THIS WEEK IN WASHINGTON
May 7, 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. 
 
This is a recess week in Washington – at least for the Senate – so, Steve Gordon took the time to reflect rather than report in Heard on the Hill about President Joe Biden and Senator Tim Scott. The President gave his State of the Union message last week and Senator Scott gave the Republican response; two very different speeches by two very different individuals.
 
Total Spectrum Senior Partner John McKechnie has been working in and with the financial services sector for over 30 years. He writes an update on pending activity in the Senate and House Financial Services Committees. Ramona Lessen provides briefs on two House hearings held this week, one on lowering the cost of prescription drugs and another on climate and energy research at the Department of Energy. To get a feel for both sides of these two issues, take a look at the livestream of these two hearings.
 
Jesse Weathington provides an update on the latest in Georgia with his Gold Dome Report. In addition, Congressman Erik Paulsen shares an article on the President’s estate tax proposal and the impact it will have on family businesses, ranches, and farms. As always, be sure to check out the Infographs for an in-depth look at current hot topics.
 
We will be back in a couple of weeks with another This Week in Washington and the next installment of Total Spectrum Spotlight.
 
Y’all stay safe, healthy AND sane…

Todd Smith
Chairman, Georgia Group

Jesse Weathington
Director, Georgia Group
Heard on the Hill
By Steve Gordon, Managing Partner
 
President Biden gave his State of the Union Address last Wednesday, which was one day short of the first 100 days of his presidency. Senator Tim Scott from South Carolina gave the Republican response.
 
The Senate is out of session this week, so it is a good time – some would say high time – that we put the wide-angle lens on the apparent transformation of Joe Biden from a moderate in the Senate to a progressive President. I would also like to give a little background on Senator Tim Scott, and then we will close with ‘odds and ends.’
 
Last Year’s Democratic Primary
Almost all the initial energy in the 2020 Democratic primaries was on the progressive side. The three leading progressive candidates – Senator Bernie Sanders, Senator Elizabeth Warren, and Mayor Pete Buttigieg – each tried to build a national campaign and each failed. Mayor Michael Bloomberg entered the race late as a self-funder and wanted to build a campaign around his brand of a common-sense progressive. But Mayor Bloomberg’s first debate performance was unnerving, and his second debate was not much better. Senator Amy Klobuchar from Minnesota appealed to Midwesterners with her blend of common sense and a progressive philosophy. She thought she could win in Iowa and that would be a springboard into other primaries, but her votes came from rural and suburban Iowa, while liberals and progressives from Iowa’s cities and colleges divided their votes among other candidates.
 
The progressive base did not support Joe Biden in the early primaries. He was considered too moderate, too establishment, and some people thought he was yesterday’s news. The base wanted someone who would carry their progressive ideals. But more than anything, they hated and disdained President Trump and they were looking for a candidate who could win in November.
 
Joe Biden’s campaign limped into South Carolina. But Congressman James Clyburn anointed Vice President Biden at the beginning of the South Carolina primary, and a win in South Carolina led to other wins. Democrats of all stripes – even progressives – came around to Joe Biden because he looked like he was the one who could defeat President Trump.
 
Senator Joe Biden becomes President Joe Biden
Democrats who worked with Joe Biden in the Senate have told me that he fit moderate Delaware like a glove. He had a love for Amtrak, a great feel for foreign affairs, and he was a strong supporter of organized labor. Senator Biden was considered a moderate, and I am told that his colleagues from both sides of the aisle liked and respected him.
 
This view of a moderate Senator Joe Biden does not square with the progressive President Joe Biden, who wants to meet the moment with a transformational agenda.
 
...Continued after the Gold Dome Report
Partner and
Georgia Group Chairman

Partner and
Georgia Group Director


Partner

Partner
INFOGRAPHS
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2020 Reapportionment - Power shifts slightly to South and West
The redistricting process explained
The apportionment process explained
Vaccine Tracker:
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Infrastructure cybersecurity legislation to watch
What you need to know about REAL ID
What you need to know about New Applications of Artificial Intelligence Software In Health Care
Gold Dome Report
by Jesse Weathington, Partner and Georgia Group Director

This was going to be a sleepier column until Atlanta Mayor Keisha Lance Bottoms dropped the bombshell announcement last night that she will not be running for re-election as Atlanta Mayor this year. Prior to the election of Senators Warnock and Ossoff, Bottoms had been the state’s highest profile Democrat still in elective office, even being vetted for a VP nod by President Joe Biden, and famously having turned down a Cabinet post in the new Administration. Her reelection bid had a firm foundation, recently posting big fundraising numbers (from an event headlined by the President) and dropping an internal poll that showed strong support. Rumors abound as to the reason for her decision, but she had drawn credible challengers and others will now surely pile into the race.
 
Walking a block up Mitchell Street from City Hall to the Gold Dome, this week saw Governor Brian Kemp enact several laws prior to the end of bill review on May 10th including adoption and foster care reforms, bills to combat street racing and ring-fence local police budgets, an education workforce act, incentives for medical supply chain manufacturing jobs, and a bill to provide paid parental leave to state employees, among others. He has not wielded the veto pen, but that typically is reserved for the very end of the bill review period, which concludes 40 days after the General Assembly adjourns Sine Die. Georgia’s Governor does not have a “pocket veto,” so if Kemp fails to sign or veto a bill, it becomes law automatically.
 
Lastly, the reapportionment season has officially begun, although the feted redistricting special session will likely not occur until well into fall, the Peach State did find itself slightly short in the Congressional apportionment race as other faster growing states picked up a congressional seat (or two) and Georgia did not. As a result, the electoral cartographers in the General Assembly will have the same number of House Districts with which to play.
Heard on the Hill (cont'd)

The view of many in Washington is that President Biden knows he cannot lose the base of his party and win reelection. I am told that he watched President Jimmy Carter govern to the right of the Democratic base and President George H. W. Bush govern to the left of the Republican base, and will not make that same mistake. 
 
It is also quite possible that President Biden feels freed from his role of legislating at or near the center of the Senate so that his views would fit a moderate state like Delaware.
 
One last observation: the Biden campaign clearly understood that many suburbanites and independents wanted a change in style. President Trump wanted to be a part of the daily story, and most often was. President Biden talks tame, speaks in a very hushed voice, talks about bipartisanship, and works best behind the scenes. Each of those attributes plays well with these voters.
 
Polls show that President Biden has a relatively significant favorability rating compared with other recent presidents at the benchmark of 100 days. But much more significant is that he has very low negative ratings.
 
I am a great believer in the pendulum theory in politics. The pendulum theory is best described by saying that there would never have been a President Reagan without a President Carter. There would not have been a President Clinton without a President George H. W. Bush, not a President George W. Bush without a President Clinton, not a President Obama without a President George W. Bush, not a President Trump without a President Obama… and there would not have been a President Joe Biden without a President Trump.
 
Senator Tim Scott – a rising star
Erik Paulsen and I are both friends and fans of Senator Tim Scott. Erik served with Congressman Scott in the House of Representatives. Former Congressman Cory Gardner of Colorado introduced me to then-Congressman Tim Scott in 2011. Later, the two served together in the Senate, and Senator Scott’s chief of staff is also from Colorado, so I have had an opportunity to see and watch Tim Scott over the past 10 years.
 
Senator Scott serves on the Senate Committees on Finance; Banking, Housing, and Urban Affairs; Health, Education, Labor and Pensions; Small Business & Entrepreneurship; and Special Aging. He played a leading role in negotiating the 2017 Tax Cuts and Jobs Act in the Finance Committee, and he was the author of the Opportunity Zones program in that Act.
 
The Senator speaks about how his family came from “cotton to Congress” in one generation, and that education and the free enterprise system are the keys to a better future. He is very smart, witty, and exceptionally comfortable in his own skin.
 
The political hospital and graveyard are both dotted with outstanding people who delivered the official response to the State of the Union message and failed to measure up to the hype. Tim Scott had 20 pounds of pressure on him, but he knocked the ball out of the park. Senator Scott has an unlimited future.
 
Odds and Ends
Infrastructure. Senator Shelley Moore Capito – interviewed by Erik Paulsen in our most recent Total Spectrum Spotlight – prepared the Senate Republican response to the President’s infrastructure proposal. It is reasonable to assume that there is some potential for compromise between the President’s proposal and Senator Capito’s proposal. But it is very hard to see any Republican voting to pay for President Biden’s proposal by gutting the 2017 Tax Cuts and Jobs Act.
 
Earmarks. The Senate Republican caucus resoundingly defeated a proposal to allow their members to participate in the earmark changes approved by Senate Democrats and both the House Republican and Democratic caucuses. However, the Senate Republican caucus vote on earmarks was nonbinding and fissures are already beginning to appear.
Financial Services Update
By John McKechnie, Senior Partner
 
Work Continues to Implement Biden Financial Services Agenda
 
House and senate Democratic leaders have Intensified their push to enact President Joe Biden’s economic strategy. While the headlines around the issue emphasize massive infrastructure and social program spending, there are financial services aspects worth examining on Capitol Hill and in the regulatory arena.
 
Aside from Biden’s ambitious plans and fiscal 2022 appropriations bills, Congress will also look to tackle a slate of financial measures.
  • Consumer Credit Reports: House Democrats have pushed for legislation to give consumers more control over their credit reports, which can determine whether they qualify for mortgages, student loans, and other types of credit. The legislation follows concerns about inaccurate credit reports and a 2017 data breach at Equifax which affected about 150 million consumers. But Democratic leaders have yet to reintroduce legislation on credit reports, to the surprise of many industry observers and consumer advocates. There is a strong possibility that at least one bill will emerge this summer. 
  • Corporate Diversity Disclosures: The Improving Corporate Governance Through Diversity Act (H.R. 1277 and S. 374) would require publicly traded companies to disclose the race, ethnicity, gender, and veteran status of their board members and executives. It would also direct the Securities and Exchange Commission to create an advisory panel to issue recommendations for increasing board diversity. Neither bill has received a vote in their respective chambers, although senior Democratic staff expect them to move this fall. 
  • Pandemic Risk Insurance: Retailers, media producers, and other businesses hit hard by COVID-19 shutdowns called on lawmakers to establish a loss-sharing program that offers insurance coverage, with a federal backstop for business losses caused by future pandemics. Subsequently, Rep. Carolyn Maloney (D-NY) introduced the Pandemic Risk Insurance Act, modeled in part after the Terrorism Risk Insurance Program. Under that proposal, once insurers incur more than $250 million in aggregate losses from a covered public health emergency, the federal government would cover 95% of insured losses. 
 
Expansion of federal housing programs: The Biden infrastructure package included almost $200 billion in federal funds directed at low-income homeowners and renters who are struggling with housing payments due to COVID-19. These programs will flow through the Department of Housing and Urban Development and the Federal Housing Administration. In late April, Senator Elizabeth Warren (D-MA) introduced a separate measure that expands requirements for financial institutions to serve low-income communities and adds federal grants for affordable housing. Look for the Senate Banking Committee to advance this Warren bill later in the summer. 
 
Additionally, both Congress and the Federal Reserve are increasing oversight of digital currencies, including bitcoin. House and Senate financial committees are holding hearings on stock market volatility tied to cryptocurrencies, and Fed Chairman Jerome Powell stated that the central bank is involved in a large-scale research and development project on the digital dollar. He noted that questions of whether adopting such a currency would provide a public benefit have yet to be resolved. “It’s a very large, complex project… this is really the beginning of the age of digital currency,” commented Powell. 
 
Finally, a new, more aggressive regulator is about to take the reins at the Consumer Financial Protection Bureau (CFPB). Rohit Chopra, a member of the Federal Trade Commission and acolyte of Senator Elizabeth Warren, is awaiting expected Senate confirmation. He told the Senate Banking Committee during his nomination hearing that he promises “a proactive approach to the bad actors in the financial services sector.” Look for Chopra to be seated at CFPB by the fall, and to actively work to reverse the deregulatory steps taken by now departed Trump-appointed Director Kathy Kraninger.
Opinion: President Biden’s Estate Tax Plans Would Hit Middle Income Families and Impact Many Family Businesses, Ranches, and Farms
by Congressman Erik Paulsen, Strategic Consultant
 
President Biden and his administration will soon release the details of their plan for individual tax increases. He promised during the 2020 presidential campaign to lower the estate tax exemption, currently $11.7 million to $3.5 million and raise the estate tax rate from 40 percent to 45 percent, but in a major surprise it appears that he will keep the current exemption and estate tax rate in place.
 
However, the Biden administration wants to require estates to pay taxes on unrealized capital gains on assets that are now exempt from that tax when the owner of those assets dies. President Biden has pledged that his tax increases would only fall on the wealthy, but his proposed estate tax changes would significantly impact middle class families and family run businesses, ranches, and farms.
 
The current law indicates that when the owner of assets such as a personal residence or stock passes away, his or her property receives a ‘stepped-up’ basis for estate tax purposes reflecting the fair market value of the property. President Biden calls this a loophole even though it has been a basic principle of tax policy and part of the tax code since 1994. Repealing the ‘stepped up’ basis provisions and taxing capital gains at death will be a real hardship for families who are not wealthy by any definition.
 
Here is one example. Mr. and Mrs. Brown never had annual earnings over $400,000, the threshold that President Biden differentiates between middle class and wealthy families. They worked hard and purchased their dream home in Phoenix 50 years ago for $200,000. When they passed away, their house had increased in value to $1.5 million. Their will gave their home to their only child which she intended to use as her personal residence. Under President Biden’s proposal, the Browns’ estate would be subject to a capital gains tax of as high as 39.6 percent based on the current value of their house, resulting in a tax bill of approximately $514,000. The Brown’s estate would have to liquidate whatever assets the Browns may have held at death – including the house – unless Mr. and Mrs. Brown’s daughter can come up with the taxes out of her own pocket.
 
Here is a little different example. Mr. and Mrs. Smith bought 4,000 acres of land in Arizona’s Santa Cruz County 50 years ago for $1 million and became successful cattle ranchers. When the Smiths passed away, the total value of the ranch based on the land and the Smiths’ reputation, including the quality of the cattle they raised, was $15 million. Under President Biden’s estate tax proposals, their estate would be required to pay a 45 percent tax on the value of the estate over $3.5 million or approximately $5,175,000.  The estate would have little choice but to sell the ranch just to pay the tax – and send pink slips to their employees. It would be very unlikely that the Smiths would be able to leave much of their successful ranch to their children.
 
President Biden has proposed one approach to handling the estate tax. Other Democrats are proposing their own estate tax changes.
 
Senators Chris Van Hollen (D-MD), Cory Booker (D-NJ), Bernie Sanders (Independent-VT), Elizabeth Warren (D-MA), and Sheldon Whitehouse (D-RI) recently introduced the Sensible Taxation and Equity Promotion (STEP) Act which expands on the President’s plans. 

The STEP Act includes exemptions to focus proposed estate tax proposals more on unrealized capital gains over $1 million and adds an additional exclusion of up to $500,000 for personal residences. On top of the $1 million capital gains exemption, this proposal includes an exclusion of up to $500,000 for personal residences – which is carried over from the current law. Assets held in retirement accounts would continue to be exempt from the capital gains tax. Gifts and bequests to charities would also be exempt.

The STEP Act would somewhat reduce but not eliminate the financial burdens the Browns’ estate would face from taxing unrealized capital gains after death dealing with their private residence. The Smiths’ problems with their ranch would not be helped by the STEP Act. Their estate would be allowed to pay the tax over a 15-year period – interest only for the first five years and then 10 equal payments for the remaining 10 years. But selling the property would require payment of the tax in full, and there would be a lien attached to any property which would likely prevent the Smiths’ estate from refinancing the property without paying off the tax owed the IRS. 

It is hard to predict the changes Congress will make to either President Biden’s estate tax plan or the STEP Act, but there is no doubt that the Administration will strongly push changes to the estate tax laws. Republicans are not expected to vote for any changes to the individual tax code, especially those changes that hit the middle class and individuals who run family businesses, ranches, and farms. Senate Democrats will be forced to try to pass these tax changes under reconciliation, which means that they will need the support of all 50 Senate Democrats.
 
Erik Paulsen is a strategic consultant with Total Spectrum. He represented Minnesota in the U.S. House of Representatives from 2009-2019 and was chairman of the Joint Economic Committee.
 
This op/ed originally appeared in The Well News on May 3, 2021. The views expressed in this article are the writer’s own.
Hearing Report
By Ramona Lessen, Executive Director
 
House Energy and Commerce Subcommittee on Health hearing on “Negotiating a Better Deal: Legislation to Lower the Cost of Prescription Drugs”
Tuesday, May 4, 2021; 11:30am
 
To view a livestream of the hearing please click here.
 
Opening Statements:
Congressman Frank Pallone Jr, (D-NJ), Committee Chairman
 
Congresswoman Anna G. Eshoo (D-CA), Subcommittee Chairwoman
 
Congressman John Joyce, MD (R-PA), Subcommittee Member
 
Witnesses:
Therese Ball
Patient
 
Michael A. Carrier
Distinguished Professor of Law
Rutgers Law School
 
Rachel Sachs
Associate Professor of Law
Washington University in St. Louis, School of Law
 
Gaurav Gupta, M.D., M.S.E.
Founder
Ascendant BioCapital
 
Khrystal K. Davis, J.D.
Rare Disease Caregiver & Patient Advocate
Texas Rare Alliance Founding President
 


House Science, Space and Technology Subcommittee on Energy hearing on Climate and Energy Science Research at the Department of Energy
Tuesday, May 4, 2021; 11:00 a.m.
 
To view a livestream of the hearing please click here.
 
Opening Statements:
Congressman Jamaal Bowman (D-NY), Subcommittee Chairman
 
Congresswoman Eddie Bernice Johnson (D-TX), Committee Chairwoman
 
Congressman Randy Weber (R-TX), Subcommittee Ranking Member
 
Witnesses:
Dr. Kristin Persson
Director, Molecular Foundry
Lawrence Berkeley National Laboratory
 
Dr. Fikile Brushett
Associate Professor of Chemical Engineering
Massachusetts Institute of Technology
 
Dr. Esther Takeuchi,
Chair, Interdisciplinary Science Department
Brookhaven National Laboratory
 
Dr. Xubin Zeng,
Professor, Hydrology and Atmospheric Sciences
The University of Arizona
 
Dr. Narasimha Rao
Associate Professor of Energy Systems
Yale School of the Environment

Department of Commerce
 
The Honorable Marcia Fudge
Secretary
Department of Housing and Urban Development
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.