The Senate confirmed various Biden administration nominees. The House passed a bill that would require increased corporate disclosure of environmental, social and governance (ESG) matters (see below) and a bill to repeal the 2002 authorization for the use of military force in Iraq. Both chambers passed a bill to designate Juneteenth as a federal holiday (see below).
The Senate will approve additional Biden administration nominees. The House will consider a bill to address age discrimination in the workplace and three Senate-passed measures that focus on reversing regulatory actions made by the Trump administration.
Infrastructure / Tax Increase Bill.
A bipartisan group of 20 Senators have agreed in principle to a $579 billion infrastructure bill that would be paid for without tax increases. At this point, it’s not clear whether there would be the needed 60 votes to advance this deal in the Senate. The compromise is now under review at the White House. We expect President Biden early next week to outline his views on the proposal, which will be important in determining support among congressional Democrats. While a deal on infrastructure could be a sign of greater bipartisan cooperation, it is more likely to be fleeting. Democrats likely still would try to pass a broader package through budget reconciliation covering spending not included in a bipartisan infrastructure bill. Democrats likely would pair their spending in this second bill with more controversial tax increases. We should have clarity in the next week on whether there actually will be a bipartisan bill.
The House this week passed a legislative package focused on corporate disclosure of environmental, social and governance (ESG) matters. The bill, which sets a broad framework on ESG disclosure and also has other measures on disclosure of climate risk and political contributions, only squeaked by in a 215-214 vote. The proposal is a non-starter with Republicans, who have been increasingly vocal in criticizing the Biden administration’s and Democrats’ efforts on climate change and ESG issues, accusing them of trying to politicize lending and investment decisions. As such, this bill and others focused on ESG have no path forward at this time in the Senate. While Congress is unlikely to pass legislation in this area, the SEC already has legal authority to increase corporate disclosure in this area. Indeed, this week, the comment period ended for a request for information from the SEC on climate disclosure. Although the SEC received some pushback from Republican officials and some industry groups, it is likely to issue a formal proposal on climate risk disclosure later this year.
Juneteenth Federal Holiday.
We now have a new federal holiday. The House and Senate passed a bill this week recognizing June 19 as “Juneteenth National Independence Day,” giving our country its 11th federal holiday. The holiday commemorates the date the last remaining enslaved people were emancipated by Union soldiers in Galveston, Texas in 1865. The bill was fittingly sponsored by two Texas members – a Democrat and a Republican – and the vote for passage was bipartisan. Most states already recognize this day of emancipation and, in fact, are recognizing it today (i.e. June 18). Texas has recognized the holiday for 41 years. Going forward, the holiday will fall on June 19.
Senator John Kennedy (R-LA) has joined a chorus of lawmakers pushing for changes to laws regarding retirement savings. He has one bill to allow for an increase in the contribution limit to IRAs from the current $6,000 to $12,000 for those under age 50 and $15,000 for those over age 50. The proposed expansion only applies to workers with employers that do not offer a retirement plan. Senator Kennedy also recently introduced legislation to increase the Required Minimum Distribution (RMD) age from 72 to 75. At the end of 2019, Congress passed a law to increase the RMD age from 70 ½ to 72. Senator Kennedy and other lawmakers believe the RMD age should be increased again. In fact, as we have previously discussed in this publication, we expect the House to pass this summer a package of retirement incentives that could contain this provision. Even in these partisan times, we remain optimistic about the prospects for passage of a bipartisan retirement savings bill.
Donor Advised Funds.
Donor Advised Funds (DAFs), which allow investors to donate to a charitable fund while maintaining control over the assets, have become more popular in the past few years. In fact, there are an estimated $140 billion invested in DAFs. While lawmakers generally appreciate the support DAFs provide to philanthropic causes, some lawmakers are concerned about the lack of a payout requirement for DAFs. This contrasts with private foundations, which must make annual contributions exceeding five percent of their assets. Senators Chuck Grassley (R-IA) and Angus King (I-ME) recently introduced a bill that would require DAFs to provide funding to charities within 15 years in order to receive the full tax benefit. While we don’t think the proposed changes to DAFs will be enacted into law this year, we will be keeping a close eye on the issue given the potential for this provision to be tucked into a broader tax package.
Government Funding Season.
The House and Senate will have dozens of hearings over the coming weeks on government funding for the next fiscal year of 2022, which technically begins October 1. While the annual goal is to pass all of the bills to provide funding for government agencies and departments by October 1, Congress hasn’t met this deadline for many years. Final funding bills will likely be enacted in December after a series of ”continuing resolutions” and threats of government shutdowns. Though we do not project a government shutdown later this year, the perennial drama has become tiresome. The big fight over government spending this year will focus on the size of the increase. Democrats are in charge on Capitol Hill, and they will likely act in sync with President Biden’s budget plans to increase discretionary domestic spending by just over 16%, while providing only a 2% increase for defense spending. The expected rate of spending this year on government agencies (which does not include the so-called “entitlement” programs or interest on the national debt) is expected to be $1.5 trillion, a significant increase from last year’s level. However, it is dwarfed by the separate spending bills that have been debated recently, including the already-enacted $1.9 trillion COVID relief bill and the administration’s proposed $4 trillion of spending for infrastructure and broader social programs. Higher spending levels continue to be a major theme in Washington.
Competition Policy Legislation.
Reflecting growing bipartisan concern about the market power of large tech platforms, lawmakers in just the last week have put forward a flurry of legislative proposals. House Judiciary Committee members recently introduced a suite of bipartisan bills that (among other things) would ban the largest tech platforms from self-preferencing their products and services and acquiring start-up competitors as well as increase regulators’ authority to pursue anti-trust actions against these companies. This week, two leading Senate Republicans on the Senate Judiciary Committee introduced a bill that would boost funding for antitrust enforcement, move all such enforcement to the Department of Justice and give regulators greater authority in blocking mergers. Despite the clear bipartisan interest and some bipartisan agreement, it will remain challenging for lawmakers to reach agreement on a set of proposals that can become law. Also this week, the Senate approved the nomination of Lina Khan, a leading tech critic, to join the Federal Trade Commission (FTC), at which time the Biden administration promptly appointed Ms. Khan to head the agency. While this move is a way for the Biden administration to signal a tough stance on these issues, the administration still needs to name nominees for a third and likely decisive Democratic commissioner on the FTC and for the anti-trust head at the Department of Justice. These positions will be key in determining exactly how aggressive the administration will be with big tech companies and on anti-trust policy more generally.
A Final Word
A Final Word
Party Switching in the Senate?
With the left wing of the Democratic party applying significant pressure on Senator Joe Manchin (D-WV) over the past few weeks (particularly for his opposition to eliminating the filibuster), speculation has mounted over whether the moderate Senator from a very conservative state would flip his party affiliation from Democrat to Republican. Such a change would be seismic in the Senate. Control of the Senate would immediately go to Republicans. The Biden administration’s legislative agenda effectively would be derailed (budget reconciliation measures and an elimination of the filibuster would no longer be a part of the Senate’s agenda this or next year). Having said all of this, we don’t expect Senator Manchin to flip parties. He values his independent role and has resisted overtures from Republicans throughout his long political career. Nevertheless, the likely persistence of these rumors will provide a frequent reminder of the fragility of Democrats’ control of the Senate and overall legislative agenda.