Means Committee ranking member Richard E. Neal, D-Mass., said of the argument that tax cuts pay for themselves, which he called 'so dated.' That position has 'been dismissed by every mainstream economist in America,' he added."

Trade — On April 17, the House Ways & Means Committee approved trade bills during a lengthy markup, addressing issues including:

  • the Generalized System of Preferences (GSP) program (H.R. 7967, approved 25-17) providing duty-free tariff treatment to products imported to the US from developing countries, which would be reformed under the bill;
  • the treatment of imports from certain nations for purposes of the de minimis rule that keeps imports under $800 duty- and tax-free (H.R. 7979, approved 24-18); and
  • involvement by prohibited foreign entities for purposes of the new clean vehicle credit (H.R. 7980, approved 22-18).

The future of the measures, which leave off the Miscellaneous Tariff Bill (MTB) that typically rides in trade packages, is unclear. Democrats pushed for inclusion of Trade Adjustment Assistance (TAA) in the GSP bill, which was the basis of their opposition. Rep. Earl Blumenauer (D-OR) pushed for his Import Security and Fairness Act (H.R. 4148) to fully prevent certain nations from using the de minimis rule for imports, in the place of H.R. 7979, which a release said "ends De Minimis evasion of trade enforcement tariffs, improves transparency and data collection on De Minimis entries into our supply chains, and adds penalties for those who violate U.S. law through De Minimis entries." Rep. Darin LaHood (R-IL) said he hoped the Committee would act on an MTB bill which, like GSP, expired at the end of 2020.

Members of both parties — trade is as much a regionally focused issue as it is partisan — have expressed concerns over what they say is an unambitious Biden administration trade agenda. During a Senate Finance Committee hearing with USTR Katherine Tai April 17, Chairman Ron Wyden (D-OR) described various "unfair subsidies and practices" in other nations that are "hurting workers and companies" in the US. "There's a lot more USTR can be doing, in my view, with the tools it has," he said. Chairman Wyden also called for action to "expand opportunities in the global market for American exporters across all our industries."

Senator John Thune (R-SD) asked Ambassador Tai about "easy" Free Trade Agreements (FTA) such as with the UK. "I think there are no easy FTAs," she said. "I don't know if you followed, but the UK and Canada have been negotiating an FTA that they stopped negotiating because the UK won't talk agriculture market access." In response to Senator John Cornyn's (R-TX) assertion that "the Administration is not currently negotiating any free trade agreements," Ambassador Tai said, "Not in the traditional sense … the traditional FTAs that we negotiate continue to pit Americans against Americans, and sectors against sectors in a way that is entirely unsustainable, as we've seen in our recent experience." Senator Cornyn said, "The point is that absent trade agreements there is no enforcement mechanism to make sure that American farmers, businesses and workers aren't harmed by denial of a market access to these countries that are denying that access for imposing huge subsidies, to prefer their products as opposed to ours."

Data privacy — On April 17, the House Energy and Commerce Subcommittee on Innovation, Data, and Commerce held a hearing entitled, "Legislative Solutions to Protect Kids Online and Ensure Americans' Data Privacy Rights." During the hearing, discussion centered on the importance of passing data privacy legislation that protects individual rights, particularly related to children. Several pieces of legislation were discussed, with most of the discussion focused on the American Privacy Rights Act (APRA), Kids Online Safety Act (KOSA) and the Children and Teens' Online Privacy Protection Act (COPPA 2.0). Lawmakers heard testimony from several witnesses who emphasized the importance of passing legislation such as APRA. However, many also provided recommendations to the Subcommittee to improve the bill further.

National security supplemental — The House is planning to be in session this weekend for votes on a national security supplemental after Speaker Mike Johnson (R-LA) split off the ingredients of the Senate measure into separate bills on funding for Israel, Ukraine, and Taiwan and other aid. When considered as one, the bills approximate the national security supplemental approved by the Senate in February, though Ukraine aid is structured as loans rather than grants at the request of some Republicans. Speaker Johnson — whose tenure continues to be threatened by the dissatisfaction of a few conservative members who can wield the motion to vacate as a tool to remove him from the position — is attempting to navigate crosscurrents of support in the House, with some Republicans opposed to Ukraine funding and the majority party likely to need the votes of Democratic members for passage. A fourth bill is a vehicle for various Republican priorities. The intent is to combine the four bills into one package to be sent to the Senate. A vote on border security provisions is expected in conjunction with, but kept separate from, the foreign aid proposals.

The House and Senate are scheduled to be in recess next week. The Senate would have to vote on any House-passed package that is different from the national security supplemental they passed in February, and it's unclear whether they would be brought back during the planned recess next week. Senator Rand Paul (R-KY) has indicated he could drag out the process. What to Expect in Washington will not be published while Congress is away.

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Washington Council Ernst & Young