Congressional Update
What a difference a week makes! A week ago, it was not clear that President Biden and Speaker McCarthy would reach an agreement on a debt ceiling increase, and it was less clear that whatever they ultimately produced would have a chance of getting through Congress. Well, a week later, the deal was made, written into a bill, passed through Congress, and signed by President Biden to avert a U.S. default.
The agreement, which is being called the Fiscal Responsibility Act (FRA), has a number of key provisions, but the most immediately critical is that it suspends, rather than raises, the debt limit until January 1, 2025. In this way, members of Congress are not required to vote to raise the debt by trillions of dollars, instead, kicking the proverbial can down the road for a future Congress to resolve. It is also worth noting that, technically, there is no cap between now and January 1, 2025. Further, in a major win for the White House, the next possible lapse would be after the next presidential election, averting another possible economic crisis in the midst of a major political campaign. Most critical pieces of the deal are limits to discretionary spending for the next two fiscal years, with FY 2024 levels set at $886.3 billion for defense and $703.7 billion for nondefense spending. In FY 2025, these numbers increase slightly to $895.2 billion and $710.7 billion, respectively. Technically, there are also restrictions on spending after FY 2024, restricting defense and nondefense to 1 percent growth for six years. However, the bill only includes teeth, so to speak, for FY 2024 and 2025. Should Congress appropriate more money in those two years, this law would trigger a sequester that would automatically cut the bills back to these prescribed levels. That mechanism does not exist in FY 2026 and beyond, so there is really no consequence if Congress decides to appropriate additional money at that time. Interestingly, the bill also includes an automatic trigger for a continuing resolution that would kick in at 1 percent below the most current year, should appropriations bills not be passed by January 1 of 2024 or 2025.
While the debt limit deal was last week’s main event, it was not its only event, with the White House pulling another nominee from contention for a federal appointment. Like FAA Administrator-nominee Phil Washington, Ann Carlson, who had been selected to run the National Highway Traffic Safety Administration (NHTSA), ran into a wall of opposition led by Sen. Ted Cruz (R-TX). Sen. Cruz raised concerns that Ms. Carlson, who practices environmental law, would prioritize green initiatives at NHTSA rather than focusing on traffic safety. Ultimately, he won over enough votes from the Senate Commerce Committee (where he is Ranking Member) to tank her nomination.
Additionally, Congress managed to pass a joint resolution to block the EPA’s rule that made changes to federal emissions standards for trucks. While this is a symbolic, bipartisan change, the White House has promised it would veto the measure. The proposal impacts emissions on heavy-duty trucks starting with the 2027 model year. Unfortunately for the proponents of this resolution, Congress will not have sufficient votes to override the President’s veto.
Finally, the Senate Energy and Natural Resources (ENR) Committee held a hearing this week to “Examine the Reliability and Resiliency of Electric Services in the U.S.” During the hearing, Jim Robb, President and CEO of the North American Electric Reliability Corporation, noted that “[u]nless reliability and resilience are appropriately prioritized, current trends indicate the potential for more frequent and more serious long duration reliability disruptions, including the possibility of national consequence events.” Some of the trends he emphasized were increases in long-duration bouts of extreme weather. It goes without saying that energy marketers serve as one of the last lines of defense when other sources of power fail, so it’s important that Congress take these concerns seriously, and we’ll continue to monitor this situation to see what types of action are spurred by this hearing, if any.
