Washington Weekly: Baby Formula Demand

Immigration and May 23.

A federal judge is set to make a big decision in the next couple of days on the future of so-called Title 42, a plan originally put in place by President Trump in 2020 to deny many asylum seekers entry into the US due to public health and safety concerns (Covid was cited as the primary reason). The Biden administration has made the decision to repeal the Title 42 plan and allow more asylum seekers into the US beginning on May 23. A coalition of states contested the decision, arguing the decision would cause undue harm and burdens. A federal judge temporarily blocked the Biden administration’s plan and will issue a final opinion by Monday, May 23. If the court acts against those states and allows the asylum restrictions to be repealed, localities (and voters) concerned with rising levels of illegal immigration along the southwest border will howl in protest. If the states’ legal challenge is accepted and the restrictions remain, those who want the asylum process to function without roadblocks will loudly object. Whether it’s through the actions of the court or of the Biden administration (in a partial reversal), we believe the outcome will be a continuation of the Title 42 asylum restrictions until at least the end of this year (after the elections).

Restaurant Aid.

The Senate couldn’t muster the needed 60 votes to debate and vote on legislation that would provide additional support for restaurants and other small businesses that endured substantial revenue loss during the pandemic. The House already has passed a similar bill that provided a broader $55 billion in relief package to pandemic-affected businesses, including $42 billion to the Restaurant Relief Fund (RRF) for applicants who did not receive earlier pandemic funding from the federal government. Only a third of restaurant applicants that applied had received grants before funding ran out. The rejected Senate bill would have provided $40 billion to the RRF and $8 billion to various other small businesses, including fitness centers, live event venues, and minor league sports teams, among others. While the bill did not have enough bipartisan support to advance in the Senate this week, we expect supporters of the measure to try again later in the year or to incorporate elements of this bill into other funding legislation (also later in the year).

US-China Technology Competition Bill.

As we have reported before, both the House and Senate have passed separate versions of legislation to enhance US capabilities in science and technology, including greater domestic production of semiconductors, with an eye towards competing more effectively with China in these critical areas. Over 100 members of the House and Senate have the difficult task of reconciling the many differences between the two bills. While there is strong bipartisan support for the core efforts of increasing US semiconductor production and bolstering research, many contentious items still need to be resolved. These include labor and environmental provisions in the sprawling House bill and a Senate proposal that would roll back some of the Trump-era tariffs on China. A final compromise bill, if one can be crafted, is likely to be the last bipartisan bill that could be passed this year. Dozens of provisions are being negotiated at this time, but the following two impactful items have gotten our attention. 

• Outbound Investment Review.
  One key issue under discussion is whether to establish a new government committee to review (and potentially disapprove) overseas investments in “countries of concern.” Given that the US already has a government body (the Committee on Foreign Investment in the United States (CFIUS)) that assesses the national security implications of foreign investment transactions in the US, this proposal, which was included in the House bill but not the Senate version, has been called “CFIUS in reverse.” Since it would mean a new layer of scrutiny on investment and supply chain decisions for companies in a wide range of “critical” sectors, it faces strong opposition from the business community. While the proposal could be watered down, there is a decent chance that some form of outbound investment review will make it into a final agreement if one is reached.

• Research and Development Tax Credit.
  About two months ago, we wrote about efforts by a bipartisan group of lawmakers to allow research and development expenses by businesses to be deducted in the year incurred versus amortized over several years. This would be impactful to many companies in the defense, tech and pharmaceutical sectors. Even though a clear majority of lawmakers support this tax provision to encourage R&D, its Inclusion in the competition bill is not a slam dunk. Many progressive Democrats don’t want to give a tax break to businesses without other tax changes to increase taxes on corporations or make the child tax care credit fully refundable. Nonetheless, this effort is gaining steam and would be a boon to the aforementioned sectors if enacted.

Gas Mileage and Tax Deductions.

A group of 18 House Democrats recently sent a letter to the IRS Commissioner asking him to increase the rate used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. The current rate of 58.5 cents per mile was already increased by 2.5 cents at the end of last year. Lawmakers argue that this increase should be further adjusted to reflect higher inflation. They also note that the IRS has previously exercised its authority for a mid-year increase to provide relief from high gas prices back in 2011. Such a change would not help every American who is struggling with high gas prices, but it would provide relief to many small businesses, self-employed and rideshare drivers.