Update 742 — NDAA Passed, Sent to Biden; House Out; Senate Stays for Supplemental

The 2023 legislative year is all but done, with Congress reaching agreement on an $886 billion defense authorization bill (NDAA) yesterday, which the President is expected to sign forthwith. The whole of Congress will not be in session until January 8, but Majority Leader Chuck Schumer is keeping members of the Senate in Washington to focus on the more contentious international emergency supplemental package requested by President Biden in early October and negotiated for months. 

Left until January are not just whatever remains of House and Senate consideration of the supplemental package, but work on the first tranche of FY24 spending that expires on January 17, with the threat of a partial government shutdown attending that deadline. The other FY24 spending tranche expires on February 2. The next year will open with many other economic policy legislative items left unresolved. 

We look at this week’s developments and the status of unfinished economic legislative business below.

Good weekend, all…

Best,

Dana

Headline 

NDAA Passes House and Senate, Bound for Biden’s Desk

The National Defense Authorization Act (NDAA) was passed in the Senate Wednesday night in an 87-13 vote. The House quickly followed suit, passing the bill in a 310-118 vote under suspension of the rules (which requires a two-thirds majority) yesterday morning. President Biden is fully expected to sign the $886 billion reauthorization into law, marking a $29 billion increase in funding from last year’s NDAA. 

Opposition to the NDAA mainly stemmed from the four-month extension of Section 702 of FISA allowing monitoring of foreign nationals’ communication with U.S. citizens. Members of Congress are concerned that Section 702 infringes on Americans’ civil liberties. Still, the section was included on a provisional basis to give Congress more time to consider its future path. 

Although most extreme provisions advocated by Republicans were omitted from the NDAA’s final text, some Democrats also expressed opposition to additional provisions that:

  • restrict the teaching of critical race theory at military academies,
  • ban unauthorized flags (like the LGTBQ flag) on military bases, and
  • prompt consideration for the reinstatement of troops that refused the COVID-19 vaccine.

After months of behind-the-scenes negotiations, Congress was able to work through objections to pass the NDAA, marking notable progress in their long list of immediate legislative priorities. The fact that the most extreme policies were excluded from the final bill’s final text may be a good sign for progressives who would like to see the same result in final FY24 appropriations bills. The fight ahead will probably be much more contentious.

Senate to Take up Supplemental Package Next Week

On Thursday, Senate negotiators announced that members will stay in town next week in a final push to secure an immigration deal demanded by the House GOP as part of a $110 billion national security package to provide funding for Ukraine, Israel, the Indo-Pacific, and the U.S. border. 

This week, the White House engaged in border discussions as the President signaled his willingness to make “significant compromises” to reach a deal with Republicans. Top White House officials were joined in negotiations by Homeland Security Secretary Alejandro Mayorkas in the Capitol on Wednesday evening. While the negotiations have been kept from the public, lawmakers are said to have discussed detention and asylum policies.   

Human rights groups, and a growing number of Democrats, have voiced concerns about attaching long-lasting policy changes to emergency funding, which may set a dangerous precedent. The administration has drawn criticism from the Congressional Hispanic Caucus, who warned the President against agreeing to Trump-era immigration policies. Immigration Hub, a national organization advocating for fair and just immigration policy, sent a memo to senior White House staff entitled “Extreme Concessions on Immigration Will Depress Support Among Battleground Voters” to urge the President to consider not only the humanitarian risk but the possible political detriment in key battleground states if a problematic border agreement is accepted.  

Critical funding for Ukraine is at stake in these negotiations as the package proposes $61.4 billion in support, around half of which is earmarked for replenishing American stockpiles. This week, Ukrainian President Volodymyr Zelenskyy visited Washington, D.C., where he met with lawmakers in an effort to rally their support. Without funding for Ukraine, Russia could gain momentum in the war which could lead to the spread of regional conflict in Eastern Europe. 

Any deal struck in the Senate is bound to face an uphill battle in the House as Republicans signaled their wish to include H.R. 2 level policy with the supplemental package. If a deal is struck in the Senate next week, Congress will be set to vote on the funding upon their return at the beginning of January.

FY 2024 Approps. Funding: On Hold Until After New Years

Discussions over Fiscal Year 2024 appropriations funding have largely stalled since Congress passed Speaker Johnson’s “laddered” CR proposal last month, taking a back seat to emergency supplemental funding and the NDAA.

Two weeks ago, the House Freedom Caucus (HFC) agreed to support the $1.59 trillion top-line funding cap that was set in the Fiscal Responsibility Act (FRA) over their unrealistic previous demands for a lower cap of $1.47 trillion. Though this originally seemed like a major concession, House Republicans have continued their push for spending cuts and extreme policy riders, nullifying hope that this move would lead to progress on FY24 funding. This has been reflected in the difficulty for both chambers to agree upon an actual top-line spending number, a necessary next step in the appropriations process.

Republicans, led by Representative Chip Roy (R-TX), have now shifted their aim toward critical non-defense discretionary (NDD) funding side deals made as a condition of the FRA passed under Former Speaker Kevin McCarthy (R-CA). These side deals would provide $69 billion in additional funding through:

  • changes in Mandatory Programs (CHIMPS),
  • emergency spending, and 
  • rescissions from the IRS and Department of Commerce.

Senators Patty Murray (D-WA) and Susan Collins (R-ME) have also added $13.7 billion in additional emergency funding — $8 billion for defense and $5.7 billion for non-defense — on top of the side agreements, a move that has angered House Republicans.  

Speaker Johnson ruled out another short-term Continuing Resolution (CR) and an omnibus spending bill after passing the laddered CR on November 17 to appease House Republicans who opposed it — leaving only full passage of the 12 appropriations bills or a year-long CR on the table. 

As Congress has not made progress on reconciling differences between the House and Senate proposals, a full-year CR seems like the most likely outcome. This result, however, would lead to a 9 percent reduction in NDD funding without the addition of FRA side deals and set up a fight over anomalies (funding for programs that are unable to survive under the funding provided by the agreement).

On January 19, the CR will expire for four of the 12 appropriations bills:

  • Military Construction and Veterans Affairs,
  • Agriculture,
  • Transportation, Housing, and Urban Development (THUD), and
  • Energy and Water.

To make matters more difficult, Congress will spend much of this time on recess, leaving only eight legislative days with both chambers in session before the first tranche of stop-gap funding bills expires. Avoiding a partial government shutdown should be top of mind for legislators as they come back into session at the beginning of January. Although the Senate’s decision to stay in session to work on the supplemental funding package next week may relieve Senate congestion and take some work off of its plate going into January. 

Other Developments

Khanna Resolution to Ban Stock Trading by Congress

On Thursday, Representative Ro Khanna (D-CA) introduced H.Res.938, “expressing support for a comprehensive political reform plan.” The resolution calls for: 

  • 12-year term limits for members of Congress
  • a ban on members of Congress from holding and trading individual stocks during their tenure
  • a ban on members of Congress and candidates for the House and Senate from accepting contributions from political action committees and lobbyists
  • a lifetime ban on lobbying for members of Congress
  • a binding code of ethics for Supreme Court Justices
  • 18-year term limits and regular appointments for Supreme Court Justices

The public has long demanded action by Congress to ensure that members of Congress act in the interest of the people they serve, rather than their own financial interest. The resolution is the latest move by legislators to ban congressional stock trading. 

20/20 Vision continues to call for the advancement of the ETHICS (Ending Trading and Holdings in Congressional Stocks) Act, which is cosponsored by Representative Khanna. The bill is led in the House as H.R.2678 by Representative Raja Krishnamoorthi (D-IL) and as S.1171 in the Senate by Senator Jeff Merkley (D-OR). Importantly, the bill would prohibit members of Congress from owning or trading any individual stocks or other similar financial assets (except registered diversified mutual funds), apply to members’ spouses and dependent children, and include a clear enforcement mechanism. 

Hearing

Senate Antitrust Subcommittee and Impact of Algorithms

The Senate Committee on the Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights convened on Wednesday afternoon for a hearing focused on the impact of algorithms on competition and consumer rights. Wednesday’s hearing is the latest held by the Subcommittee as it considers the growing use of technology to enable and exacerbate anticompetitive behavior to the detriment of consumers. The use of algorithms to drive housing prices higher was a major focus of the Subcommittee’s October hearing on the role of competition policy in addressing failures in the housing market. 

Subcommittee Chair Amy Klobuchar (D-MN) highlighted the risk that algorithms built with data reflecting past patterns of bias or discrimination can perpetuate those patterns into the future. 

The hearing also highlighted the use of algorithmic tools that raise housing prices at the expense of higher vacancy rates. A growing number of companies collect competitively sensitive pricing information from competing property management companies, and then input that data into sophisticated algorithms that recommend prices for individual housing units. 

When landlords communicate with one another on pricing decisions in an effort to drive prices up throughout the sector, rather than compete on price and quality, they engage in price fixing. As Subcommittee Chair Klobuchar pointed out, this would be illegal depending on the course of conduct. It is far less clear whether current antitrust laws are capable of holding accountable landlords that delegate their independent pricing decisions to algorithms and third parties that enable such practices since most courts require proof of an explicit agreement to fix prices to condemn such conduct. 

Klobuchar also discussed Big Tech companies’ use of algorithms to preserve their own dominant market positions, including by giving preference to their own goods and services over those of competitors on the platforms that own and operate, surveilling prices of competitors, and charging high fees to small businesses using their platforms. 

The hearing went further than simply exploring major issues threatening consumers and small businesses. Klobuchar raised S.2033, the American Innovation and Choice Online Act, led by herself and Subcommittee Ranking Member Chuck Grassley (R-IA). The bill would:

  • set rules prohibiting specific forms of conduct for major platforms
  • give antitrust enforcers strong, flexible tools to deter violations and hold dominant platforms accountable
  • prevent self-preferencing and discriminatory conduct by most major online platforms

The bill passed the Senate Judiciary Committee last year but failed to get a floor vote before the end of 2022 despite its strong bipartisan support. The bill would be a major step towards creating a more even playing field for companies in the evolving tech space.

Look Ahead

Thursday, December 21

  • Gross Domestic Product, 3rd Quarter 2023 (Third Estimate)

Friday, December 22

  • November PCE