THIS WEEK IN WASHINGTON
July 16, 2021
Welcome to the Georgia edition of This Week in Washington. Thank you for your interest in politics and policy from the Peach State to the Potomac. 
 
In Heard on the Hill, Steve Gordon covers the continuing and changing-by-the-minute story of the President’s traditional and social Infrastructure agenda. He also wades into the President’s 20-page executive order on competition. Congressman Erik Paulsen writes about six tax incentives that will play a major role in the President’s agenda. Steve Ruhlen brings us up to speed on the appropriations process for the 2022 fiscal year. Ramona Lessen reviews a recent House Small Business Agriculture and Rural Development Subcommittee hearing on economic recovery in rural America.
 
Jesse Weathington gives us the latest in Georgia with his Gold Dome Report. And, be sure to check out the Infographs for an in-depth look at current hot topics.
 
We will return in a couple of with the next issue of This Week in Washington.
 
As always, stay safe, healthy AND sane…

Todd Smith
Chairman, Georgia Group

Jesse Weathington
Director, Georgia Group
Heard on the Hill
By Steve Gordon, Managing Director
 
The most important thing that happened in Washington over the July 4th recess was that nothing important happened.
Tourists took over the town. Most of us in Washington who spend our time on policy, politics, or both shut down our minds for a while and kicked back. Local restaurants were not busy because most Washingtonians left town, but the important thing was that restaurants, bars, and museums were open.
 
The 15-month pandemic was a confining and confusing time for most of us, and a terrible time for many of those who became a COVID statistic. Maybe we will not snap back immediately to the normal life we had before the pandemic. Maybe we get to a new normal. Maybe we are already there. Whatever it was and whatever you call it, kicking back a little felt pretty darn good.
 
President Biden’s leadership and legacy are on the line this summer.
As a candidate in the 2020 election, Joe Biden was projected as an experienced legislator who was used to working with his Republican and Democratic Senate colleagues. He stressed foreign affairs familiarity as the former Chairman of the Senate Foreign Relations Committee, and he committed to get COVID vaccine into Americans’ arms.
 
But in today’s base politics, those things were a good start – but only a start. The enthusiasm of the liberal and progressive base provided energy for the campaign.
 
Now, President Biden is trying to project steadiness and calm while proposing a very expansive legislative agenda that plays to the base of his party. A midwestern Democrat told me recently that “Senator Biden watched both President Carter and President George H. W. Bush lose their base and then their reelection. There is no education in the second kick of the mule… and even less the third time.”
 
Working on traditional infrastructure through a bipartisan approach plays to the calm, steady, and predictable President. Working on social infrastructure plays to his base. Majority Leader Schumer sent out a Dear Colleague letter to his Senate Democratic Caucus on July 9th in which he spoke about a two-track approach in July – a bipartisan traditional infrastructure bill, and a resolution out of the Senate Budget Committee, setting the table for a social infrastructure bill which Democrats could try to pass through the reconciliation process.
 
Some people on Capitol Hill will tell you that a bipartisan traditional infrastructure bill costing somewhere between $700 billion and $1 trillion will ultimately get the votes of every Democrat and ten Republican Senators. Just as many people on Capitol Hill will tell you why it will not happen. For example, some Senate Republicans – including a few of the moderates who negotiated the bill – are concerned about the fuzzy revenue numbers proposed to fund the bipartisan bill, others are concerned about raising taxes to help pay for the bill. Still others are torn between passing a traditional infrastructure bill that we certainly need and passing a traditional infrastructure bill that is part of the President’s agenda. Leader McConnell has not commented publicly on the bipartisan proposal.
 
...continued after the Gold Dome Report
Partner and
Georgia Group Chairman

Partner and
Georgia Group Director


Partner

Partner
INFOGRAPHS
Click image to download
What you need to know about Biden's $400B plan for bolstering long-term care
BLS data shows Covid still affecting service and other sectors
What you need to know about Drugged Driving
Vaccine Tracker:
67.8% of the U.S. has received first dose
Companies scramble
to enter the cropland carbon market
A record number of women are serving
in state legislatures
Delta variant causing more than half of new U.S. coronavirus cases
Gold Dome Report
by Jesse Weathington, Partner and Georgia Group Director
 
High summer is upon us, and politicians and aspiring politicians alike are jumping into the pool. Not to cool off, but with an eye towards edging out their rivals and potential rivals, and despite the fact that many do not know exactly where their districts may lie, since the redistricting will not conclude until much later in the year. A (non-exhaustive) quick rundown of recent developments:
 
  • U.S. Senate (Raphael Warnock – D): Herschel Walker continues to move towards an official announcement. Agriculture Commissioner Gary Black is actively campaigning, and Congressman Buddy Carter is waiting in the wings.
  • Governor (Brian Kemp – R): Ames Barnett, businessman and former mayor of Washington, Georgia, has emerged as the likeliest potential MAGA candidate in the GOP primary, despite the best attempts of former Democrat Vernon Jones to occupy that lane. Governor Kemp posted a record fundraising haul this cycle for a gubernatorial re-election bid.
  • Lt. Governor (Geoff Duncan – R, not running): Former President Trump pointedly weighed in with a “non-endorsement” of Senator Butch Miller who had declared for the open LG slot earlier in the year. Miller was undaunted and has raised an impressive $2 million thus far. Senator Burt Jones is widely anticipated to enter this race as the MAGA candidate soon.
  • GA – 06 (Lucy McBath – D): Republicans Jake Evans and Meagan Hansen declared for the 6th district this week. Hansen was formerly a state representative, and Evans had recently served as chair of the state ethics commission prior to his run. Evans posted a big fundraising haul right out of the gate.
 
In actual electoral developments, the state House Republican Caucus had good news this week in easily holding onto a Cobb-based seat with Devan Seabaugh beating out Democrat Priscilla Smith. Leesa Hagan also bested fellow GOP-er Wally Sapp in a special election run-off in Toombs County. Both seats were vacated by longtime representatives Bert Reeves and Greg Morris moving on, respectively, to Georgia Tech (Reeves famously served as Buzz, so perfect fit) and the State Transportation Board.
 
Finally, some inside baseball news (not baseball, or politically related baseball which is a refreshing change), the departure of State Rep. Trey Kelley from the House Majority Whip position has set off a contest between current Caucus Chair Matt Hatchett of Dublin and (former Majority Whip) Barry Fleming of Harlem. The caucus will decide at a vote later this year. 
Heard on the Hill, cont'd.

Senator Bernie Sanders, Chairman of the Senate Budget Committee, proposed a budget resolution of $6 trillion for social infrastructure. Senator Mark Warner (D-VA), who is a moderate member of the Senate Budget Committee, felt that $3 trillion would be more like it. Senator Joe Manchin (D-WV) said Tuesday that the social infrastructure bill – whatever the number – must be paid for and not put on the country’s credit card.
 
Tuesday night, the Senate Budget Committee passed a resolution that included $600 billion for traditional infrastructure and $3.5 trillion in new spending for social infrastructure – and it proposes to raise taxes on corporations and individuals.
 
Early details came out Wednesday about the budget Senate Democrats passed Tuesday night. Included is a significant climate provision and funding to provide universal pre-kindergarten, childcare, and community college. The proposal also increased funding for historically black colleges and universities, paid family and medical leave, and new Medicare provisions. The revenue to pay for this agenda would come from three ‘buckets’: increasing corporate and international taxes, health savings by lowering prescription drug costs and by repealing the Trump Administration’s rebate rule, and from long-term economic growth which would generate new taxes.
 
Democrats can pass the resolution out of the Budget Committee on a party line vote, but the real work will be finding a dollar amount for social infrastructure that can be agreed to by each of the 50 Democrats. In an evenly divided Senate, every Democratic senator is a king or queen, and every senator will have leverage.
 
The calendar also counts. The legislative packages need to be written and vetted. A budget resolution will require about a week of Senate floor time, and any infrastructure bill will require two weeks. The target date for the start of the August recess is August 9th, although Majority Leader Schumer is threatening to keep the Senate past that date.
 
The President’s legislative agenda and legacy hangs on how these two infrastructure bills do in Congress. I cannot see any Democratic senator being willing to be a final no vote on the social infrastructure bill that will be brought up through reconciliation, so the questions in my mind are three:
  1. Will the traditional infrastructure bill that has been cobbled together by the bipartisan gang of 10 get the support of all 50 Democrats and 10 Republicans in the Senate? (Odds are about 50-50.)
  2. If the bipartisan infrastructure bill fails in the Senate, Democrats will include traditional infrastructure in their budget resolution, thereby recoupling the President’s original proposal. The amount that can be spent in that resolution will be decided through the push and pull of party moderates and party progressives and liberals. (The end number is almost assuredly not less than $2 trillion and will go up to the point where moderates will not spend any more.)
  3. Congress has about four weeks and change until the scheduled start of the August recess. The Budget Act will take up a lot of time on the Senate floor, and there will be amendments aplenty. Look for a vote on the budget right before the start of the August recess, and committee activity in the fall.
 
The President’s Executive Order on Promoting Competition in the American Economy
On July 9th, the White House issued a 20-page executive order designed to foster competition in labor, healthcare, transportation, agriculture, internet, technology, and banking/finance. It is a lengthy document, and an important one. But what is not clear is why the package was released on Friday – a traditionally bad day to release press releases if you want maximum exposure.
 
The White House’s fact sheet on the executive order is available here. We will review the details of the executive order and provide more information in an upcoming Heard on the Hill.
Appropriations Update
By Steve Ruhlen, Partner
 
Congress is beginning to march through its annual appropriations process, putting together the dozen bills that provide for federal spending for fiscal year 2022, which starts October 1. The House Appropriations Committee this week is considering several of these bills, as House Democratic leadership is trying to pass all twelve government funding bills before the August recess.
 
Two factors complicate the outlook for the appropriations process: the $600 billion infrastructure bill being considered in the Senate, and progressive Democrats’ efforts to approve trillions in additional spending via a partisan legislative strategy. 
 
Given the jockeying over the infrastructure deal and the possibility of trillions in additional spending outside of the appropriations process, the House postponed consideration of its annual budget resolution – which spells out specific categorical spending limits – and instead passed in June a general topline limit of $1.5 trillion for FY2022. This was a $200 billion increase over the FY2021 topline.
 
The Senate appropriations timeline is more delayed. With a 50-50 Democrat-Republican split in the Senate, it will be hard to get approval for many of the funding levels and policy initiatives that are expected to be included in the appropriations bills that pass in the Democrat-controlled House. For example, House Democrats are expected to remove several bans on federal funding for abortions, increase the Education Department spending by over 40%, increase Labor Department spending by nearly 20%, and keep defense spending essentially flat. 
 
Keep in mind, however, that while the Democrats control the House, they only have a five-vote margin over the Republicans, so passage of any highly controversial spending bills is not assured. 
 
The final outcome of the infrastructure bill in the Senate and the potential of Democrats to push through several trillions in additional spending through the reconciliation process are muddying the appropriations outlook. 
 
While House appropriators are looking to boost transportation spending by $17 billion over the Biden Administration’s budget recommendation, it is still not clear how much of the total transportation appropriations would be covered in the infrastructure package – a deal for which details are currently being hashed out in the legislative process. And although 11 Republican senators have signaled support for the framework of the infrastructure agreement, some have said they won’t be on board if the President and congressional Democrats try to ram though additional trillions in spending on a separate reconciliation bill through a party-line vote.  
 
Reconciliation is a legislative procedure that could allow congressional Democrats to pass massive increases in social spending on their own. Reconciliation cannot be filibustered in the Senate, meaning it would only need – as opposed to other bills that come before the Senate – a majority of 51 votes to pass, with Vice President Harris casting the tie-breaking 51st vote.
 
The first step in the reconciliation process requires both the House and Senate to pass a budget plan for FY2022. This week, the Senate Budget Committee introduced a $3.5 trillion spending plan that the Democratic leadership believes will fund their social spending priorities. It is expected that the President’s calls for two years of free community college, increasing the child tax care credit, subsidies for childcare, and paid leave will be in the budget proposal. The House is expected to follow suit, with both bodies looking to pass a final budget resolution before the August recess. 
 
Senate Leader Schumer still needs to ensure the support of all his Democratic senators.  With an evenly divided Senate, passage of the $3.5 trillion reconciliation package is not a done deal.  Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have expressed concerns about using the reconciliation process to pass any massive controversial spending plan on a party-line vote, and Sen. Manchin said that the budget proposal will need to be paid for and not rely on deficit spending.  
 
Democrats enjoy control of the White House, the House, and the Senate, but they must reconcile the strong push for additional spending from their considerable progressive base with extremely slim majorities on both sides of Congress. The implications of this year's appropriations process, the infrastructure negotiations, and the potential of huge social spending through the reconciliation process will almost certainly reverberate into next year's midterm elections.
President Biden’s Proposed Clean Energy and Community Development Tax Incentives Will Play a Major Role in his Infrastructure Plan
By Congressman Erik Paulsen, Strategic Consultant
 
President Biden’s $2.3 trillion American Jobs Plan released in March includes a number of community development and clean energy tax incentives which build upon existing incentives that have traditionally enjoyed bipartisan support. Examples of these include an expansion of the low-income housing tax credit, creation of a neighborhood homes investment tax, permanence for the new markets tax credit, authorization of new tax-exempt bonds for schools and infrastructure, extensions and enhancements of the renewable energy production and investment tax credits, and extensions and modifications of the energy efficiency tax incentives.
 
President Biden also proposes in the American Jobs plan to repeal all tax credits, deductions and other special provisions that aim to encourage oil, gas, and coal production. Eliminating tax incentives to produce fossil fuels is a fundamental goal of Congressional progressives.
 
Almost all Republicans in Congress believe in an “all the above” approach to energy production and support incentives to produce both renewable energy and energy from fossil fuels. Any bill put up by Senate Democrats that includes the President’s infrastructure and clean energy tax incentives but eliminates fossil fuel tax incentives will be filibustered by Republicans. 
 
That is exactly why Senate Democrats will try to unite their caucus and pass this legislation – including the Biden tax rate increases – through the budget reconciliation process, which allows certain bills to be passed with a simple majority and cannot be filibustered.
 
Below, my summary of the tax credits that will receive the greatest attention:

Expansion of the Low-Income Housing Tax Credit
The Biden Administration proposes to significantly expand this credit to incentivize affordable rental housing development in high opportunity areas. This proposal would create an additional allocation of low-income housing tax credits for these areas, which would be based on a formula that would take into consideration the cost of constructing and operating affordable housing.
 
The New Neighborhood Homes Investment Tax Credit
There are currently no federal tax provisions that directly support building or renovating owner-occupied housing. The Biden Administration’s proposal would create the Neighborhood Homes Investment Tax Credit, which would provide approximately $2 billion in credit authority to support new construction and substantial rehabilitation for existing homeowners. It would be allocated to states with an emphasis on populations living in distressed urban, suburban, or rural neighborhoods.
 
The New Markets Tax Credit
This tax credit is for qualified equity investments made to acquire stock in a corporation, or a capital interest in a partnership, that is a qualified community development entity. The credit totals 39% of the original investment and can be claimed over seven years. The Biden proposal would permanently extend the New Markets Tax Credit and allow community development entities to continue generating investments in low-income communities, but now with greater certainty.  
 
Schools and Infrastructure
It is generally agreed we need to renovate some older educational facilities and to encourage the construction of new structures. This proposal would create tax-exempt School Infrastructure Bonds, which would be similar to the Build America Bonds that were authorized under the Obama Administration. The proposal would authorize up to $50 billion in these bonds, with $16.7 billion authorized in each of 2022, 2023, and 2024.
 
The proposal would also expand the category of private activity bonds by allocating an additional $15 billion for use by the Secretary of Transportation. The proposal would allow private activity bonds to be issued for public transit, passenger rail, and infrastructure for zero emissions vehicles. 
 
Extend and Enhance the Production Tax Credit and the Investment Tax Credit
The Renewable Energy Production Tax Credit would be extended in its entirety for projects that begin construction after December 31, 2021, and before January 1, 2027. Beginning in 2027, the credit rate would begin to phase down to zero over five years.
 
The Renewable Energy Investment Tax Credit, much like the Production Tax Credit, would be extended for 1) solar and geothermal electric energy property; 2) qualified fuel cell power plants; 3) geothermal heat pumps; 4) small wind properties; 5) offshore wind properties; 6) waste energy recovery properties; and 7) combined heat and power properties. Starting in 2022, the Renewable Energy Tax Credits would be expanded to include stand-alone technology that stores energy for conversion to electricity and has the capacity of not less than five kilowatt hours.
 
Taxpayers would have the option to receive a cash payment instead of a credit from either the Production Tax Credit or the Renewable Energy Investment Tax Credit. The Department of the Treasury has not specified the amount of the cash payment or how that option might work. This promises to be an area where intense input from policy makers will be needed.
 
New Electricity Transmission Tax Credit
The proposal would provide a credit equal to 30% of a taxpayer’s investment in qualifying power transmission property placed in service in any given year. Qualifying electric power transmission property would include overhead, submarine, and underground transmission facilities meeting certain criteria, including a minimum voltage of 275 kilovolts and a minimum transmission capacity of 500 megawatts. Qualifying property would also include any ancillary facilities and equipment necessary for the proper operation of the transmission facility. This new credit also has a direct pay option. The New Electricity Transmission Tax Credit would be effective for property placed in service after December 31, 2021, and before January 1, 2032.
 
The current discussions on potential infrastructure legislation have focused thus far on the definition of infrastructure, its cost, and how it would be financed. But the tax issues related to community development, clean energy, and fossil fuels will soon take center stage. Both the Senate Finance Committee and the House Ways and Means Committee have started assembling the proposed legislation.
 
I would be pleased to visit with anyone who has questions; I can be reached via email by clicking on my name above.
Hearing Report
By Ramona Lessen, Executive Director

House Small Business Agricultural and Rural Development Subcommittee hearing on the economic recovery efforts in rural America
Tuesday, July 13, 2021; 1:00 p.m.
 
To view a livestream of the hearing please click here.
 
Congressman Jared Golden (D-ME-2nd)
 
Congressman Roger Williams (R-TX-25th)
 
Witnesses:
Mr. Nathan Ohle
Chief Executive Officer
Rural Community Assistance Partnership
Washington, DC
 
Ms. Jessica Campos
Women's Business Center Director
Center for Rural Affairs
Lyons, NE
 
Mr. Brett Challenger
Senior Vice President of the Regional Agribusiness Banking Group
CoBank
Greenwood Village, CO
 
Mr. Alan M. Crawford
Owner and President
Rangaire Manufacturing Company
Cleburne, TX
This e-newsletter is produced by Total Spectrum/SGA and Total Spectrum Georgia. The views expressed herein may include subjective commentary and analysis that are the views of the editors and authors alone. Information in this e-newsletter is obtained from sources believed to be reliable, but that cannot be guaranteed as independently investigated or verified. Information in this e-newsletter is not an endorsement, advertisement, recommendation, or any type of advice, political, legal, financial, or otherwise. With questions about the content of this e-newsletter, please contact Total Spectrum Georgia.