Congressional Action

We’ve seen this movie before. Conservatives, eager to bend the curve on federal outlays, are preparing to use the only leverage they have (their votes) while Senate Majority Leader Charles Schumer is talking about “House Republican extremists” causing a government shutdown. In most people’s eyes, Republicans have “lost” every shutdown fight since 1995. So why are conservatives back at it again?

Beyond their preference for a smaller government, conservatives are not alone in seeing runaway spending as a dire threat and will admit that their own party shares the blame. Our political system is structurally ill-equipped to turn off spending once it begins. A new estimate that the deficit will double to $2 trillion this year and Fitch Ratings’ recent downgrade of government credit are the most recent reminders that the problem is real. Efforts to rein in the deficit date back at least to the Gramm-Rudman-Hollings agreement in 1985 and include proposed Constitutional amendments, the Budget Enforcement Act of 1990 (PAYGO), the Line Item Veto Act of 1996, the Balanced Budget Act of 1997, a “sustainable growth rate” for Medicare reimbursements, George W. Bush’s plan to make Social Security sustainable, the 2010 Simpson-Bowles Commission, the 2011 ‘Supercommittee,’ sequestration, the discretionary spending caps in the Budget Control Act of 2011, revenue-producing tax increases, and growth-generating tax cuts.

None of it worked and the government is $32 trillion in debt. Congress rarely makes tough decisions without an action-forcing mechanism and conservatives want to be that mechanism. The House’s two conservative caucuses, the Freedom Caucus and the larger Republican Study Committee have identified similar priorities. Most broadly, they do not want the Covid-era surge in spending to serve as the baseline for future spending. The FY 2023 omnibus, which was called a “monstrosity” by Speaker Kevin McCarthy, passed the House with almost no GOP support in the very last days of the Democrats’ majority. Conservatives want to return to pre-Covid levels or lower. With $115 billion in rescissions, House appropriators have offered budgetary authority at pre-pandemic (FY 2022) levels, but conservatives say this is a gimmick that won’t reduce actual outlays. On this point, the Heritage Foundation says, ‘This represents an unprecedented expansion of rescissions as a budgetary tool to add spending within appropriations caps.’ Many conservatives also see the President’s emergency supplemental request as an end-run around the debt-limit agreement and have a longstanding position that supplementals should be offset.…

Continue Reading What Conservatives Want From the Spending Spat

On September 6, 2023, U.S. Senator Bill Cassidy, ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, published a white paper addressing artificial intelligence (AI) and its potential benefits and risks in the workplace, as well as in the health care  context, which we discuss here.

The whitepaper notes that employers…

Following our recent overview of key topics to watch in the National Defense Authorization Act (“NDAA”) for Fiscal Year (“FY”) 2024, available here, we continue our coverage with a “deep dive” into NDAA provisions related to the People’s Republic of China (“China” or “PRC”) in each of the House and Senate bills.  DoD’s focus on strengthening U.S. deterrence and competitive positioning vis-à-vis China features prominently in the 2022 National Defense Strategy (“NDS”) and in recent national security discourse.  This focus is shared by the Select Committee on Strategic Competition Between the United States and the Chinese Communist Party (“Select Committee”), led by Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL). 

It is no surprise, then, that House and Senate versions of the NDAA include hundreds of provisions—leveraging all elements of national power—intended to address what the NDS brands as China’s “pacing” challenge, including many grounded in Select Committee policy recommendations.  Because the NDAA is viewed as “must-pass” legislation, it has served in past years as a vehicle through which other bills not directly related to DoD are enacted in law.  In one respect, this year is no different—the Senate version of the NDAA incorporates both the Department of State and Intelligence 2024 Authorization bills, each of which includes provisions related to China. 

To get a flavor of the approach to China in this year’s NDAA, look no further than the “Ending China’s Developing Nation Status Act” in Section 1399L of the Senate bill, which would require U.S. opposition to granting China “developing nation” status in treaties under negotiation and by international organizations of which the U.S. and China are members, such as the World Trade Organization.  Classification as a “developing nation” affords China access to preferential loans and other economic benefits intended to increase trading opportunities, notwithstanding its current status as an upper-middle income country (as determined by the World Bank), and the world’s second largest economy, trailing only the U.S.  Not to be outdone, Section 155 of the House bill contains a provision mandating expedited deployment of advanced radars to track high-altitude balloons and other potential threats to the U.S., in direct response to the incident earlier this year in which a Chinese balloon flew across the U.S. before being shot down by the Air Force.

Given these provisions, and many more (some we discuss below), this year’s NDAA strikes us as different.  It incorporates many more China-related provisions and many of these would impose greater obligations on government contractors to limit their interactions with the PRC and entities affiliated with the PRC Government.  Whether the laundry list of China-related provisions in the current NDAA survive, and in what form, will be determined by the conference process currently underway.  But these provisions have the potential to impose significant near-term burdens on contractors—requiring them to assess their obligations and make adjustments to ensure compliance.  Indeed, these provisions may be far more disruptive than requirements imposed by prior year NDAA China provisions that contractors have navigated by reassessing supply chains and increasing due diligence.  All government contractors and suppliers to government contractors with any connection to China would be well advised to monitor how the NDAA conference approaches resolution of this legislation over the coming months.…

Continue Reading Not to Be Outpaced: NDAA Presents Measures Addressing China

Last week, a bipartisan, bicameral group of legislators introduced the Retroactive Foreign Agents Registration Act (“RFARA”) in the U.S. Congress.  Led by Chairman Mike Gallagher (R-Wis.) and Ranking Member Raja Krishnamoorthi (D-Ill.) of the U.S. House Select Committee on the Chinese Communist Party, the bill would amend the Foreign Agents Registration Act (“FARA”) to clarify…

On Thursday, the Senate passed two bills — The Lobbying Disclosure Improvement Act (S. 264) and Disclosing Foreign Influence in Lobbying Act (S. 289) — that attempt to increase disclosure of Foreign Agents Registration Act (“FARA”) activity through amendments to the Lobbying Disclosure Act (“LDA”).  The Senate passed versions of these…

Today, Senate Majority Leader Chuck Schumer (D-NY) unveiled a new bipartisan proposal to develop legislation to promote and regulate artificial intelligence. In a speech at the Center for Strategic & International Studies, Leader Schumer remarked: “[W]ith AI, we cannot be ostriches sticking our heads in the sand. The question is: what role [do] Congress…

Congressional scrutiny of the U.S. relationship with China marched forward this week as Representatives Rosa DeLauro (D-CT), Bill Pascrell (D-NJ), and Brian Fitzpatrick (R-PA) reintroduced a new and expanded version of the National Critical Capabilities Defense Act (NCCDA)—legislation to create a national security review process for “outbound” transactions by U.S. companies investing overseas.

The bill…

Late last week, the Committee on Oversight and Accountability published the House of Representative’s “Authorization and Oversight Plans.” The massive 241-page report is required by the House rules, and the Oversight Committee’s report collects the individual oversight plans that each standing committee of the House is required to create at the start of a new Congress. The report is the most comprehensive collection of the committees’ plans for investigations in the coming Congress.

This year’s report reflects a significant shift in priorities, reflecting the change in control of the House to the Republicans. For example, the Oversight Plan speaks to expected oversight of the Administration’s alleged “collusion” with “Big Tech,” the “politicization” of the federal government, China’s interactions with the American economy and national security, and the federal government’s response to the COVID-19 pandemic and ongoing prevention efforts. A repeated priority throughout the plans is seeking out and minimizing instances of “waste, fraud, and abuse” in government programs, which includes scrutinizing the recipients and use of government funds.

The plans of the four most active oversight committees—Oversight and Accountability, Judiciary, Energy and Commerce, and Financial Services—stand out in particular for their focus on the private sector and the way companies interact with the federal government. Other committees, including the Foreign Affairs Committee, have outlined ambitious oversight agendas as well. Of note, the Foreign Affairs Committee has added a Subcommittee on Oversight and Accountability “to undertake more complex oversight and investigative activities,” including on issues related to China, the conflict in Ukraine, the United States’ withdrawal from Afghanistan, and the origins of the pandemic. The Oversight Plan does not include the oversight objectives of the newly created House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, which we explored in a separate alert.

The following summarizes key portions of the Oversight Plan with implications for the private sector and other individuals and entities that routinely interface with government:…

Continue Reading Newly Published “Oversight Plan” Outlines the House’s Investigative Priorities

On March 21, 2023, the Department of Commerce (“Commerce”) published a Notice of Proposed Rulemaking (the “Commerce Proposed Rule”) to implement certain provisions of the CHIPS and Science Act of 2022 (“CHIPS Act”) that place restrictions on certain activities of businesses receiving federal funding pursuant to the CHIPS Act (“Commerce Guardrails”).  On the same day…

Funding incentives under the U.S. Inflation Reduction Act of 2022 (IRA) to transition to a clean energy economy are unleashing opportunities for key U.S. allies and partners around the world. In particular, tax credits exceeding 10% of the price of average electric vehicle (EV) sold in the United States are leading to new investments in Mexico and Canada, and have triggered high-level political negotiations from U.S. partners such as the European Union and Japan.

IRA Tax Credits for EV Critical Minerals and Battery Components

Under the IRA, EVs and batteries produced in North America (including Mexico and Canada) may qualify for significant tax breaks. Partial tax breaks are also available for EVs with batteries utilizing critical minerals extracted or processed in countries with which the U.S. has a free trade agreement (FTA).

As we previously discussed in greater technical detail, the IRA amended the Clean Vehicle Credit under section 30D of the U.S. tax code to provide a $7,500 consumer tax credit for the purchase of a qualified vehicle such as an EV. This consists of $3,750 for vehicles meeting the “critical minerals” requirements and $3,750 for those meeting the “battery components” requirements.

  • Under the critical minerals requirements, a share of critical minerals contained in the battery of a qualified vehicle must have beenextracted or processed in the U.S. or in a country with which the U.S. has an FTA, or recycled in North America. The applicable share is at least 40 percent for vehicles placed in service in 2023, and increasing by 10% per year until reaching 80% for vehicles placed in services after 2026.
  • Under the battery components requirements, final assembly must have occurred in North America and the percentage of the value of the components contained in such battery that were manufactured or assembled in North America must be equal to or greater than the “applicable percentage,” i.e., “60% for 2024 and 2025 vehicles, and going up 10% per year till past 2028 at 100%.”

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Continue Reading Global Spotlight: the IRA’s Implications for Key U.S. Allies