As Congress is home for August recess, NLBMDA provides a legislative outlook for items that need to be resolved as we approach the end of the fiscal year.
The most pressing issue on Congress’s plate is the need to raise the country’s debt ceiling within the next few weeks. Earlier this month, Treasury Secretary Steven Mnuchin informed Congress that the U.S. government could run out of cash sooner than expected and is at risk of defaulting on its obligations by early September.
This warning from Secretary Mnuchin has created a sense of urgency on Capitol Hill to resolve the debt ceiling issue before Congress heads home for August recess at the end of the month. Further, Congress will need to pass a new budget by September 30 to avoid $126 billion in automatic spending cuts to domestic and defense programs, known as sequestration. This is a situation both political parties are hoping to avoid.
As a result, the focus of negotiations between the White House and Congress thus far has centered on a potential two-year budget deal that would stave off sequestration and also raise the debt ceiling. On Thursday, the Trump Administration and Speaker Pelosi announced they were close to a deal and had agreed on the top-line spending levels for defense and domestic programs. Once these top-line spending levels are established in the budget agreement, Congress can then move forward with a government funding bill for fiscal year 2020 to avoid a potential shutdown on October 1.
Another legislative debate that will be playing out in Congress this fall will revolve around expired tax extenders. These are a series of tax incentives that elapsed in 2017 and have yet to be renewed. Among these provisions are three incentives important to the construction and manufacturing industry: 25C, 45L, and 179D. The 25C provision provides homeowners with a tax credit for investments in energy-efficient windows and doors. 45L provides eligible contractors with a tax credit for constructing energy-efficient new homes. 179D enables building owners to claim a tax deduction for installing energy efficient systems and buildings.
The path forward on tax extenders remains unclear. Many Republicans view tax extenders as a potential vehicle to fix technical errors in the Tax Cuts and Jobs Act (TCJA), such as the Qualified Improvement Property (QIP) glitch, while some conservative members would like to eliminate tax extenders all together. Democrats are looking to use tax extenders as an opportunity to rollback provisions of the TCJA. However, this is considered a non-starter for President Trump and congressional Republicans.
Attaching tax extenders to the budget deal or other “must-pass” legislation by the end of the year remains the most likely outcome for passage. NLBMDA is working with coalition partners and Members to ensure this legislation gets enacted and reflects our association’s priorities.
Finally in this legislative outlook, the White House has been gearing up with congressional allies to push for ratification of the United States-Mexico-Canada Agreement (USMCA) in the second half of 2019. Last month, Mexico became the first country to ratify the USMCA and Canada is expected to take it up in the fall.
On May 30, U.S. Trade Representative Robert Lighthizer formally sent a draft Statement of Administrative Action to Congress which allows the Trump Administration to submit the final implementing bill to Congress after a 30 day waiting period. Once the final bill is submitted to Congress, the House has 60 session days to vote up or down on the agreement followed by a 30 day window in the Senate.
Democratic leaders have expressed concerns regarding the USMCA’s labor, environment, pharmaceutical, and enforcement provisions which has put ratification in jeopardy. Speaker Pelosi has indicated that Democrats would be open to approving the USMCA as long as their concerns are addressed by the Trump Administration. Republican leaders in both chambers of Congress have been strongly supportive of efforts to ratify the agreement. NLBMDA continues to advocate for the USMCA and educate Congress on the importance of this agreement for our industry.
All of the pending issues in this legislative outlook will be taken up under the shadow of the 2020 Presidential election. This will surely shape the final outcome and could complicate matters further. Ten congressional Democrats are running for president, including seven Senators, and they will be looking to differentiate themselves from President Trump.
Meanwhile, Republicans will be looking for a string of legislative accomplishments that they hope will help them not only retain the White House in 2020 but also retake the House majority and hold battleground Senate seats in states like Arizona, Colorado, Iowa, Maine, and North Carolina.
It is shaping up to be an eventful second half of 2019 and NLBMDA is committed to navigating the tricky political climate to ensure our member’s priorities are reflected in legislation passed by Congress.