US-China Tensions. Not a day passes when lawmakers and administration officials do not talk about new or ongoing policy conflicts with China. This continued focus has given momentum to and raised public awareness of legislative efforts to address the China challenge. This week, a key House committee passed several bills to provide further US assistance to Taiwan. Meanwhile, the newest House committee—the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party—began its deliberations. It is likely to emerge as the key oversight panel this Congress on the US-China relationship. The committee wants to dive into a wide range of issues, many of which will be contentious and have never been explored in great detail before. That scrutiny will ensure that US-China policy conflicts are kept in the spotlight for the foreseeable future.
Given that the Congressional focus on China is bipartisan and that concern about China is a growing issue for voters, we expect the 2024 candidates (regardless of party) to be uniformly urging a tough US position on China and the issue to be a dominant one for the foreseeable future.
ESG Retirement Investments. Toward the end of the Trump administration, the DOL finalized a rule that would have mandated that retirement plan fiduciaries consider only financial factors when considering investments. The rule would have placed limitations on including ESG investments in retirement plans. This rule was subsequently revoked by the Biden administration, and the DOL issued a rule last November to put ESG investments on equal footing with other types of investments. However, with ESG having become a political lightning rod, this rule has drawn the ire of Republicans in Congress. This week, the House and Senate voted to approve a resolution to overturn the DOL’s ESG rule. Though the resolution will be vetoed by President Biden, it is notable that two Senate Democrats joined Republicans in voting for it. In addition, the issue has gained plenty of traction at the state level. Twenty-five Republican state attorney generals have pending litigation against the DOL’s rule and a growing number of Republican states (notably Florida) have passed or are about to pass bills to prohibit state investment funds from investing in funds or strategies that consider ESG factors.
Finally, the mobilization of political and legal opposition to the DOL’s rule sends a clear warning to the SEC as it finalizes its more complex and far more controversial corporate climate disclosure rule in the coming months.
Biden Budget Coming. President Biden will submit his fiscal year 2024 budget for the federal government next Thursday. This document will be a big story in Washington but not elsewhere. Presidents are required by law to submit budgets each year to Congress. While Congress may adopt some of its provisions, it will largely follow its own course in funding the government next year. Still, the budget proposal is important since it reflects the priorities of the President. The President’s budget and any budget resolution the House and/or Senate might pass also would tee up the battle over increasing the debt ceiling, which will heat up as we move toward the summer. Particularly given that debate about the level of federal spending and deficit reduction will be important issues in that battle, both parties aim to have credible budget proposals that can generate public support. If House Republicans are able to muster the support within their ranks to pass a budget resolution (this will be difficult), it may contain clues on how an agreement on a debt ceiling increase could be reached.
It would contain key deficit reduction priorities that House Republicans would want in any debt ceiling compromise.
Tax Increases? The President’s budget is very likely to include a range of familiar tax increases on higher-income individuals and corporations. The extra revenue gained from those proposed tax increases will offset proposed spending increases in the budget. That will enable President Biden to say that his budget proposal doesn’t increase the budget deficit. However, none of these tax increases will be enacted this or next year. Senate Democrats couldn’t pass them last year when they had control over both the House and Senate (thanks to Arizona Senator Kyrsten Sinema), and Republicans control the House this year.
These tax-the-rich proposals will be showcased next week during the budget release, but they will not advance.
For more, see Washington Weekly, 3 March, 2023.
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Approval date: 3/3/2023
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