By Omar S. Nashashibi, co-founder, The Franklin Partnership, LLC
In July, I marked my 25th year living and working in Washington, D.C. – Bill Clinton still occupied the Oval Office; Newt Gingrich was in his final months as House Speaker; and northern Republicans and southern Democrats still were a regular sight on Capitol Hill. Those were not the good old days by any stretch of the imagination, as we were in the midst of the Ken Starr investigations and fierce partisan battles. Back then, those in opposing parties often still found a way to legislate, whereas today, the infighting within the Republican party is so intense that Democrats are happy to sit back and watch as they are five seats away from retaking control of the US House next November.
That infighting has the potential to hold up important tax legislation, cause the federal government to shut down on October 1, and possibly hand the House back to Democrats by forcing vulnerable moderate GOP lawmakers to take tough votes on cultural issues that never will clear the Senate. This dysfunction is wreaking havoc on Washington’s agenda for the second half of 2023.
Tax Legislation
In July, House Republicans had planned on moving major tax legislation that cleared committee only to run into intraparty opposition to the GOP-only drafted plan. The legislation includes a reversal of the Tax Cuts and Jobs Act Section 174 requirement to amortize and capitalize Research and Development expenditures and reinstates the ability to fully deduct those R&D expenses. In an April 2023 survey, AMBA members reported having a $290,013 tax liability for 2022 due to the tax law. That is a significant tax bill that will continue to grow without congressional action this year.
If Republicans do come to an internal agreement in the coming month, there still is enough time to negotiate a solution with Senate Democrats – meaning, once the GOP resolves its infighting, they still must battle with Senate Democrats and a Biden White House on a package of largely business tax cuts. The message is that AMBA members certainly can spend $290,013 more wisely than bureaucrats in Washington, but Congress needs to act to give the industry a chance. Agenda item number one – put money back into the pockets of America’s mold, tool and die builders.
Federal Government Funding
Stalled agenda item number two is funding the federal government beyond October 1. Congress last passed all 12 of the required bills to fund the federal government in 1996, and this year is not the one in which lawmakers break their winless streak. Senators cleared all 12 bills from their committee, while the House failed to pass two and did not move any through that lower chamber prior to leaving for the August summer break on July 28. Should lawmakers fail to pass a bill, government agencies will begin to shut down – and GOP lawmakers in the House are miles apart from their Senate counterparts on spending levels.
The House Republican bill proposes to eliminate or reduce funding for roughly 100 programs, including those for workforce development and training, and to help with recruiting the youth, underserved and remote communities into careers. The bipartisan Senate bill increases funding for these programs by $147 million, setting up yet another showdown for lawmakers and causing further disruption to the congressional agenda this fall.
Policy Bills
Congress this fall also must pass the National Defense Authorization Act, the Pentagon policy bill lawmakers have completed each year since 1961. House Republicans inserted a number of untenable cultural provisions into their bill that largely passed along party lines, compared to an overwhelmingly bipartisan Senate bill that passed by a vote of 86 to 11. Of note, language to codify President Biden’s increased Buy America domestic content requirements to require purchases of domestically manufactured goods likely will survive in a final bill – if Congress can pass one.
Bills to renew programs for the nation’s airports and farmers also are among the top ticket items left on the congressional agenda for this fall. These all are must-pass bills, from defense to farming to career development, the pending legislation impacts all aspects of the industry.
On the Senate’s agenda is a possible bill focused on China and US supply chains. Senate Majority Leader Charles Schumer (D-NY) has tasked nine Senate committees with piecing together parts of a bill focused on controlling exports to China, increasing transparency of imports and restricting investments from China into key US industries and companies. AMBA is working with lawmakers on language to address transshipment and third-party subsidization. China often creates hub zones in different countries and then provides subsidized loans, directs investments or pays employees directly, creating a network of government-backed manufacturing companies around the world competing with American mold, tool and die makers.
Bipartisan legislation some hope to attach to this broader China bill will increase resources for US Customs to crack down on Chinese shipments coming in from other countries as importers seek to avoid the 25% import tariff still in place.
Regulatory Agenda
All of this represents a calendar of uncertainty on Capitol Hill for American manufacturers. What is certain, however, is when Washington cannot legislate, it will regulate. This summer, the Biden administration released its regulatory agenda for the remainder of 2023 and the first half of the coming year. The regulatory agenda includes 1,472 proposed federal rules, much of which impact American industry. The most immediate AMBA members can expect to see include an increase in the overtime exemption threshold, making millions more workers eligible for time and a half; rules that increase the OSHA reporting requirements for manufacturers; and an aim to increase industrial decarbonization by limiting process heating in manufacturing and reducing emissions.
Of particular concern, and certainty, is a potential OSHA rule in development regulating indoor and outdoor workspaces when the heat index exceeds 80o F. This could require manufacturers to impose additional PPE and engineering-control requirements, along with designated cool-down stations and specified rest breaks.
While manufacturers can count on uncertainty on Capitol Hill, it is the certainty when Congress does not act, and regulators do, that should raise the most concern.
Omar Nashashibi is a founding partner at The Franklin Partnership, LLC, a bipartisan government relations and lobbying firm retained by the American Mold Builders Association in Washington, D.C.