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Peter Friedmann's
View From Washington D.C.

Peter Friedmann's View from Washington DC

FBB Federal Relations, P.C.

November 2023

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It is hard to know where to begin this month’s ‘View from Washington DC’. It almost seems that Washington DC, like the entire world, is spinning out of control. But let's try.

 

Mideast..everywhere, for now

Everywhere in DC, the Mideast is top of mind., second only to the perennial highest priority of every elected official – getting reelected. Thousands demonstrating, on Pennsylvania Avenue and even inside a House Office Building. At the White House, it’s the President’s primary focus. On Capitol Hill, the Israel/Ukraine aid bill enjoys bipartisan (but not unanimous) support; Republicans are split over aid to Ukraine, and now the House Republicans seek to use it as a legislative vehicle to repeal significant Internal Revenue Service funding. For now, Mideast is top of mind, but Congress is famous for its short attention span; how long it remains at the top of the agenda remains to be seen. In the meantime, it is only one factor in determining which who gets reelected and which party controls Congress and the White House a year from now.

 

Will there be a shutdown?

Despite the many ‘warring parties’ (House versus both the Senate and the White House, Republicans versus Democrats, Democrats versus Democrats, Republicans vs Republicans) they’ll try to pass a budget, to avoid a Federal government ‘shutdown’ beginning November 18. The means of passing the various appropriations bills or at least a ‘Continuing Resolution” (which temporarily continues to fund the govt at last year’s levels) is even now being negotiated, out-of-the-public-eye, between the warring parties.  Fortunately, contrary to common wisdom, the new Republican speaker has been given some leeway to negotiate with the House Democrats, a budget that could avoid a ‘shutdown’.

 

The term ‘shutdown’ is very much misunderstood. In fact, wide swaths of federal responsibility will continue operating, including all military, both active and retired, all deployments and all the procurement; all entitlement programs such as Social Security, Medicare, Medicaid, food stamps, housing and other welfare programs will continue unabated. And many Federal agencies, including Customs and Border protection, Dept Homeland Security continue with their responsibilities. Yes, all Federal workers do get paid as soon as the shutdown ends, just not on the normal paydays -- obviously painful for those who live paycheck to paycheck. Perspective: since 1980 there’ve been 15 shutdowns, the longest 34 days. We’ll get past this one as well.

 

Republicans Find a Speaker

Much “ado” about Republican efforts to find a new leader, known as Speaker of the House of Representatives. Embarrassed by jettisoning 4 of their own before landing on Louisiana Congressman Mike Johnson. A primary responsibility of any Speaker, Republican or Democrat, is to raise the funds that his party needs to win elections and maintain its Majority. Nancy Pelosi was a prodigious fundraiser for Democratic candidates, Kevin McCarthy was highly effective for Republican candidates. Many questioned if a newcomer like Johnson could be capable?  We’ve all been reminded of the power of the DC campaign fundraising apparatus, which has helped Johnson raise more in 2 weeks since elected Speaker, than in his 7 1/2 years in Congress.

 

So why was he selected when others, more senior and widely known, were rejected?  First, he hasn’t been around long enough to make too many enemies.  [Harry Truman’s famous adage: ‘if you want a friend here in DC….get a dog’.) Second, apparently, he’s a pleasant guy, easy to get along with, even with those who opposed his politics. Third, Rep. Mike Johnson is easily the most conservative Republican to hold the Speakers’ gavel, in some ways the legal and intellectual mind behind the most conservative positions on abortion, government funding, and States’ rights, etc.   Will he be able and willing to compromise his deeply held views, in order to advance Congressional business? So far, the answer is ‘maybe’ – already compromising on Federal spending, in order to avoid a shutdown.

 

China

Up till October 7, when Hamas invaded, the US-China relationship was top of mind throughout Washington DC.  Reigning in China is one place where Congress, both Republicans and Democrats and the White House agree. The House established the Select Committee on the Chinese Communist Party. In hearings and bills House and Senate demanded tough ‘anti-China’ initiatives, such as the Uniform Forced Labor Protection Act.  The President agrees, with additional restrictions on China technology imports and US investment in China. I believe USTR will allow existing exclusions from Section 301 Trump-Biden tariffs to expire, thus increasing the number of Chinese products that will be subject to the Trump-Biden China tariffs.

 

All are alarmed at China's rapid global military expansion, it’s ‘Belt and Road’ global infrastructure, threats to Taiwan, support of Russia’s invasion of Ukraine.  But it’s a balancing act, as both Capitol Hill and the White House are aware of our country’s mutual dependance. We want access to Chinese markets, access to rare earth minerals. All while hoping not to ‘poke the bear’, to induce China to advance on Taiwan.

 

So, President Biden has invited President Xi to come and meet which he will do later this month in California. He has sent three Cabinet Secretaries to China to maintain relations and communications. So, is China our enemy or our partner? Very much on the minds of those at both ends of Pennsylvania Avenue.

 

Ocean Shipping, Protecting the US Shipping Public, Customs Brokers and Truckers:

Much effort was put into passing the Ocean Shipping Reform Act (OSRA) in order to address the supply chain crisis and to assure fair treatment of US exporters, importers, customs brokers, freight forwarders, truckers. Right now, the FMC is close to implementing the Detention and Demurrage Billing Practices Rule, which will address this question: should middleman (such as ‘notify parties’) and truckers be held responsible for the payment of detention and demurrage charge, or should carriers and marine terminals only submit detention and demurrage bills to the importer or consignee? The PCC has vigorously pursued the latter (while allowing the importers to hire customs brokers, for a fee, to receive, review and process the D & D invoices).

 

Campaigns for control of the White House and Congress are well underway.

We could not finish up this month’s View without a nod to the 2024 elections. As always, an elected official’s highest priority is their reelection. The 2024 elections are very much on the minds of everybody in Washington DC on both ends of Pennsylvania Ave. So much is at stake. What party will control the agenda in the House of Representatives and in the Senate? Who will occupy the White House and thus control the foreign policy and spending priorities of the United States?

 

It's common wisdom that President Biden and former President Trump will be the candidates of their parties. My own view differs -- I believe that neither will be nominated by their party as their candidate. As of this writing the latest polls show Trump and Biden tied (within the margin of error). Each would get about 35 or 36%, while Robert Kennedy would garner 25%. This year we will see how far a third-party candidate can get; Kennedy will learn how integral our two parties are to our system, no 3rd party candidate has ever won.

 

It’s early days; since 1980, the individuals who lead in the polls on January 1 are not the ones who gain their parties’ nomination. In 2020, Joe Biden was running 12th in Iowa primary; Barack Obama was still unheard of in January of his election year; in March 2016 Donald Trump was laughed at by many in the Republican Party, by August he was their nominee.

 

“It’s the economy, stupid”. A strong economy is the linchpin to any President’s reelection.  How will the economy fare during this coming election year? Will the Fed slow or suspend interest rate hikes? Will inflation abate or lock many out of housing, car loans, etc.?

 

Joe Biden a self-professed “best friend labor has ever had in the White House”, has been buffeted by labor strikes which slow the economy, surely the President is asking unions to take a break from the strikes. Will they listen, or follow the lead of the auto unions which won very big in recently concluded negotiations? This week we learned that the President of the ILA, the east and gulf coast longshore union is talking “strike”. Would this damage the economy, and thus President Biden’s re-election chances?

 

Both Joe Biden and Donald Trump are seeing competition emerge for their parties’ nominations.  This too will be felt on Capitol Hill; several Congressmen, Senators and Governors, both parties, are running or preparing to run.  We are less than 12 months from determining which party will control the nation’s Agenda in the House, the Senate and the White House. In the midst of campaigns, will Congress and the Administration be able to focus on the nation’s unprecedented domestic and foreign challenges?

 

Peter Friedmann  

OurManInDC@FederalRelations.com

November 6, 2023

The Shutdown and Speaker Primer

Peter Friedmann, FBB Federal Relations

October 2023

 

Even though we are all inundated (and appalled) with ‘news’ about what’s happening in the House of Representatives this month, I’m receiving many questions, listed below. Here I attempt to respond.

 

But first, before you believe anything anyone (particularly those on cable ‘news’ shows) predicts, remember that the sudden vote to pass a Continuing Resolution to avoid a shutdown until November 18, was predicted by no one. Even the two players who reached the agreement, Speaker Kevin McCarthy and Democratic Leader Hakim Jeffries, didn’t know it would happen when they came to work that very day.  The point is, it's fluid, unpredictable, stay tuned.

 

So, here are the questions we’ll address:

  1. What exactly is a “shutdown”? 

  2. Does the Federal govt actually shutdown?

  3. Will there be another ‘shutdown’?

  4. Are Federal employees paid?

  5. Why is the Speaker Such a Big Deal?

  6. If the Speaker is so powerful, how was Speaker McCarthy removed?

  7. Will a new Speaker be elected, how, when?

  8. Can the House conduct business in the meantime?                                         

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1. What exactly is a “shutdown”?   The fundamental function of Congress is to review Federal programs and passing the 12 appropriations bills providing funding by the beginning of each new Fiscal Year (October 1). See the list of Appropriations bills at the bottom of this Update. This is serious business, funding determines policy – failure to pass the Appropriations bills is typically due to inability to gain agreement on challenging Federal policy questions, for examples, should there be money for Ukraine aid? for building the southern border ‘wall’? COVID or disaster (drought, earthquake, hurricane) relief? recruiting/training additional air traffic controllers, customs inspectors, etc?

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If it appears they won’t be able to pass Appropriations bills by October 1, Congress can enact a “Continuing Resolution” (CR) for some or all the relevant govt functions, continuing funding at the prior year’s levels. But if they can’t get that done by October 1, those functions ‘shut down’.  We’ve had 15 ‘shutdowns’ since 1980.

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2. Does the Federal govt actually shutdown?  No, not by a long shot. Wide swaths of the Federal govt keep functioning.

a. The Appropriations bills only cover ‘discretionary’ funding, not the ‘entitlement’ programs such as Social Security, Veteran’s benefits, Medicare, Medicaid, unemployment, Welfare, food stamps, which continue without the need for Congress to approve funding each year. They continue during a “shutdown.

b. The military is exempt.

c. Most agencies have determined “essential functions” that continue to function. Customs, border patrol and agriculture inspections, air traffic controllers, etc. continue, albeit often without ‘back office’ support and other reductions. But many other services are suspended, such as national parks and monuments, etc.

d. We and others have communicated with various federal agencies the specific functions that we believe should be “essential’ and thus continued during a ‘shutdown’. The agencies have been generally receptive.

e. The trend: we’ve observed, over the years, more and more federal govt functions continuing during the ‘shutdowns”.

 

3. Will there be another ‘shutdown’? Hard to see how the House can find the time to elect a new Speaker and resolve the federal funding dilemma. Possible, unlikely. To avoid another ‘shutdown’, Congress must, by the end of the day on November 17, either pass appropriations bills, or pass another Continuing Resolution to keep federal funding flowing until end of the calendar year, or till Congress convenes its next Session in January 2024, or even until the beginning of the next Fiscal Year in October 1, 2024. All of those have happened in the past. What will happen this year?

 

4. Are Federal employees paid? Yes. Federal workers, both those performing the “essential functions” as well as those deemed ‘non-essential’ who are staying at home, will not receive their regular paychecks while the government is shut down, but all will receive, retroactively, full pay, once the shutdown is over.   

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5. Why is the Speaker Such a Big Deal?

The US Senate and the US House of Representatives operate very differently. While any senator can go to the Senate floor and offer an amendment or introduce legislation, or address the 100 Senators, the same is not true in the House. With 435 Congressmen/women (most with very big egos), it can be an unruly place. So, the House rules are designed to keep order, by consolidating power in the Speaker of the House. Each time there is a new majority party in House, all the representatives vote for the Speaker. Typically, the members of the majority party have the votes to elect one of their own, who becomes Speaker.  While the Speaker does not appoint each Committee Chair, he or she has an outsized role in leading the whole House in selecting the Chairs. They are all members of the majority party. The Chair of each Committee determines if and when to hold hearings, on what topics, and which bills to consider and pass on to the Floor. The Chair of the Rules Committee, always a close ally of the Speaker, determines what bills and amendments can be considered on the House Floor, and thus, the bills that will be voted upon and have a chance to pass the House. As you can see, the Speaker has a hand in everything the House does. 

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Recent demonstrations of the Speaker’s power were two Select Committees set up (and terminated) by the Speakers. First, Speaker Nancy Pelosi (elected by the then-Democrats’ majority) selected the Members and Chair of a Select Committee to investigate the January 6 attack on the Capitol and President Trump’s role. Then, once Republicans gained the majority, one of Speaker McCarthy’s first acts was to disband that January 6 Select Committee, and to establish a new Select Committee on the Chinese Communist Party. The Speaker’s role is dominant in the House.

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6. If the Speaker is so powerful, how was Speaker McCarthy removed? Typically, the party with the most seats in the House votes one of their own to be speaker, usually without much drama. While every Speaker has had some dissidents within his/her caucus (including the prior Speaker Nancy Pelosi), they enjoyed a sufficient ‘cushion’ of loyal members of their own party, to limit the dissidents’ impact. In contrast, the Republican majority resulting from the 2022 elections is extremely slim. So slim, that to win enough votes to be elected Speaker, Kevin McCarthy was forced by a very small number of the most conservative Republican dissidents to accept a rule change to allow, upon the motion of a single member of the House, a vote of the full House to remove him (unprecedented).  Then, the unthinkable was possible: a handful of most conservative dissident Republicans joined with Democrats (including some of the most liberal) to vote McCarthy out. Capitol Hill is still in shock.

 

7. Will a new Speaker be elected, how, when? Now the House goes about electing a new speaker. Anything is possible (as we saw this week). Making any prediction is foolhardy, but the current ‘common wisdom’ (which is usually wrong) is that the Republican majority will come together sufficiently to vote one of their own to be the next Speaker. But no shortage of drama:  At least two Republican Congressmen have declared their candidacy. Several more are being discussed. Donald Trump’s name is being floated. Could centrist Republicans and Democrats come together to select a Speaker and then engage constructively on policy? Hard to imagine, but then again, this entire situation was hard to imagine! 

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Voting could be as soon as late in the week of October 9, or drag on for the following weeks.  

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8. Can the House conduct business in the meantime?  The Senate work can proceed, but the Speaker selection will be a major distraction from the legislative work of the House -- except the House was already scheduled to be in recess until October 17. Upon their return, even without a Speaker, the Committees, with their current Chairs still in place, can proceed with Committee legislative work. Some believe that it may be possible for the full House to debate and vote on resolutions and legislation, even without a Speaker in place – we’ll see. As noted repeatedly, we are in uncharted waters.

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We are in uncharted territory, we’re in touch with our Hill contacts. Call or email with questions, insights, predictions. See the 12 Appropriations bills below:

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Peter

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Peter Friedmann

FBB Federal Relations, P.C.

801 Pennsylvania Ave. NW

PH21
Washington, D.C. 
202-329-7040
ourmanindc@federalrelations.com

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ATTACHED: 12 Appropriations Bills covering Federal ‘discretionary’ spending:

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12 Appropriations Bills covering Federal ‘discretionary’ spending:

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Deminimis -- A Reference on the Deteriorating US-China Relationship

July 2023

 

What’s Deminimis? – Under Section 321, 19 USC 1321 imports into the US are exempt from import duties as long as the import value is under $800, the product is sent to the ultimate user/purchaser. In addition, the usual Customs documentation and import compliance scrutiny is significantly reduced, allowing for expedited arrival  and entry into the US distribution channels, making possible the eCommerce bringing us so many deliveries to our homes, seemingly overnight. In 2016 Congress increased the threshold, imports that were exempt from US import duties as long as valued under $200, now escape import duties as long as under $800.  By comparison, imports escape Mexican import duties if valued under US$10, Canada $40, China $7, European Union$130 - 170. See all the countries here.

 

First, as deminimis is new and a bit complicated, few members of Congress every really understood it. Now, due to attention directed by the Select Committee on the Chinese Communist Party in the House of Representatives, increasing numbers of members of Congress understand what deminimis actually is., and they don’t seem to like it. Three bills have been introduced to curtail or restrict deminimis.

 

Second, the deminimis debate is no longer about revenue, it’s about national security, and the balance of power conflict between US and China. 

 

Third, it’s clear by now, nobody in Congress is going to defend the status quo.

 

Fourth, the press is picking up on deminimis for imports from China; nothing gets Congress’s attention faster than that. 

 

Fifth, Congressional, Presidential and public skepticism of our trade relationship with China is not new. Five years ago we got a glimpse of Congressional embrace of White House imposition of broad tariffs on imports from China when not one member of Congress offered any legislation, even a modest amendment, to counter the Trump China tariffs. During the 2020 elections, both Presidential candidates gauged public opinion, and hammered on the need to restrict imports. Once in the White House, Biden embraced and extended those tariffs; since then, no member of Congress is contesting them.

 

Sixth, is CBP going in the opposite direction from Congress?. While Congress is advancing legislation to eliminate or severely restrict deminimis, CBP appears to be ramping up efforts to make the status quo ($800 threshold) work; perhaps a bit late.

 

Seventh, all members of the House of Representatives, President Biden and a third of the Senate are gearing up their campaign themes. Now, just a month before the first Presidential debates for the Republicans, and approaching one year before Biden stands for re-election, count on “Tough on China” being of everyone’s theme tunes. 

 

Eighth, once members of Congress make a complicated issue part of their campaign arsenal, anything can happen. Treating favored constituencies (such as air courier who originally lobbied Congress to increase the demininimis threshold from US$250 to US$800) more favorably, or imposing a simplistic “all or nothing” solutions (such as eliminating all deminimis entirely).    

 

Ninth, while the US-China trade relationship is of most immediate interest to many in the trade community; no one should forget the bigger picture confronting the President and Congress: economic, military, currency, political stresses reported daily: China’s tightening grip on Hong Kong, military threats against Taiwan, naval challenges to international transit of the South China Sea, endorsing Russia’s invasion of Ukraine, threatening our access to minerals essential for our own technology, challenges to the dollar’s global economic primacy, competing in space exploration, too many to list. 

 

Lastly, all this motivated the establishment of the Select Committee on the Chinese Communist Party in the House of Representatives. While this was one result of the midterms – a Republican Majority in the House – the Committee is bi-partisan, and as we have seen with the China tariffs, both Republicans and Democrats appear glad to let the others, in this case the Committee, be the point of the spear against China; while most are eager to jump on the bandwagon.  

 

Peter

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