Debt Ceiling Update

The past few months have seen House Republicans and President Joe Biden exchange political broadsides over the debt ceiling with virtually no real negotiation taking place. Republicans have called for raising the debt ceiling in combination with spending cuts and regulatory reform while the President has insisted on a clean debt ceiling increase free of cost-cutting policies. Both sides have accused the other of being irresponsible and threatening to default on the debt, yet both sides have not met in person in months. 

In an attempt to put pressure on Biden to negotiate, House Republicans last week released their first legislative proposal to raise the debt ceiling and reduce government spending.

The legislation raises the debt ceiling through either March 31, 2024, or the accumulation of $1.5 trillion in new debt, whichever comes first.  In exchange, the bill establishes a cap on discretionary spending at Fiscal Year 2022 levels and limits spending growth to 1 percent per year through Fiscal Year 2033.    

The proposal also contains a number of Republican priorities including rescinding unobligated COVID-19 federal spending; blocking President Biden’s proposal to forgive up to $20,000 in student loan debt; repealing green energy tax credits and $80 billion in IRS funding passed by Democrats last year; reforming welfare programs like SNAP and TANF; reforming the permitting process; and increasing domestic energy production.  

Even after the introduction of the GOP proposal, President Biden continues to refuse to meet in-person with Speaker Kevin McCarthy.

House Republican leadership intends to hold a vote on the bill today or tomorrow before leaving town for a one-week recess. At this time, it is not clear if they have the 218 votes needed for passage.

As of Tuesday, Republican leadership insisted the bill could not be changed; however, as many as 10 Midwest lawmakers opposed repeal of ethanol tax credits in the bill – more than enough to sink the legislation given every Democrat is expected to vote no. Several conservative members also wanted to see the bill strengthened in some ways such as adding stronger work requirements to the welfare reform section of the bill. Others did not want to vote for a debt ceiling increase at all.

On Wednesday morning, Republican leadership announced an amendment that removed repeal of the ethanol credits and strengthened work requirements in an attempt to win over skeptical lawmakers. While this has reportedly won over many holdouts, it has angered some moderates who were told the bill was not open for amendment.

Republicans hold a narrow majority and can only afford to have four members vote against the legislation, meaning changes or delays to the bill remain possible.

Even if the bill passes the House, it is dead on arrival in the Democrat-controlled Senate, and President Biden has already criticized the bill.

Nonetheless, there is some evidence that Speaker McCarthy’s release of the bill is putting pressure on vulnerable Democrats.  In the last week, several Democrats in the House and Senate have called on the President to reverse his position – that he would not negotiate a debt limit with spending restraints – and begin negotiating with Republicans over adding other items to a debt ceiling package. Senate Republicans have so far echoed the calls of their House counterparts in urging Biden to negotiate.    

One complication to the debt ceiling fight is that it remains unclear when the deadline will be hit.  

The statutory borrowing cap was officially hit in January and the Treasury department has been using “extraordinary measures” to temporarily delay the deadline and continue making payments on debt and other outlays.  

While initial estimates forecast the debt ceiling would be hit in August or September, more recent estimates from financial institutions have warned the date could be June or July due to lower than expected tax receipts and a slowing economy.  

Non-compete Ban / Federal Trade Commission Update  

In January, the Federal Trade Commission (FTC) issued a notice of proposed rulemaking (NPRM) to ban non-compete clauses, opening a time window for public comments. The comment period for the NPRM ended last week and NAW submitted comments on the rule which can be found here. NAW also signed onto a coalition comment letter led by the Chamber of Commerce on the NPRM.  
As a reminder, the proposal would impose a blanket ban on all non-compete clauses and would apply that ban retroactively to all existing agreements. The proposed rule could also extend to other covenants like non-disclosures and non-solicitations if they are deemed to be overly broad in scope. The FTC also asked for input on alternative proposals that would impose a more limited ban on non-competes such as a ban limited to an income threshold or a category of workers. More information on the NPRM can be found here and here.  

Moving forward, the FTC will consider input provided on the NPRM and will almost certainly move forward with a final rule in the months ahead. There has been some conjecture that the FTC will move quickly to release a final rule that will be narrowed in some ways, possibly exempting highly-compensated employees from the ban.

We will continue updating you as the issue develops.  

On a related note, the House Energy and Commerce Innovation, Data, and Commerce Subcommittee held a hearing last Tuesday examining the Federal Trade Commission’s Fiscal Year 2024 Budget. FTC Chair Lina Khan and Democrat Commissioners Rebecca Slaughter and Alvaro Bedoya testified before the Subcommittee. There are currently no Republican Commissioners following the resignation of Christine Wilson in protest of Chair Khan’s running of the FTC.  

The hearing was an opportunity for lawmakers to discuss policies being pushed by the agency. Republican lawmakers criticized the agency for its overreach, partisanship, and lack of transparency, and noted the historically low levels of staff morale and high turnover under this administration. Democrats defended the agency and pointed to the work the agency had done to protect consumers. Topics discussed included data privacy, protecting children from big tech, ensuring the FTC had the proper tools to win monetary compensation for consumers, stopping junk fees and preventing monopolies in areas such as healthcare and agriculture.  

There was virtually no discussion of the FTC’s non-compete proposal; however, this could be because the proposal is still in the early stages of the regulatory process.  

There was also no mention of the FTC’s plans on another NAW priority – holding Amazon accountable for its anticompetitive behavior toward third party sellers.  

While recent news reports have suggested the FTC could move forward on a lawsuit against Amazon for its anti-competitive behavior, it remains unclear when or if a suit will be initiated. Obstacles remain to progress on holding Amazon accountable. ​​​​​​

First, the FTC has been launching lawsuits and investigations across a wide range of industries and issues so their bandwidth to focus on any single suit is limited – especially one against a large company like Amazon that would require significant resources.  ​​​​​​

Second, the FTC is extremely unpopular with Republicans due to their belief that the agency is unaccountable and overly partisan. While these same lawmakers typically believe big tech should be reined in, their opposition to the Biden FTC precludes them from supporting any action taken by the agency. 

Congressional Update

After a slow first couple of months, Congress has begun to pick up the pace with a flurry of Committee activity in recent weeks. In fact, at the end of March, House Republicans held 42 committee hearings in a single day, the most in a single day in history.   

These hearings are part of House Republican efforts to establish a body of work that highlights their policies to their conservative base and builds a case to push messaging bills later in the year that contrast with the policies of Democrats and President Biden. For instance, Republicans on the House Ways and Means Committee have held several hearings outside of DC on the state of the economy to build consensus on their tax and economic growth policies.

Many of these hearings are also taking place due to the House Republican rules requiring any bill to receive a legislative markup before it can be considered on the House floor.  

However, while this activity is keeping lawmakers and staff busy, the number of hearings occurring simultaneously means that very few are receiving significant media attention or getting the attention of voters.  

House Republicans have also introduced a border security package which they hope to bring to the House floor in the coming months. While this was a key issue that many conservative lawmakers campaigned on in 2022, it is unclear whether it has the votes to pass because of the concerns of many moderate Republicans. The bill is purely a messaging exercise – it contains no reforms to encourage more legal immigration or address the workforce shortage and is dead on arrival in the Senate.   

More broadly, the Senate’s tight, 51-49 majority means that Democratic Leader Schumer must have all Democrats in attendance in order to get anything done.  Senator John Fetterman (D-PA) recently returned to the Senate following a two-month absence for clinical depression, and Dianne Feinstein (D-CA) has been absent from the Senate since the beginning of March.  Of note:  Senator Feinstein serves on the Judiciary Committee, and her extended absence has made it impossible for the Committee to report out the President’s judicial nominations, leaving vacancies unfilled on the US courts.

Labor Update:

As we have reported before, the resignation of Secretary of Labor Marty Walsh earlier this year resulted in the automatic elevation of Deputy Secretary Julie Su to Acting Secretary, and President Biden formally nominated her to be Secretary shortly thereafter. 

The business community had a generally cordial relationship with Secretary Walsh, who was a union organizer but with a track record of competency rather than confrontation.  As one of his labor-union critics described his tenure as DoL Secretary: “While the National Labor Relations Board has become very proactive in handing down pro-worker judgments and slapping violators with fines and unfavorable rulings, the DOL has been quieter under Walsh’s leadership.”  That was clearly preferable for business.

Secretary nominee Su’s track record puts her much closer to the pro-union, anti-business activism of the NLRB, and her nomination has drawn significant and growing opposition from the business community.  Su’s mismanagement as Labor Secretary for the State of California of the state’s COVID unemployment benefit program resulted in payments of more than $30 billion in fraudulent claims, and she was an active advocate of the controversial California AB5, which would have virtually eliminated the ability of a worker to be an independent contractor and crippled California’s vibrant gig economy.  In addition, the ongoing west coast port labor negotiations have raised serious concerns about Su’s lack of experience and lack of Marty Walsh’s recognized skill at handling tough labor negotiations. 

While only a few business groups initially opposed her nomination, the opposition has strengthened as more becomes known about her record.  NAW sent a letter to the Senate opposing the Su nomination, and joined more than 30 business organization in signing an additional letter.  An additional letter will be sent in a few days with even more groups signing on to join the opposition.

The Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing on the Su nomination last week, leaving her critics unconvinced that she could capably run the department and convinced of her pro-union and anti-business bias.

Su’s nomination was confirmed this morning by a party-line vote of 11-10, but her confirmation by the full Senate remains uncertain.

Healthcare update:

The House is holding a number of hearings on healthcare issues this week.

The Education and Workforce Subcommittee on Health, Employment Labor, and Pensions is holding a hearing entitled “Reducing Health Care Costs for Working Americans and Their Families.” The Partnership for Employer-Sponsored Coverage (P4ESC), a coalition of business groups which includes NAW submitted a statement for the record.

This statement outlines many of the priorities of the coalition including preserving and strengthening employer-sponsored coverage, providing employers with relief from burdensome healthcare regulations, addressing high medical costs, and promoting innovation and diversity in the design of employer health plans.

P4ESC also submitted a statement for the record for an Energy and Commerce Subcommittee on Health hearing entitled “Lowering Unaffordable Costs: Legislative solutions to increase transparency and competition in healthcare.” The comments noted that rising healthcare costs are a significant challenge for employer-sponsored health coverage and urged lawmakers to take steps to make the healthcare system more transparent.

On the Senate side, lawmakers are in talks to bring up a healthcare bill that would include price transparency measures, reforms to the practices of Pharmacy Benefit Managers, and a price cap on insulin.

The Senate HELP Committee is expected to consider multiple bills dealing with PBMs and increasing access to generic medications next Tuesday, May 2^nd and will hold a hearing on the high costs of Insulin on May 10. Given this timeline, it is possible that the full Senate could consider legislation in late May or in June.