Peter Friedmann’s View from the Hill – December 2021

 

Supply Chain – Still Front and Center in 2022

 

Transportation and supply chain concerns were once reserved for the maritime trade press, but no longer. National media coverage is intense, and shifting from ships awaiting berths at terminals in San Pedro Bay and Savannah; to the role of this crisis as an engine of inflation. Here in Washington DC, inflation can be a paramount threat to anyone seeking reelection in the “midterms” in November (or to any President who depends upon his party retaining the Majority in the House or Senate, or both). One indicator of what we can expect in the coming year: a survey of the chiefs of staff of the 435 members of the House of Representatives revealed that fixing the supply chain will be the top legislative priority for more members of Congress than any other issue.

 

Apparently, this survey was accurate: in the closing weeks of the just-ended Session, the House passed the Ocean Shipping Reform Act of 2021 addressing supply chain issues, by a margin of 364 to 60. The substance of this bill aside, the politics were remarkable. First, while retailers, manufacturers, truckers, importers, agriculture all supported for this bill, key maritime stakeholders—ports, marine terminals, waterfront employers, and ocean carriers did not. In ‘normal’ times, that would have been sufficient to kill a maritime/port bill. This time, though, Congress advanced it; the President endorsed it. Second, despite toxic partisanship on Capitol Hill, this bill was an island of bipartisanship, from introduction through the final vote. And third, the House acted with unprecedented speed. The original Shipping Act of 1984 took three years to make its way through the legislative labyrinth. OSRA21 took four months. Of course, the Senate has yet to act, but as Senators represent similar constituents (consumers, farmers, retailers, manufacturers) it would be logical to expect similar results.

 

The Executive Branch has been engaged. The White House Supply Chain Task Force meets regularly and the Administration’s “Ports Czar” John Porcari is promoting supply chain improvements nationwide. Last week, the Secretaries of Transportation and Agriculture issued a joint missive pressing supply chain service providers to alleviate the crisis.

 

Will it work? It’s unclear. The benefits of the Administration’s pressure on ports to open West Coast marine terminal gates 24 hours a day (compared to the “normal” 8, and sometimes 12, hours) remain less discernable than hoped. But other initiatives are being pursued by the ports in collaboration (and funding) with the Executive Branch, or on their own: data sharing portals, container storage locations, “inland ports” or load points, etc.

 

The supply chain crisis and public agitation it is generating, remain a top priority here in DC. The people we elect are increasingly anxious and aggressive in pursuit of solutions.  2022 will again be a year when “supply chain” will be two words heard frequently on both ends of Pennsylvania Avenue….almost as much as “Omicron”.

 

Peter Friedmann

OurManInDC@FederalRelations.com

Peter Friedmann’s View from Washington, DC  -  November 2021

 

Now Everyone’s a Supply Chain Expert

 

If, two years ago, you had asked the young lady working at the car wash if she knew what the supply chain was, you’d have gotten a blank stare. But today, she will explain to you that they are out of the car wash detergent “because the supply chain.” Then she will tell you about all the ships floating around outside of Los Angeles. And now, children are hearing that good Santa is being prevented by evil “Supply Chain” from delivering their presents.

 

If there is anything positive about this crisis, it’s that all who are in the trade and transportation business are now “experts” – neighbors and family who didn’t really know what you did, now do, and suddenly, what you do is important! Instead of “my son the doctor,” it’s “my daughter is in charge of her company’s supply chain.” If you are enjoying all this attention, then you’ll be glad the supply chain crisis will continue through the end of 2022.

 

Unless something dramatic happens in our economy, the data is showing that replenishment of distribution center inventories will not catch up with the outflow to consumers and manufacturers until then.

 

Did this all happen because of COVID? The answer is an emphatic NO! We have had cracks in our supply chain, both international and domestic, for decades. When the flood of imported consumer goods and manufacturing components began last year, it finally revealed how derelict we’ve been in addressing these deficiencies.

 

It’s not that we haven’t known what those deficiencies were. From time to time Congress has attempted to legislate solutions, but entrenched interest groups opposed each effort. But now, the supply chain crisis has forced everyone to recognize that the country must address those deficiencies to not only mitigate the current crisis but to also prevent ongoing harm to our economy.

 

We have the lowest allowable truck weights in the world. Our national truck weight is 80,000 pounds gross vehicle weight (GVW). A number of states allow more – up to 105,500 lbs. with an extra axle. That’s also the Canadian model. Weights above ours are standard in Europe and Asia. But California sticks to 80,000 pounds, creating a type of “wall” impeding transport of imports and exports through the cities of Los Angeles, Long Beach, and Oakland. Even powerhouses such as Anheuser-Busch, Coca-Cola, Pepsi, and International Paper have been unable to win Congressional approval for a higher national truck-weight limit. Why? Because the railroads maintain a permanent (and effective) lobbying campaign against the higher weights.

 

We have a shortage of truck drivers. It does not help that we prevent high school graduates from becoming a truck driver. The minimum age for a commercial drivers license (CDL) is 21 years, but with state regulatory and insurance requirements, it’s effectively 23 years. By that time the person has found some other career. Think about it: a young person joins the Army, and at age 19 is driving a multimillion-dollar vehicle through battle-torn Afghanistan or Iraq, dodging rockets and grenades. But we don’t trust that person to drive a truck loaded with cotton or hay here in the U.S.? It makes no sense.

 

In a frightening Container Port Performance Index report, the World Bank and IHS Markit ranked 351 container ports around the globe on their efficiency and performance. None in the US ranked in the top 50. Los Angeles was ranked 328, Long Beach at 333. Why? Our ports are not automated, the gates operate for limited hours, they shut down for lunch. We are left to argue about whether the gate hours can be expanded by just a few hours a day, while overseas, automated ports operate 24/7.

 

Trade used to be about, well, trade policy: Should we allow the import of so many manufactured and consumer goods, and what should the tariffs be? Today trade is also a supply chain issue. If we continue to “offshore” to far-flung locations around the world, how can we expect not to be challenged by those lengthy ocean or air supply chains?

 

These challenges are not new, and there are entrenched interests fighting to maintain the status quo. Until we have the political will to address them, the supply chain crisis will continue. Every person in this country will soon become a supply chain expert. At least our friends and family will understand what we are talking about all the time.

Peter Friedmann’s View from Washington, DC  -  October 2021

 

Infrastructure Bills Held Hostage on the Hill

 

What happens when an activist group of legislators attempts to move their party and their president off center? The Democrats’ internal conflict over spending is not a new story, but a decade ago, it was the Republicans who mounted a similar challenge to party leadership. Unless the stand-off is resolved soon, U.S. infrastructure improvements will—as usual—continue to be postponed.

 

Seems like we’ve seen this show before. What happens when an activist group of legislators attempts to move their party and their president off center? Today, it is the Democratic “Progressives” moving the Democratic Congress and White House to the left; 10 years ago it was the “Tea Party” Republicans moving their Republican colleagues and president to the right. Without passing judgement on the merits of their respective agendas, today’s left fringe of the Majority party in the House and Senate (and occupying the White House) seeks to expand the federal social safety net and spend trillions of dollars to accomplish it, while 10 years ago the Majority party’s fringe rebelled against seemingly uncontrollable government spending.

 

Interestingly, in both cases the conflict has not been about the frequent flash point between liberals and conservatives: the social issues such as abortion and gun control. Instead, the battle has largely been around the levels of government spending and the role of the federal government. Ten years ago, the right fringe of the Republican Majority sought dramatic cuts in federal spending and federal programs—far more than the Republican leadership, or many of their Capitol Hill colleagues, were seeking. Today the left fringe of the Democratic Majority is pressing for dramatic increases in federal spending and federal programs, more than Democratic leadership and many of their congressional colleagues would prefer. The question now, as it was then: Will the “outer edge” of the party be successful in moving their caucus (representatives and senators of their own party) to embrace, or at least not oppose, their ambitious agenda?

 

Today, as it was 10 years ago, the leadership of the congressional Majority party is struggling to maintain control of the agenda. Today, as then, Majority leadership is buffeted by an energized Minority party, which is only a few votes and perhaps just one election away from capturing the Majority. Losing the Majority means losing control of the congressional agenda, the right to move (or kill) legislation, and the right to confirm (or reject) the president’s nominations for judges on the courts, including the Supreme Court, and Cabinet leadership. But challenges from the Minority party are normal—and have been since 1776. It is more difficult for the Majority leadership to fend off competition to control the legislative agenda from within its own party.

 

According to polls, the public (or at least the public that is engaged in policy issues) is focused on COVID, the U.S. withdrawal from Afghanistan, and treatment of migrants on our southern border. But the debate that has brought Congress to a standstill revolves around something altogether different: the $1.2 trillion “hard infrastructure” bill—roads, bridges, transit, internet access—and the $3.5 trillion “human infrastructure” bill—free day care and community college, lower age/eligibility for Medicare, and addressing climate change, among other measures. The congressional debate revolves as well around how to pay for all this, meaning repealing a number of the tax cuts enacted three years ago under then-President Trump. It is this point, together with the sheer cost of spending $3.5 trillion to expand the federal role in our lives, that motivates a few Democrats to oppose the “human infrastructure” legislation and tax increases advocated by “Progressive” Democrats.

 

With a Senate split 50-50 between the parties (requiring Vice President Harris to come to the Hill to split a tie vote), and the Democrats’ thin majority in the House, all it will take to prevent passage is one or two Democrats to join a united Republican front in opposition to the progressive “human infrastructure” agenda. But without the Progressives’ votes, the Democratic leadership is unable to move any legislation, including the bipartisan “hard infrastructure” bill.

 

How long will these two infrastructure bills remain hostage? Roads, bridges, public transit, and other beneficiaries of the “hard infrastructure” bill have now waited two months since a bipartisan compromise was reached; promised deadlines to advance the legislation have been repeatedly extended. Congress, unable to agree and pass its appropriations bills by the end of the 2021 Fiscal Year (September 30), passed a continuing resolution to keep the government running into December. This suggests that the Majority party leadership is prepared for the stand-off between its progressive wing and center to continue.

 

While we might feel that the challenges from within the Majority party to the Speaker’s control of the agenda is something new … it isn’t. In the meantime, paving our roads and rebuilding bridges and public transit get “kicked down the road” once again.

Peter Friedmann’s View from Washington, DC  -  September 2021

 

Too Much on Its Plate – What Will Congress Get Done?

 

It’s a calm, sunny day here in D.C. As I look out the window, the view of the Capitol, eight blocks away, is clear. But the view of what is going to happen inside that building is anything but clear. As one commentator has said, the “news gods” are being too generous, and there’s way too much going on for us to handle.

 

There are so many pressing legislative proposals and responsibilities on the Congressional plate today: setting the federal budget, COVID-19 response, increasing personal and corporate taxes, rebuilding roads and bridges, climate change, free community college and day care, cybersecurity, immigration, interest rates set by the Federal Reserve Board, and increasing the debt ceiling and borrowing to finance that spending. Under the Constitution, dealing with these issues, all of which are part of setting federal budgets and the government’s spending priorities in the related appropriations bills, is the fundamental responsibility of Congress.

 

Studying each of the thousands of federal government functions, revising them, and then voting on how to authorize and appropriate funding for each of them is hard, time-consuming, and sometime contentious work. Generally, that work doesn’t generate the kind of press coverage that most members of Congress relish: coverage that would enhance their stature with their constituents. That’s particularly important to many of them now, as all 435 members of the House and 34 senators are just about a year away from standing for reelection, on November 8, 2022. 

 

More rewarding, in terms of press coverage and influencing voters, are other pursuits. Rather than sitting through another subcommittee mark-up of yet another authorization bill of some obscure federal agency, it is so much easier for members of Congress to opine on, garner press coverage, and gain constituent and national visibility on matters that generate more public and press attention, even if they aren’t going to do more than talk (loudly) about them.

 

NOTE: Spoiler alert and apologies in advance to readers who hope to read an opinion on the following acutely partisan and contentious issues: You may be frustrated by my intentionally neutral language. On the other hand, you might enjoy this brief respite from the polarizing bombardment of opinions masquerading as “news” in the media.

 

  • The overwhelming majority of Democrat and Republican members of Congress agree that it was time to get the United States out of Afghanistan. None were asked by the Biden Administration to work with it on the specifics of the withdrawal, and few, if any, offered suggestions. Yet, as the fall legislative session gets underway, there is no shortage of members of Congress rushing to the floor of the House or Senate or to the media’s microphones to share the wisdom and clarity of their hindsight. But I feel this will be a temporary diversion from legislating.

 

  • While some members of Congress seek opportunities to engage on abortion policies, most try not to; it is just too controversial, too personal, and too emotional for too many voters. For nearly 48 years, since the Supreme Court’s Roe v. Wade decision in 1973, Congress has periodically considered amendments relating to abortion; but generally speaking, and contrary to the impression one could get from the press, it is not an issue that gets much time in the day-to-day business of Capitol Hill. It certainly does emerge in full force at predictable times, such as when the Senate considers the nomination of a Supreme Court justice. This fall is different. There are no Supreme Court nominations, but states are enacting new abortion laws, the Administration is intervening, and the Supreme Court is making rulings, so Congress will engage. Expect attention devoted to abortion in the House and Senate to build for the next 12 months leading to the November midterms. 

 

  • January 6, 2020. The House has begun an investigation and hearings into the events of that day, when the Capitol was invaded. The Speaker appointed members of the House to serve on a select committee, while Republican leadership opposes the committee’s formation and functions. While Democrats and Republicans might eventually find some measure of compromise or resolution to many issues for the remainder of this Congress, this investigation will not be one of them.  Meanwhile the fence is going back up around the Capitol in anticipation of this weekend’s rally in support of those who were arrested last January.

 

In just a couple weeks we will get an indication of how much time and attention these controversies will take from the regular business of Congress. Will Congress complete all or most of the appropriations bills funding federal agencies and programs, before the current federal fiscal year expires on September 30? Most definitely not. It will “kick the can down the road” well into next year. But Congress must increase the federal debt ceiling, by trillions of dollars, to allow continued federal borrowing (by issuing Treasury bonds) to finance federal spending – either by finding compromise, or by the Majority ramming through its preferred dollar amount.

 

So, with all that, will there be enough oxygen on Capitol Hill to dig into and advance the very complex proposals now before Congress (COVID-19 response, the collapsing international supply chain, immigration, cybersecurity, the infrastructure bill to rebuild roads and bridges, increasing personal and corporate taxes) that will be essential to pay for the $3.5 trillion “reconciliation” package of “human infrastructure” that would address climate change, provide free community college and day care, reduce the age eligibility for Medicare, increase the national minimum wage, and much more.

And what about taxes? A draft proposal from the Chairman of the House Ways and Means Committee, ricocheted across D.C. last night. It will be an epic battle: between Democrats and Republicans, and between Democrats and Democrats, all attacked and/or supported by the best-connected, highest priced lobbyists who swarm Capitol Hill whenever Congress tackles tax policy. The proposal would:
 

  • Increase the top personal rate from 37% to 39.6%, for individuals earning $400,000 or married couples earning $450,000.

  • Increase the top capital gains rate from 20% to 25%, but changes to what qualifies as investment income would make the effective rate 28.3%. 

  • Accelerate the end of the $24 million estate-tax exemption.

  • Impose an additional 3% tax on Americans who make more than $5 million.

  • Expand restrictions on “carried interest,” impacting how private equity firms compensate employees.

  • Mandate that Medicare negotiate pharmaceutical pricing, projected to save $700 billion.
     

The “news gods” have indeed been overly generous; all this is almost too much to digest, and would be too much for any Congress, at any time. Certainly it is too much for this current, narrowly split, partisan Congress, whose members are positioning themselves to keep their jobs, and to maintain or gain the Majority (and control of the agenda) in the next Congress.
 

Peter

 

Peter Friedmann’s View from Washington, DC. July, 2021

All Eyes on the Midterms


On the heels of COVID-19, the President and Congress are tackling perhaps the most ambitious agenda of issues we have seen in many years: immigration, voting rights, foreign relations, tax policy, infrastructure, racial justice, law enforcement reform, oversight of global tech companies, trade, corporate consolidation/monopolies. These are seemingly diverse and unrelated, but there is a common thread to the way the President and Democratic Majority and Republican Minority are addressing each of these important issues: It is not only about the substance of each of these issues, but also about the 2022 Midterms. The November 2022 elections will determine who gets re-elected, and which party is in the Majority in the House or Senate beginning in January 2023. One can safely say that none of the major issues that Congress will debate this year or next will be decided purely on the merits.


Why are the White House and all Senators and members of Congress so laser-focused on November 2022, even more than usual? The Senate is equally divided: 50 Democrats, 50 Republicans. The Democrats are the Majority party because the Vice President can vote in the Senate, which this term gives Democrats 51 votes, and thus the Majority. That status, in turn, grants them the right to set the agenda, to chair the committees, and so forth. Practically speaking, if one Democratic Senator decides to chart an independent path, the Majority power is lost. This is why West Virginia Senator Joe Manchin, a “centrist’” Democrat from a state that went strongly for Donald Trump last November, is seen by many as the most powerful legislator on Capitol Hill. Without his support the Democratic agenda does not advance; his ability to thwart some of the more ambitious objectives of the Progressive wing of the Democratic party and force compromise with Republicans has the whole town watching his every move. Already in the first six months of President Biden’s term, his influence can be seen in tax, energy, and infrastructure legislation.


With 30+ Senate seats and all 435 House seats up for election in November 2022, only a very few seats need to change from one party to the other to tip the balance. Either Republicans gain the Majority in one or both houses of Congress and can stop the Democrats’ agenda, or Democrats increase their Majority and are better able to advance their agenda.
So how has the Majority advanced its agenda so far this year, in the face of unified Republican opposition?


First, through a procedure known as “reconciliation,” which is immune from filibuster and thus can pass with only a majority – 51 votes in the Senate, and a majority of those voting in the House. So far this year, that procedure has been used once, to overcome unified Republican opposition to pass the massive COVID relief and stimulus bill. It can be used once again. It is the means by which the Affordable Care Act (also known as “ObamaCare”) passed. The rules specify that it must be solely a budget bill, but even within that constraint it is possible to tuck in many substantive policy initiatives.


Second, by compromise – something we may be seeing on infrastructure. Earlier, 10 Republican Senators joined with moderate Democratic Senators to negotiate with President Biden a compromise infrastructure bill – one that is focused on roads, bridges, broadband, and other physical infrastructure, but not the agenda of the progressive wing, particularly climate change, and shifting/increasing taxes on the wealthier Americans and corporations.


Third, by avoiding Congress altogether, through Executive Order. President Biden is starting right where Presidents Trump and Obama had left off. The most obvious example would be immigration, where Biden has reversed Trump’s Executive Orders restricting immigration. The use of Executive Orders is also evident in recent international trade decisions.

Let’s focus on the issues themselves. The following are some of the current priorities for the Biden Administration and the Democratic Majorities in Congress:


1. Immigration. The President’s recent Executive Order will dramatically increase the number of immigrants, particularly those crossing the Southern Border.
2. Voting rights. This area, which encompasses access to ballots, redistricting, etc., is highly contentious, and perhaps will be pursued via reconciliation, Justice Department intervention, or legislation. Passage or defeat of this legislation would have direct impact on the 2022 Midterms, which only fuels the partisan battle over these bills. Again, Senator Manchin’s skepticism of the more ambitious proposals has sent them back to the “drawing board.”
3. Infrastructure. So far, we’ve seen a compromise between Senate Republicans and the White House, but that does not mean the bill they agreed on will be enacted. There are still significant differences of opinion and priorities, even within each caucus: Some Republican Senators believe that, coming on the heels of COVID stimulus spending, the compromise still costs too much, while some Democratic Senators believe that it should not advance without paying for the infrastructure by increasing taxes on “the wealthy” (yet to be defined) and corporations, and adding significant spending to combat climate change. This is a very volatile situation.
4. Energy. The President is committed to moving from fossil fuels to solar and other renewables, as is the Democratic Majority in the House and Senate. This issue was expected to play a central role in the infrastructure bill, but here again, the influence of Senator Manchin, representing a state whose economy has been dependent upon fossil fuel production, was apparent. The grand shift from fossil fuels to electric power was not included in the infrastructure compromise and will have to await another vehicle.
5. Law enforcement reform, including funding and training for police. Both Democrats and Republicans openly state that the increasing violent crime rates and police department attrition will be a significant issue in the minds of voters in November 2022. This concern has already had the effect of muting the Democratic Progressives’ drive to change policing nationwide.
6. International trade. Trade policy changes are not a high priority of this Administration or Congress. The so-called “Trump Tariffs” on China are still popular on Capitol Hill among both Democrats and Republicans. We do not see any movement toward trade expansion via new treaties. However, there has been some reduction in trade tensions with our allies, such as the resolution of the Airbus/Boeing dispute with the European Union. President Biden has not been willing to support the EU’s proposed tax on U.S.-based digital giants, but he has been willing to discuss a global minimum corporate tax. As for Mexico, we are now, for the first time, using provisions of the U.S.-Mexico-Canada Agreement (USMCA) to pursue increased wages and labor standards in Mexican factories, a potential flashpoint in US-Mexico relations. So far, these are not significant issues on Capitol Hill, they are not partisan, and they are almost exclusively in the domain of the President.
7. China. Relations with China remains the primary focus of bipartisan Congressional concern: restraining China’s unfair trade practices, curbing its military and geopolitical expansion, and protecting our country’s cybersecurity. Aside from more funding for cybersecurity programs, Congress will leave the U.S.-China relationship to the White House.


We are only six months into the first year of the Biden Administration. Some in his party are impatient for dramatic policy changes. But the limitations of a razor-thin Majority, the clout of one or maybe two moderate Democratic Senators, and the focus in both the House and Senate on appealing to the moderate/center of the electorate in order to win enough seats in the 2022 Midterms, has already moderated the agenda. No statement, no action will be taken by the White House or Congress without an eye on those elections – only 16 months away!

 

Peter
OurManInDC@FederalRelations.com