Plurus Strategies Weekly Update: War in Ukraine, USICA/America COMPETES Act Conference, Reconciliation, and Midterm Tidbits
War in Ukraine
While many Russia watchers predicted that Russian PresidentVladimir Putin might use Monday’s Victory Day in Europe to escalate the war in Ukraine, Putin largely stayed on message by reiterating the need for Russian forces to defend Russian territory and to rid the areas bordering Russia of Nazis. Also absent from Putin’s remarks was any suggestion that Russia might seek to orchestrate sham referendums in territories held by Russian troops. What Putin presented this week reinforced the views of many that the war in Ukraine is likely to be a prolonged conflict.
In the meantime, the Biden Administration is maintaining efforts to spotlight its commitment to supporting Ukraine. At the end of last week, President Joe Biden announced an additional $150 million in military assistance for Ukraine. The administration also ramped up its economic response by banning U.S. accounting and consulting firms from working with Russia, imposing sanctions on Gazprombank and Russian state-owned television stations, and issuing new export controls on industrial items, including engines, boilers, motors, fans, and ventilation equipment. First Lady Jill Biden paid a Mother’s Day visit to Ukraine where she met with Ukrainian First Lady Olena Zelenska and visited with children displaced by the conflict, while President Biden and other G-7 leaders met virtually with Ukrainian President Volodymyr Zelensky.
We also continue to see legislative movement related to Ukraine. On Monday, President Biden signed the Ukraine Democracy Defense Lend-Lease Act, which would expedite the delivery of U.S. weapons to Ukraine and other allies in Eastern Europe by expanding authorities for the administration to enter into lend-lease agreements. Also this week, the House also took up several Ukraine measures on the suspension calendar, including legislation directing U.S. financial institutions to ensure their subsidiaries comply with U.S. sanctions against Russia and Belarus; requiring U.S. representatives to international financial institutions to advocate for debt relief and financial assistance for Ukraine; barring Russian officials from G-20 summits and international financial institution activities; and blocking the Treasury Department from engaging in transactions that involve the exchange of Special Drawing Rights (SDRs) held by Russia or Belarus.
On Monday night, Democratic leaders announced an agreement on an additional $39.8 billion aid package for Ukraine, up from the $33 billion supplemental appropriations requested by the White House. The deal splits the $6.8 billion beyond the administration’s request evenly between military and humanitarian assistance. As the news broke, President Biden acknowledged that the Ukraine package would have to move without additional COVID assistance attached. He urged Congress to pass the Ukraine aid package and get it to his desk within a matter of days. This urgency was echoed by Defense Secretary Lloyd Austin and Secretary of State Antony Blinken, who sent a joint letter to Congress on Monday emphasizing that remaining authorized funds would run out by May 19.
Despite some drama that led to the elimination of language that would create a path to permanent legal residency for Afghan nationals who have come to the U.S. since the U.S. withdrawal, on Tuesday, the House cleared the Ukraine package by a vote of 368-57. The final package also dropped provisions rejected by Republicans that would have permitted a $21 billion International Monetary Fund (IMF) loan and increased in the Export-Import (Ex-Im) Bank’s default rate cap.
The bill is now on the Senate floor and whip counts are taking place. Some Senate Republicans have expressed disappointment that the House-passed package did not include an even bigger increase over the president’s request. A unanimous consent agreement might allow the Senate to send Ukraine aid to the president for signature, and there is some optimism that could happen as soon as today. However, Republicans are demanding votes on amendments that could result in delays. Democrats have already granted Sen. Randy Paul (R-KY) a vote on his amendment to require an inspector general to monitor spending of Ukraine assistance, which Sen. John Kennedy (R-LA) has also introduced as standalone legislation. It’s unclear if other Republican amendments will be added to the queue to secure the 10 GOP votes needed for Senate passage. Any tweaks would require the bill to be passed again by the House. If there is no agreement to move the bill forward in the next 24 hours, final passage is likely next week.
On Tuesday, the Senate Foreign Relations Committee held a hearing on Bridget Brink’s nomination to serve as U.S. ambassador to Ukraine. Brink, who was previously confirmed unanimously by the Senate to serve as U.S. ambassador to Slovakia, received a friendly reception, and we continue to believe her nomination will move quickly. The committee also received testimony today on U.S. efforts to support Ukraine against the Russian invasion. Also on Tuesday, Ukrainian Ambassador Oksana Markarova addressed Senate Democrats at the weekly caucus lunch.
COVID Aid
While Democrats had hoped to attach $10 billion in COVID funding to Ukraine assistance to expedite its passage, the COVID piece has now been dropped from the package and left without any immediate path to cross the finish line. As you know, Senate Republicans stopped the COVID bill from moving before the Easter recess by demanding a vote to reject the Biden Administration’s decision to lift the Trump-era Title 42 immigration policy that cited the pandemic to justify turning away asylum seekers and other migrants at the border.
The immigration issue remains an obstacle to COVID aid moving forward, especially given that some of the most vulnerable Senate Democrats would be likely to side with Republicans on a vote on Title 42. In recent days, Senate Democratic leadership has indicated a vote on Title 42 might be worth the political risk to unlock the COVID package. However, it also remains possible that Republicans and the White House could negotiate a deal to address concerns about a rise in migrants seeking to cross the border, potentially including more border security funding.
Though the strategy for moving COVID assistance forward is murky, Democrats continue to emphasize the importance of increasing resources to fight the ongoing pandemic, especially as today the Biden Administration marks the grim milestone of one million COVID deaths in the U.S. Additionally, public health experts are ramping up warnings about emerging variants and the likelihood of an uptick in cases this fall. While President Biden has accepted that Ukraine aid and COVID monies will need to move through Congress separately, he continues to message that without an influx of resources, the U.S. could be forced to limit access to vaccines and testing, miss out on new therapeutics, and fall short in its mission to assist lower income countries as the global health crisis continues.
On the latter, toady the administration opened a second summit aimed at promoting vaccines abroad to mitigate the threat that new COVID variants emerge and spread globally. While the summit resulted in $3.1 billion in new financial pledges to support low-income countries and commitments from pharmaceutical companies to reduce the costs of treatment, global pandemic assistance remains a hotly debated issue in Congress.
USICA/America COMPETES Act Conference
The USICA/America COMPETES Act conference kicked off this morning with the first formal meeting of the more than 100 conferees. During today’s session, Members delivered opening statements. Going forward, Sen. Maria Cantwell (D-WA), who chairs the conference committee, has indicated that the larger group could be broken up into subgroups to make progress on more than 1,000 issues that need to be reconciled across multiple committee jurisdictions.
We continue to be in touch with staff who are involved in USICA/America COMPETES Act conference negotiations. One Democratic Senate staffer whose boss is a conferee recently told us that “with every day that goes by, the worse I feel about the conference.” This is consistent with what we have heard from several sources about the timeline for a final conference report slipping.
We continue to hear from Members and staff that just before the August recess might be the most optimistic timeframe for compromise legislation to reach the president’s desk. Of course, Democrats are hopeful this will be the case, as they would welcome the chance to campaign on the China competitiveness package heading into the midterm elections. We are hearing that Senate Majority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA) have directed all the committees involved to aim for wrapping up conference negotiations ahead of the July 4 recess. There seems to be understanding that this target is probably unrealistic and may be more intended to create some pressure for conferees to drop controversial provisions so the legislation can see action before the August break.
On the other hand, a few staffers on both sides of the aisle have told us they could see the final version of USICA/America COMPETES Act dragging into the lame duck. If this turns out to be the case, the outcome of the elections and whether it prompts a desire to “clear the decks,” could shape the environment for passage later this year. We continue to hear that regardless of who will hold the House and Senate majorities next year, that there is motivation to, at the very least, move CHIPS Act funding and related provisions. This would be consistent with discussion in the Senate Intelligence Committee this week on the importance of the U.S. preserving its competitiveness over China in key areas, such as semiconductor design. If the broader conference craters over unrelated issues, the CHIPS pieces could move during the lame duck, perhaps by hitching a ride on the National Defense Authorization Act (NDAA).
Speaking of semiconductors, we are continuing to hear that Sens. Ron Wyden (D-OR) and Mike Crapo (R-ID) are pushing to airdrop the FABS Act into the final USICA/America COMPETES Act conference report. As a reminder, this bill would create a semiconductor investment tax credit, potentially opening a whole new can of worms in adding a tax title to the bill. We spent some time this week with Rep. Richard Neal (D-MA), who also recently endorsed including the FABS act in the final compromise bill. He expressed his view that even with passage of a compromise USICA/America COMPETES Act bill, the U.S. will still be competing with low-wage countries for semiconductor investment.
There are several other provisions that may be candidates for getting airdropped into the conference report. For example, we are hearing rumors that Reps. Anna Eshoo (D-CA) and Blake Moore (R-UT) could pursue similar tactics to get the Supporting American Printed Circuit Boards (PCBs) Act, which they introduced this week, included in the conference report. This legislation would establish a financial assistance program and provide a tax credit for manufacturing, research, and purchasing PCBs. Also related to chips, Sen. John Cornyn (R-TX) and Bob Casey (D-PA) are seeking the inclusion of language that would require an outbound investment review on potential semiconductor investment in China.
Additionally, we are hearing that compromise language restoring the Federal Trade Commission’s (FTC) 13(b) authority could be included in the final USICA/America COMPETES Act bill. Such legislation has already passed the House and was recently approved by the Senate Commerce Committee.
BBB/Reconciliation
Ongoing conversations are taking place to rally Democrats around a reconciliation proposal that can unite Democrats in the House and Senate. Sen. Joe Manchin (D-WV) has indicated he could be willing to support a package that reforms the tax code, lowers prescription drug costs, and addresses climate change, all while reducing the deficit and tackling inflation.
While many believed Sen. Manchin’s parameters left some of the human infrastructure components of President Biden’s original Build Back Better (BBB) framework on the cutting room floor, Sens. Patty Murray (D-WA) and Chris Coons (D-DE) are out this week with a narrower approach to addressing these issues as part of a potential reconciliation measure. Their proposal envisions as much as $200 billion for these programs, including a $72 billion boost for the Child Care and Development Block Grant Program, $18 billion for a new grant program to help states expand access to prekindergarten, and $12 billion for the Head Start program dedicated to raising teachers’ wages. With so much uncertainty surrounding reconciliation, it is difficult to judge the chances this proposal is included in any ultimate BBB bill.
Another factor that could impact work on reconciliation is that the Congressional Budget Office (CBO) will be putting out their new baseline for the next ten years on during the week of May 23 with fiscal year 2023 (FY23) president's budget request analysis and its long-term budget outlook coming out in July. We have heard that Speaker Pelosi does not want those figures out until reconciliation has wrapped up, especially since any BBB-like agreement will cover nine years, as almost one year of reconciliation authority has been used up on negotiations.
Perhaps because he remains distracted by a new Senate working group discussing bipartisan energy legislation, Sen. Manchin does not appear to be interested in holding the pen for whatever comes next on BBB. Many Democrats tell us they think that if reconciliation has a shot, a framework will need to be agreed to with Sens. Manchin and Kyrsten Sinema (D-AZ), drafted by the White House, and given to Leader Schumer and Speaker Pelosi to sell to their respective caucuses. As a reminder, the clock is ticking with the budget resolution that included reconciliation instructions due to expire September 30.
Appropriations
This week continued the recent tranche of budget hearings with testimony by Defense Secretary Austin, Treasury Secretary Janet Yellen, Commerce Secretary Gina Raimondo, Agriculture Secretary Tom Vilsack, Transportation Secretary Pete Buttigieg, Housing and Urban Development (HUD) Secretary Marcia Fudge, U.S. Agency for International Development (USAID) Administrator Samantha Power, Army Secretary Christine Wormuth, and Customs and Border Protection (CBP) Commissioner Chris Magnus. The fact that the Appropriations Committees are moving through these hearings at a rapid pace bodes well for what we have been told about good faith negotiations to complete the FY23 spending cycle this year.
As of now, the “big four” have yet to schedule their next formal meeting in a series aimed at producing consensus on topline defense and non-defense numbers within the next few weeks. However, we continue to hear positive reports coming out of their first meeting after the Easter break. We expect there will be a continuing resolution (CR) in late September that will carry federal spending past the midterms but remain cautiously optimistic that we will not be dealing with FY23 appropriations next year.
Late last week, we had a private conversation with a senior Democratic Senator on the Appropriations Committee. He reported that following the big four meeting, even though there are not yet toplines, the pen has been turned over to staff. This Senator also indicated he is also thinking a lot about inflation. He said he has been floating a proposal to create “a one-time exemption for inflation in the appropriations cycle.” He described his idea as “something like an overseas contingency operations (OCO) account for inflation.” It remains to be seen how inflation will influence the FY23 appropriations cycle going forward.
Political Tidbits
Primaries
A week after the leak of the draft Supreme Court (SCOTUS) opinion on Dobbs v. Jackson Women’s Health Organization, some Democrats remain hopeful that abortion will bring younger voters to polls. However, most Republicans believe the decision will not significantly impact midterm elections. Polls consistently show a strong majority of Americans support at least some access to abortion nationwide, but conservatives argue that voters are not likely to make their choices based on a single issue. Others believe the issue could give Democrats a small boost but not necessarily enough to overcome overarching disadvantages. It is likely too early to tell if and how the decision will impact elections.
Democrats face an uphill battle to maintain the majority. The New Dems, often seen as a serious caucus that is thoughtful on policy issues, has 22 of their 33 Members on the Democratic Congressional Campaign Committee (DCCC) frontline list of vulnerable incumbents. There are still just under 200 days until Election Day to shore up these campaigns.
Tuesday saw primaries in Nebraska and West Virginia with several competitive primaries in the House and one intraparty match. We tracked the following races:
Nebraska
NE-01: State Sen. Mike Flood won the GOP primary for the vacant seat. Although Rep. Jeff Fortenberry (R-NE) resigned from office and ended his reelection bid after being convicted of lying to federal authorities, his name appeared on the ballot Tuesday night. Flood had 76 percent of the vote to Rep. Fortenberry’s eight percent. Patty Pansing Brooks won the Democratic nomination, but the district is heavily Republican and is expected to remain that way in November.
NE-02: State Sen. Tony Vargas won the Democratic nomination and will face incumbent Republican Rep. Don Bacon (R-NE) in November. The district went for President Biden by six percentage points in 2020 and has been rated as leaning Republican this year (R+3), making it the state’s only swing district.
NE-03: Incumbent Republican Rep. Adrian Smith (R-NE) won the GOP nomination. David Else secured the Democratic nomination, but like the 1st district, this district is heavily Republican and is expected to remain that way in November.
Gubernatorial: While some Trump-endorsed candidates fared well on Tuesday, not everyone saw victory. In the race to replace term-limited Republican Gov. Pete Ricketts, President Donald Trump’s preferred candidate, Charles Herbster, lost to Gov. Ricketts-backed Jim Pillen. Herbster’s loss may raise the stakes on other high-profile raises coming up later this month in Pennsylvania and Georgia where Trump has made endorsements. Some Republicans in Nebraska have said that neither Trump’s endorsement nor accusations made against Herbster were a factor in how they voted. Many went into Election Day debating between Herbster, Pillen, and GOP challenger Brett Lindstrom, but ended up choosing Pillen because of age and experience.
West Virginia
WV-01: First elected in 2018, incumbent Rep. Carol Miller (R-WV) secured the Republican nomination. She will face Lacy Watson, who won the Democratic nomination unopposed. Rep. Miller was endorsed by President Trump and is expected to win reelection in November.
WV-02: In one of the most-watched races on Tuesday’s ballot, GOP incumbent Rep. Alex Mooney (R-WV) defeated fellow Republican incumbent Rep. David McKinley (R-WV). Their two districts had been merged since West Virginia lost a Congressional seat in reapportionment. Rep. McKinley was criticized by President Trump when he broke from his party as one of 13 Republicans to vote with Democrats to support the bipartisan infrastructure law. President Trump instead endorsed Rep. Mooney, Tuesday’s winner. Rep. McKinley’s loss officially brings the number of sitting House Republicans not returning in the 118th Congress to 18, not including those who left office early. Barry Wendell won the Democratic primary, but Sen. Manchin remains the only Democrat in the state’s Congressional delegation, and that is unlikely to change this year. West Virginia was one of the first of five primaries in which two incumbent House members faced one another. Similar contests will take place in Georgia (5/24) and Michigan (8/2) and two in Illinois (6/28) will follow in coming weeks.
Looking ahead, we'll be watching the following key races this month:
May 17
Idaho
Kentucky
North Carolina: Republican primary for the open Senate seat
Oregon: Democratic Gov. Kate Brown is term-limited, and Democratic Rep. Kurt Schrader (D-OR) faces a primary challenge
Pennsylvania: Democratic Gov. Tom Wolf is term-limited, and both Democrats and Republicans have contested primaries for the open Senate seat
Republican conventions in three Virginia Congressional districts
May 24
Alabama: Incumbent Republican Sen. Richard Shelby (R-AL) is retiring
Georgia: Republicans will decide who incumbent Democrat Sen. Raphael Warnock (D-GA) will face in the fall, and Democratic Reps. Carolyn Bourdeaux (D-GA) and Lucy McBath (D-GA) face each other in a redistricted seat
Runoff in Texas from the primary earlier this spring – incumbent Democratic Rep. Henry Cuellar (D-TX)faces a challenge from progressive Jessica Cisneros
Special election in Minnesota to replace the late Republican Rep. Jim Hagedorn (R-MN)
Redistricting
Following last month’s announcement that New York’s maps would be tossed, a federal judge on Tuesday signed off on plans for the state to hold some of its primaries on August 23. Now, a special master appointed by a lower court in Steuben County is in the midst of the map-redrawing process. A hearing took place in Bath, Steuben County last Friday. This special master must produce a final set of maps by May 24.
Retirements
Just as New York State approved plans for August primaries, Rep. Tom Reed (R-NY) announced his immediate retirement on Tuesday. While he had previously made known his intent to not seek reelection in 2022, his resignation comes seven months before the end of his term, meaning the state is now set to hold two special elections. Rep. Antonio Delgado (D-NY) announced his plans to become Gov. Kathy Hochul’s lieutenant governor last week. If Rep. Delgado announces the date of his departure after May 25, the special election for his seat could coincide with the state’s August primary. Rep. Reed’s special election is expected to be held between July 20 and August 8. Rep. Claudia Tenney (R-NY), whose district was merged with Rep. Delgado’s in earlier versions of the map, announced that she plans to run for the seat being vacated by Rep. Reed.
Rep. Kai Kahele (D-HI) announced his retirement last Saturday with plans to run for governor, joining the race to succeed term-limited Democratic Gov. David Ige. Other Democrats in the race include Lt. Gov. Josh Green and former first lady of Hawaii Vicky Cayetano.
As of today, the breakdown of retirements and resignations is as follows:
1 Senate Democrat: 1 full committee chair (Appropriations)
5 Senate Republicans: 5 full committee ranking members (Appropriations; Armed Services; Banking; Health Education, Labor, and Pensions (HELP); Homeland Security and Governmental Affairs (HSGAC); and Rules)
33 House Democrats: 4 full committee chairs (Budget; Ethics; Science, Space, and Technology; and Transportation and Infrastructure)
21 House Republicans: 2 full committee ranking members (Homeland Security and Ways and Means)