Legislative Update: Congress Passes Bipartisan Bill Averting Debt Default

President Joe Biden signed the Fiscal Responsibility Act (FRA, H.R. 3746) on June 3, suspending the debt ceiling for another two years just two days before the U.S. Treasury said it would default on its financial obligations.  After what essentially became a political game in brinksmanship, the White House and Republicans etched out a bipartisan deal that caps defense and non-defense spending for two years.

The legislation was quickly drafted and passed through the House and Senate in less than a week.  The House passed the bill in a 314-117 vote on May 31, after Democratic and Republican centrists banded together against the more conservative and progressive factions in their parties that opposed the bill.

The next day, the Senate voted to pass the bill by 63-36. Ahead of the vote on final passage, the Senate rejected 11 amendments, nearly all from Republicans. Senate Majority Leader Chuck Schumer (D-NY) and Minority Leader Mitch McConnell (R-KY) also had to win over defense hawks and top appropriators who sought a commitment on a supplemental spending bill. They pledged that the debt limit package wouldn’t preclude consideration of emergency supplementals, whether for defense and national security-related purposes or domestic needs.

The package also includes a provision to incentivize Congress to pass the 12 annual appropriations bills by the end of the calendar year. If the appropriations bill is not passed by December 31, 2023, a Continuing Resolution (CR) would automatically kick in on January 1, 2024, along with a 1 percent cut in discretionary spending for defense and nondefense budgets.  Passing these bills will be no small feat, especially after the delays and postponements already encountered this year.

The FRA did not include some House GOP debt limit package provisions that would have repealed clean energy programs enacted last year as part of the Democrats’ climate, health, and tax law. The legislation includes some provisions meant to streamline the permitting process related to infrastructure projects requiring National Environmental Policy Act (NEPA) review.  These provisions narrow the scope of agency considerations to reasonably foreseeable environmental impacts, establish time limits for agency reviews, and allow project sponsors to contribute to the environmental review process. These modifications are the first significant reforms to NEPA since it was enacted in 1982 but didn’t go as far as the House Republicans called for. The agreement does not reduce the statute of limitations to seek judicial review, narrow down who can seek judicial review or other judicial remedies, or roll back certain actions taken by President Biden.

The agreement includes provisions for a study on interregional transmission and energy storage projects in the list of projects eligible for expedited permits. It also approves the remaining permits for the Mountain Valley gas pipeline, a project supported by Senators Joe Manchin (D-WV) and Shelley Moore Capito (R-WV).

Despite these changes, lawmakers intend to pursue broader reforms to the federal permitting process. Speaker Kevin McCarthy has stated that further negotiations will take place to expand on the permitting provisions passed in the FRA. McCarthy has assured President Joe Biden and Minority Leader Hakeem Jeffries (D-CA) that he is committed to moving forward with a more comprehensive permitting package.

The FRA also claws back unspent pandemic aid, redirects some IRS funding for other uses, ends a pause on student loan repayments, and toughens some work requirements for certain food stamps and cash assistance recipients.

Upcoming Legislative Agenda Worth Noting

Congress is working a tight schedule for the next couple of months due to the two-week Fourth of July recess starting the week of June 26. Members will be in Washington, D.C., for only a few weeks in July, then return to their home states and districts for the month of August.

Speaker McCarthy is also dealing with a protest from his party’s right flank that defeated a procedural vote to move forward on a package of GOP priority bills. McCarthy had to cancel votes for the rest of this week to discuss the situation with the dissenters. House Freedom Caucus members are angry about the negotiated debt ceiling package and how McCarthy worked with Democrats to bring the FRA to a vote.

This week’s votes were inconsequential given that they were bills that were not likely to become law. Still, they may foreshadow the delicate balance Speaker McCarthy will have to take as he works through future bills and the agenda, especially if he can’t get the support of the Caucus to advance special rules that allow legislation to come before the House for a vote. The alternative would mean he would need  Democrats to help pass a rule, which would require the Speaker to meet more of their demands and likely only inflame the tensions with the Freedom Caucus more.

Appropriations, Farm Bill, and Other Stalled Authorizations

Expect an intense push to get some of the stalled FY24 Appropriations bills back on track after markups have been postponed, especially with the looming threat of a 1 percent sequestration if they aren’t passed by the end of the year.  House Appropriators are reportedly planning to kick off markups starting the week of June 19.  The debt ceiling crisis has slowed down the work on several bills, including the Farm Bill, which is set to expire on September 30, 2023. House and Senate panels are also working to pass the annual defense authorization and reauthorize the Federal Aviation Administration and the Foreign Intelligence Surveillance Act, among other measures.

Business Taxes

Ways and Means lawmakers are discussing reversing some business-related tax changes from the 2017 tax law.  Last year, the formula to determine the 30 percent cap on the business interest deduction changed, which further limited the deduction.  Also, the immediate expensing of R&D costs switched to a five-year deduction.  Congressional Republicans have been pushing to suspend these changes at least temporarily.  However, Democrats want to use any changes in corporate taxes as a means to expand the Child Care tax credit.  Republicans haven’t said yet whether they will try to extend any of the tax cuts for individuals scheduled to expire at the end of 2025 this year.

Senate EPW to Examine Impacts of Plastic on EJ Communities

Senate Environment and Public Works Subcommittee on Chemical Safety, Waste Management, Environmental Justice, and Regulatory Oversight will be holding a hearing on June 14 on the impacts of plastic production and disposal on environmental justice communities.

Presidential Veto on GOP EPA Regulations

President Joe Biden has threatened to veto two House GOP bills if they receive floor consideration. The two bills’ paths are currently uncertain after members of the House Freedom Caucus voted with Democrats to reject the rule governing debate on the legislation. The first bill, H.R. 277 (Regulations from the Executive In Need of Scrutiny Act), would require Congress to approve any rule from the EPA and other agencies costing more than $100 million. Biden argues that this bill would undermine agencies’ efforts and prevent the implementation of critical safeguards. The second bill, H.R. 288 (Separation of Powers Restoration Act), seeks to revoke the Chevron deference, which allows agencies to interpret ambiguous statutory language. The administration opposes this bill, stating that it would undermine the separation of powers and fail to respect agencies’ expertise.

The Supreme Court is also set to hear a case that could impact Chevron deference, which was established in a 1984 case. The doctrine states that courts should defer to agencies’ “reasonable” interpretations of ambiguous statutory language. Critics, including some on the Supreme Court, believe that too much deference has been granted to the agencies, and over the years it has been used that conjure up policies (in some cases major policies) that the law-making branch never intended.

Strengthening Rail Safety

Senate Majority Leader Chuck Schumer listed rail safety as one of five bipartisan legislative efforts he intends to work on in this work period. Back in April, he called for an intensive audit of all Class I Freight railroads, citing concerns about the industry’s safety culture. In response to Schumer’s request, the Federal Railroad Administration (FRA) announced on June 1 that would will conduct a broad assessment of Norfolk Southern’s safety culture and perform similar assessments on other Class I railroads. The FRA intends to release reports on these assessments and identify common issues and trends across the industry.

Schumer has criticized the freight rail industry for prioritizing profits over safety, pointing out downsizing of the workforce, stock buybacks, and the introduction of automation as contributing factors to safety incidents. Schumer sees the FRA’s audits as a necessary step to address the industry’s systemic problems and ensure safer rail travel for workers and communities.  Schumer emphasizes the importance of preventing tragedies like the derailment in East Palestine, Ohio, and calls for robust action from rail companies in response to the FRA’s recommendations.