Member Briefing December 7, 2022
Lawmakers Work to Break Impasses Stalling Massive Spending Bill
Top lawmakers are still grasping for the deal they need to tee up a sprawling year-end spending package as potential pitfalls for the bill pile up, nearly guaranteeing that Congress will be working until Christmas or later to fund the government. Democrats and Republicans leading the negotiations are still tens of billions of dollars apart on a total amount for domestic programs, preventing lawmakers from cementing an agreement on the overall funding levels necessary to smooth out the finer points.
Federal cash expires on Dec. 16, meaning lawmakers will almost certainly need to pass a stopgap spending patch that buys them an extra week or more to finalize any funding package for the current fiscal year. The bill could top $1.7 trillion, in line with President Joe Biden’s budget request, and include a swath of other policy provisions. Settling for a so-called continuing resolution that would keep the government funded at current levels for the rest of the fiscal year is hardly the note that the Senate’s two top appropriators.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russian Missile Strikes Force Emergency Power Shutdowns - BBC
- Russian Oligarch Seizes 400,000 Acres of Ukrainian Farmland, Owners Say - WSJ
- ‘We Haven’t Got This Figured Out Just yet’: Pentagon, Industry Struggle to Arm Ukraine - Politico
- Oil Prices Rise as Cap on Russian Crude Kicks In - BBC
- EU to Propose Sanctions on Russia’s Mining Industry – Financial Times
- Drone Attacks Hit Russia for 2nd Straight Day - NYT
- South Korea’s Arms Sales Double in Wake of Russia’s War in Ukraine - Bloomberg
- Why The Sanctions Against Russia Aren't Working. Yet. NPR
- Putin Grips Economy Tighter to Supply Russian War Machine - WSJ
- Major Russian Bank Faces 'Unprecedented' Cyber Attack - CNBC
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Timmons: Unfilled Jobs Could Grow to 2 million By 2030 ‘If We Don’t Get it Under Control’
The NAM took its competitiveness agenda on a media tour last week. In appearances on CNBC, Bloomberg and Yahoo! Finance, NAM President and CEO Jay Timmons called for policy moves that will benefit manufacturers and the U.S. as a whole. Timmons discussed the need to keep in place the tax reforms of 2017, some of which expire at the end of 2022. These changes have enabled many manufacturers to invest in their businesses, raise wages and grow.
“We have had four consecutive years of record wage growth in the sector. That has been made possible … by the tax reforms enacted in 2017,” Timmons said on Bloomberg’s “Balance of Power.” “We have had record investment, record job creation and record wage growth because of those reforms that were made.” However, “immediate expensing, interest deductibility and the research and development tax credit are all coming to an end at the end of this month,” Timmons continued. “We need Congress to renew that to be able to keep those great reforms of 2017 in place.”
US Could See a Fight Over Debt Ceiling That Rocks Markets, Goldman Sachs Warns
Republicans and Democrats are likely to clash next year over the debt ceiling, a fight that could rock financial markets, unnerve consumers and threaten the economy with the specter of a calamitous default. “To raise the debt limit next year, bipartisan support will be necessary but hard to achieve,” Goldman Sachs economists wrote in the report. The looming debt limit battle in Washington could spark the most uncertainty since the 2011 brinksmanship that cost America its perfect AAA credit score and caused chaos on Wall Street, Goldman Sachs warned clients in a note Monday.
The “debt ceiling” is the maximum that the federal government is allowed to borrow, after Congress set a level more than a century ago to curtail government borrowing. But when push comes to shove, Congress has in the past raised the debt limit to avoid a default on US debt that economists have warned would be “financial Armageddon.” That’s what lawmakers did in late 2021 following the last standoff over the debt ceiling.
U.S. COVID – CDC Head: Flu Shots Look Like ‘a Very Good Match’ for This Year’s Strains
Centers for Disease Control and Prevention (CDC) Director Rochelle Walensky told reporters on Monday that the updated flu shots generated this year seem to be “a very good match” for the most prevalent strains of influenza. The CDC shared that its newly revised vaccine was effective in animal tests this season, saying that samples of the inoculative shot were “well recognized” by the immune systems of study subjects.
Monday’s briefing raised concerns about high levels of flu cases already this year, with scientists encouraging the public to get vaccinated for both influenza and COVID-19 ahead of large holiday gatherings and colder weather. Last week found “high” or “very high” levels of flu in 36 jurisdictions, indicating a large increase in cases this week.
Warnock Holds Georgia Senate Seat in Runoff Election
Democrat Raphael Warnock won re-election to the U.S. Senate in a hard-fought Georgia runoff on Tuesday, strengthening his party's razor-thin majority as he fought off a challenge by Republican former football star Herschel Walker. Warnock's projected victory was narrow. With 99% of the estimated vote counted, he led Walker by 50.8% to 49.2%, according to Edison Research.
The result cements Georgia as a battleground state certain to play a prominent role in the 2024 presidential election. Democrats have now won three Senate races in the past two years in the former Republican stronghold, and Democratic President Joe Biden carried the state in 2020.
Beijing Drops COVID Testing Burden as Wider Easing Beckons
Residents of China's capital were allowed into parks, supermarkets, offices and airports without a negative COVID-19 test on Tuesday, the latest in a mix of easing steps nationwide after unprecedented protests against a tough zero-COVID policy. Authorities have been loosening some of the world's toughest COVID curbs to varying degrees and softening their tone on the threat of the virus, in what many hope could herald a more pronounced shift towards normalcy three years into the pandemic.
China may announce 10 new easing measures as early as Wednesday, two sources with knowledge of the matter told Reuters. The prospect of a relaxation has sparked optimism among investors that the world's second biggest economy would regather strength and help to boost global growth. The Chinese yuan has risen about 5% against the dollar since early November on expectation of an eventual reopening of China's economy.
The Dollar Comes Back Down to Earth
it’s starting to look like this era of the strong dollar could be coming to an end: Over the last month or so, the greenback has given up about half of its gains for this year. Part of why the dollar’s been so strong this year is because the Federal Reserve’s been raising interest rates, making U.S. bonds more attractive. And to buy U.S. Treasury bonds, you’ve got to have dollars. But the Fed is likely to slow down its rate hikes.
“Other central banks potentially will be hiking a little bit more rates more than is expected, which will be beneficial for those local countries’ currencies, relative to the U.S. dollar,” said Chuck Tomes at Manulife Investment Management. A weaker U.S. dollar could help all the big, multinational companies that sell a lot of products overseas. “Manufacturing companies that are selling abroad and competing with foreign manufacturers may find that they are able to do better with a less-strong dollar,” said Kathryn Dominguez, a professor at the University of Michigan. Some American exporters are already benefiting from the weakening dollar.
Negotiators Dig In Over Tax Credits in Spending Bill
Tax credits for individuals and businesses are up for grabs as negotiations on a year-end spending deal come down to the wire. Though support for the various tax provisions doesn’t break down perfectly along party lines, Democrats for the most part are arguing for credits geared toward low-income workers and families, while Republicans want extensions of the Trump administration’s 2017 Tax Cuts and Jobs Act that allow businesses to keep more of their money.
Some of those business provisions have received support from Democrats in the past, namely a write-off for research expenses traditionally used by companies in the pharmaceutical, defense and manufacturing sectors. But analysts say that Democrats are now holding back support for the research write-off in the hopes of getting more on the CTC as well as the earned income tax credit, worth thousands of dollars to low and middle-income families.
New York Paid Family Leave Changes In 2023
Effective January 1, 2023, The New York Paid Family Leave (PFL) Law’s new guidance allows eligible employees to care for the serious health conditions of their biological and adopted siblings, step siblings and half-siblings while taking PFL protections. Additional protections for situations related to military deployment and minor dependent children under isolation for COVID-19 are also included in this updated guidance.
The New York Paid Family Leave (“PFL”) Law first went into effect in 2018 with the goal of supporting working families by providing them with economic security to care for their loved ones. PFL is funded by employee payroll deductions and it accomplishes its mission by providing workers with job-protected, paid time off for qualifying events.
Judge Dismisses Former New York Lieutenant Governor's Bribery Charges
A federal judge on Monday dismissed the bribery and fraud charges against Democratic former Lt. Gov. Brian Benjamin, but kept charges that he falsified business records in place for now. Benjamin, who was appointed lieutenant governor by Gov. Kathy Hochul last year, resigned in April after he was charged with felony corruption by federal prosecutors. Benjamin, a former state senator, was accused by federal prosecutors of sending state money to a Harlem-based real estate developer in exchange for campaign contributions to an unsuccessful bid for New York City comptroller.
Benjamin has denied the allegations and had moved to have the charges dismissed. Judge Paul Oetken agreed with dismissing some of the charges, determining the indictment "fails to allege an explicit quid pro quo, which is an essential element of the bribery and honest services wire fraud charges brought against Benjamin."
EU Must React to 'Distortions' of Competition From USA's Inflation Reduction Act
The EU must take "rebalancing" measures to smooth out the "distortions" of competition caused by the massive American subsidies of Joe Biden's Inflation Reduction Act (IRA), European Commission President Ursula von der Leyen said on Sunday.
Speaking at the College of Europe in Bruges in Belgium von der Leyen said that the bloc "must take action to rebalance the playing field where the IRA (Inflation Reduction Act) and other measures create distortions. In other words: we need to do our homework here in Europe and at the same time, we have to work with the United States to mitigate competitive disadvantages."
Port of New York and New Jersey Will Fight to Retain Leading Market Share
The Port of New York and New Jersey, now the busiest in the US, attributes more than 85% of its growth this year to the cargo it snagged from West Coast rivals contending with labor talks, and said that its top priority is to keep that business in the east. The largest complex on the East Coast handled more containers than any other port in the country for a third straight month in October. Its main competitors in California, meanwhile, moved the lowest number of containers since mid-2020 in the same period.
Taken together, the neighboring ports of Los Angeles and Long Beach are by far the biggest port complex in the US, handling about 40% of all the nation’s containerized trade with Asia. Still, widespread logjams last year and uncertainty around ongoing labor talks involving 22,000 dockworkers has led shippers to increasingly divert cargo to the East Coast. Despite taking more market share from the West Coast, the Port of New York and New Jersey is starting to see volumes slow as consumers shift their spending from goods to services and others tighten their belts amid an uncertain economic outlook. October marked the third-weakest month for the East Coast port this year.
NY Regents Debate Worth of Regents Exams for High School Graduation
Members of the Board of Regents debated the value of the Regents exams Monday as part of an overall planned examination of the state testing system and graduation requirements that had been delayed due to the pandemic. For now, the Regents are back, but a Blue Ribbon Commission is expected to weigh in on new high school diploma requirements next year. Graduation rates increased during two years without Regents exams, due to the pandemic.
The commission was announced in 2019, but the pandemic led to a slowdown and the commission wasn’t named until last year. In 2019, Education Commissioner Betty Rosa made it clear that she did not think the Regents exams are “working” for every student, and questioned whether the tests improved college readiness, among other factors. She has pressed for alternative paths to a high school diploma, including career and technical programs. At Monday’s meeting, she urged the Regents to have an open mind. “We really have to take into account not what worked for us, but what will work down the road,” she said. “At the end of the day, our job is to keep in mind what our students need for the future.”
TSMC to Increase Investment in Arizona to $40B as Biden
Taiwan Semiconductor Manufacturing is set to make history with one of the largest foreign investments in the United States. The company announced plans yesterday to build its second chip plant in Arizona, increasing its investment in the state to $40B. The event will be attended by President Biden, as well as CEOs who will benefit from the increase in American chip production, like Apple's CEO Tim Cook, Micron's (NASDAQ:MU) Sanjay Mehrotra and Nvidia's Jensen Huang.
TSMC previously disclosed a $12B investment plan to build its first factory in Arizona that was slated to manufacture 5-nanometer chips (and later changed to 4-nanometers) with mass production expected in 2024. Construction on the second site that will make 3-nanometer chips (the tiniest "die shrink" available today) will start in the coming year, with production set to begin in 2026. Once the plants come online, they are expected to deliver enough chips to meet U.S. annual demand of 600K wafers per year.
Airbus, CERN Researching Hydrogen-Powered Aircraft
Airbus is starting a research project with the European Laboratory for Nuclear Research (CERN) to evaluate the potential role for superconductivity in developing decarbonized aircraft systems. More specifically, the research is directed at how cryogenic superconductors may be used to test electrical distribution systems for hydrogen-powered aircraft. Through its subsidiary UpNext, Airbus and CERN will conduct the Super-Conductor for Aviation with Low Emissions (SCALE) program, to demonstrate “superconducting technologies in airborne electrical distribution systems.”
“Superconductor” materials transmit electricity with zero resistance, but the electrical system that hosts the material must be chilled cryogenically in order for the transmission to work. CERN, at Meyrin, Switzerland, is the site of the Large Hadron Collider and other infrastructure used for high-energy physics research, as well as a computing center used to store and analyze the results of research done there.