Blue sky at the U.S. Capitol building

Swirling Political Forces Could Derail Passage of Federal Continuing Resolution

Welcome to September! With temperatures starting to cool down, kids heading back to school, and football season kicking off, it’s easy to forget that the federal fiscal year ends at the end of the month. That means that there are only 11 days when both the House and the Senate are scheduled to be in session before the current federal funding authorization expires. Moreover, only one of the annual appropriations bills has passed the House and none have passed the Senate.

In most years, the House and Senate leadership would simply agree to a continuing resolution (CR) that maintains existing federal policy and holds funding at current levels for a certain period to prevent a government shutdown before Oct. 1. Leadership would then negotiate an omnibus package that includes all 12 of the annual appropriations bills, and just when congressional members are desperate to get home for the winter recess, pass it late at night and leave town. 

This year, however, is not following Congress’ standard operating procedure, and is reminiscent of the years when congressional leaders were powerless to rein in the political forces that led to government shutdowns. Republicans hold a slim five-vote majority in the House while Democrats hold a mere one-seat majority in the Senate. Adding to the partisan pressure, President Joe Biden is up for reelection in just over 14 months; former President Donald Trump, the current Republican front-runner, faces multiple indictments on the federal and state levels; and two congressional committees are investigating Biden’s son Hunter’s business relationships with foreign entities to see whether those contracts involved the president. 

Into this already difficult political mixture, House Speaker Kevin McCarthy (R-CA) could be hamstrung by divisions in his own Republican conference. Two weeks ago, the House Freedom Caucus (a group of approximately 36 Republican members who make up Trump’s strongest supporters in the House) issued a statement. Axios reports they’re calling for “a sweeping GOP border bill that has stalled in the Senate;’ addressing ‘the unprecedented weaponization’ of the Justice Department and FBI and ending ‘woke’ Defense Department policies.”

Adding to McCarthy’s challenges, the Republican Study Committee (a group of 125 conservative Republicans) issued their own statement last week opposing a CR agreement that does not “(1) reiterate the House’s support for pre-COVID-19 spending levels by ensuring the CR comports with the overall spending limit contained in the House-passed Limit, Save, Grow Act; (2) ensure the CR lasts to a date that takes holiday shutdown pressure out of the equation; and (3) show unwavering commitment to fighting Biden’s radical agenda by coupling the CR with high priority conservative policies.”

Considering McCarthy’s slim Republican majority, a statement of opposition from 36 Freedom Caucus Republicans and additional concerns from other fiscal conservatives greatly limits any flexibility he would have to deal with Senate Democrats. Meanwhile, the White House is insisting that McCarthy deliver a “clean” short-term CR so that more time will be available for the appropriations legislation to be agreed upon, which will almost assuredly result in the hardening of the sectors of Republican opposition. 

For McCarthy to persuade his majority to allow a CR to be considered on the House floor before the Sept. 30 deadline, he will need to come up with some proposals – perhaps non-budgetary – to give those Republicans already publicly opposed to a CR a reason to support one. One such move may be his seeming acceptance over the weekend of moving forward on an impeachment inquiry against President Biden in connection with his son Hunter’s business dealings. 

An impeachment inquiry would authorize the House Judiciary Committee to initiate an investigation of the president. Such an effort would give the committee more authorization to hold public hearings, compel the release of documents and provide subpoena power. This type of investigation would be difficult if not impossible to conduct during a government shutdown. There may be additional concessions that could garner the support of some of those opposing a short-term extension, and other representatives may start getting more nervous as the Sept. 30 deadline approaches.

For NAIOP’s part, we will continue to work on our priority issues regardless of how long it may take for the government funding impasse to work itself out. The NAIOP government affairs team has been working closely with House and Senate members on drafting legislation to create a new tax credit for adaptive reuse that helps owners of commercial real estate in their efforts to convert vacant properties to affordable housing.

Finally, while the heated partisan environment in Washington, combined with the large amount of unfinished business, makes it challenging to anticipate that a compromise year-end tax deal will emerge, elected officials ultimately want to show their constituents that they can get things done, especially as they enter an election year. Several provisions in the Tax Cuts and Jobs Act (TCJA), which commercial real estate businesses have benefited from since 2018, expire over the next few years. NAIOP’s government affairs team will continue to advocate for extension of important tax policies on tax legislation that passes this year or early next year.

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