Roundtable Weekly - January 11, 2019
Partial Government Shutdown Continues Over Border Wall Disagreement
Unless an agreement with Congress is reached soon, President Trump this week indicated he is considering declaring a national emergency in order to fund the construction of a border wall on the southern border. A national emergency declaration
would face significant legislative and legal opposition, yet it could create a path to end the partial government shutdown that tomorrow will become the longest in U.S history, exceeding the 21-day shutdown of 1995-96. (New York Times,
Jan. 9 / NBC News, Jan. 10 / Politico,
Unless an agreement with Congress is reached soon, President Trump this week indicated he is considering declaring a national emergency in order to fund the construction of a border wall on the southern border.
- Federal Reserve Chairman Jerome Powell said this week that if the current situation is prolonged, it would start to noticeably affect the economy. "If we have an extended shutdown, I do think that would show up in the data pretty clear." Powell added that the full economic impact of closed government agencies is difficult to track because data usually provided by the Commerce Department is not currently available, due to the shutdown. (Economic Club of Washington video interview at 13:30, Jan. 10)
- Nine of the 15 Cabinet-level departments remain unfunded, including Agriculture, Homeland Security, State, Transportation, Interior and Justice. 800,000 federal workers won't receive paychecks due today. (AP, Jan. 11). Historically, federal workers ultimately do receive back pay for government shutdowns.
- According to S&P Global Ratings Chief U.S. Economist Beth Ann Bovino, "We estimated that this shutdown could shave approximately $1.2 billion off real GDP in the quarter for each week that part of the government is closed." (CNBC, Jan. 11) White House Council of Economic Kevin Hassett last week offered a similar assessment, estimating economic output would decrease by about 0.1 percent every two weeks. (Bloomberg, Jan. 3)
- President Trump this week cancelled a planned Jan. 21 trip to the annual World Economic Forum in Davos, Switzerland after recently saying he may keep the government closed for "months or even years." (Time, Jan. 10 and AP, Jan. 4)
- Despite the shutdown, The IRS announced this week that the 2018 tax filing season will begin on Jan. 28. Last year, the IRS issued nearly $300 billion in tax refunds to 102 million taxpayers between January and May, with an average refund of more than $2,700. Any major disruption in tax refunds could dampen economic growth. A detailed IRS contingency plan for handling the tax filing season and enforcement and taxpayer assistance is expected soon. (IRS, Jan. 7 and TIME, Jan. 9)
- Additionally, until the shutdown ends, the EB-5 Immigrant Investor Regional Center Program and federal cleanups at Superfund sites around the nation are suspended.
- The National Association of Realtors yesterday reported that the partial shutdown is starting to cause transactional delays related to federal housing, mortgage, and other programs of interest to the real estate industry (NAR, Jan. 10).
- "All the fluctuations that's going on puts a pause on companies deciding what long-term investments to make," NAR chief economist Lawrence Yun said. "Do they actively purchase a commercial property knowing there could be further disruption in the future? They could be more hesitant or go on a more [smaller] scale." (Commercial Observer, Jan. 2)
- Negotiations over the border wall impasse broke down this week when President Trump ended a meeting with Democratic leaders. Trump tweeted that the meeting had been a "total waste of time" and reported that when House Speaker Nancy Pelosi (D-CA) told him that Democrats wouldn't approve border-wall funding, "I said bye-bye, nothing else works!" (Wall Street Journal, Jan. 10)
Federal Reserve Chairman Jerome Powell said that if the current situation is prolonged, it would start to noticeably affect the economy. "If we ave an extended shutdown, I do think that would show up in the data pretty clear." (Economic Club of Washington video interview at 13:30, Jan. 10, 2019)
The effects of the government shutdown and prospects for policymaking in the new Congress will be topics for discussion during The Roundtable's Jan. 29-30 State of the Industry Meeting in Washington, DC.
Congress Ushers In New Leadership on Key Committees
The 116th Congress convened last week with Democrats in control of the House for the first time in eight years as Nancy Pelosi (D-CA) was reelected House Speaker. Among the new leadership is a fresh slate of committee chairs who will address issues of importance to real estate in the areas of tax; capital and credit; energy; infrastructure; homeland security and other policy areas. The lawmakers who will set agendas for key committees in a divided Congress include:
Rep. Richard Neal of Massachusetts – the long-standing co-chair of the House Real Estate Caucus – is the new Democratic chairman of the tax-writing House Ways and Means Committee .
- Rep. Richard Neal of Massachusetts – the long-standing co-chair of the House Real Estate Caucus – is the new Democratic chairman of the tax-writing House Ways and Means Committee. He will be joined by 10 new Democratic committee members. Former Chairman Kevin Brady (R-TX) – a principal author of the 2017 tax overhaul law – now serves as ranking member. Neal has indicated he may hold several rounds of hearings on the legislation’s economic impact and alternative proposals. Ways and Means may also consider a technical corrections bill – including a correction related to the depreciation schedule for nonresidential, interior real estate improvements (Roundtable Weekly, Dec. 7 and Jan. 4)
- Sen. Chuck Grassley (R-UT) is now the chairman of the tax-writing Senate Finance Committee, following the retirement of Sen. Orrin Hatch (R-UT). This will be Senator Grassley’s third tenure at the helm of Finance. Sen. Ron Wyden (D-OR) retains his ranking minority member seat. The committee may consider proposals affecting the retroactive renewal and extension of temporary tax breaks. Grassleyreleased his tax priorities for the committee yesterday and stated this week that Congress will not grant President Trump any expansion of his executive authority over tariff and trade issues. (Reuters, Jan. 9)
Capital and Credit:
Rep. Maxine Waters (D-CA) is the first woman and African-American to lead the House Financial Services Committee .
- Rep. Maxine Waters (D-CA) is the first woman and African-American to lead the House Financial Services Committee. Among the wide-ranging issues addressed by the committee that would require Republican support for enactment is a long-term approach to Terrorism Risk Insurance. The Terrorism Risk Insurance Act (TRIA) has been extended three times since 2002 and is currently scheduled to expire at the end of 2020. Waters has historically been a strong supporter of TRIA and will play a pivotal role in the reauthorization process. The committee is also expected to address the reauthorization of National Flood Insurance Program, which is scheduled to sunset on May 31, 2019. Waters has also expressed interest in working with the Senate on reforming government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. (Insurance Journal, Jan. 7) Rep. Patrick McHenry (R-N.C), the House GOP’s former chief deputy whip, is now the committee’s ranking member.
- In the Senate, the Banking, Housing and Urban Affairs Committee is led by Chairman Mike Crapo (R-ID), with Sen. Sherrod Brown (D-OH) serving as the ranking member. Along with terrorism risk insurance, flood insurance and reform of the GSEs, several capital formation proposals considered during last year’s lame duck session may be addressed by the committee in 2019. Last year, the committee passed important banking legislation to reduce regulatory burden and clarify the High Volatility Commercial Real Estate (HVCRE) rules.
Energy and Commerce
- The House Energy and Commerce Committee will be chaired by Frank Pallone, Jr. (D-NJ), who yesterday announced the Committee’s six subcommittees for the 116th Congress – including one on Environment and Climate Change. Rep. Greg Walden (R-OR) is the ranking member. Climate change will be a focus of the full committee’s first round of hearings. Policy issues affecting energy efficiency in buildings will likely be considered by the committee.
The Senate Committee on Energy and Natural Resources is now chaired by Sen. Lisa Murkowski (R-AK), who is expected to propose a broad energy bill that she first introduced in 2015.
- House E&C also has jurisdiction over the public-private partnership “Brand USA” program to boost U.S. job creation, grow our economy, and reduce the foreign trade imbalance to attract more international travelers to visit our country. The Roundtable is a member of the Visit U.S. coalition, which advocates for Congress to reauthorize BrandUSA (which expires in 2020 without legislative action).
- Building codes that could promote increased energy efficiency may also be addressed by the Senate Committee on Energy and Natural Resources, now chaired by Sen. Lisa Murkowski (R-AK), with Sen. Joe Manchin (D-WV) serving as the ranking member. Murkowski is expected to propose a broad energy policy bill that she first introduced in 2015. (Roundtable Weekly, April 25, 2016)
- In addition to the climate subcommittee mentioned above, a House Select Committee on the Climate Crisis was announced by Speaker Pelosi in her opening remarks for the 116th Congress (Politico, Jan. 3). Chaired by Rep. Kathy Castor (D-FL), the committee was formerly a select committee on global warming and energy independence. (National Public Radio, Dec. 30)
- The House Transportation & Infrastructure Committee will be led by Rep. Pete DeFazio (D-OR) with Rep. Sam Graves (R-MO) as ranking member. DeFazio recently stated, “As Chairman, I will be a tireless advocate for the kind of infrastructure investment that results in job creation, increased economic growth, and decreased emissions.” (Committee News Release, Jan. 4)
The House Transportation & Infrastructure Committee will be led by Rep. Pete DeFazio (D-OR).
- Roundtable President and CEO Jeffrey D. DeBoer addressed the nation's evolving infrastructure needs in an interview on CNBC Squawkbox in June 2017. (Roundtable Weekly, Oct. 16, 2018).
- Sen. John Barrasso (R-WY) will continue to chair the Senate Environment & Public Works Committee while Sen. Tom Carper (D-DE) will remain the ranking Democrat. Legislation to reauthorize surface transportation programs – including the Highway Trust Fund that finances most federal spending for roads and mass transit – will likely be a priority for both committees.
- Rep. Bennie Thompson (D-MS) will chair the House Committee on Homeland Security with Rep. Mike Rogers (R-AL) as ranking member. Last year, the committee passed multiple bipartisan cybersecurity bills, including one creating the Cybersecurity and Infrastructure Security Agency within the Department of Homeland Security.
- The Senate Committee on Homeland Security and Governmental Affairs continues to be chaired by Sen. Ron Johnson (R-WI), and includes new ranking member Sen. Gary Peters (D-MI). Chairman Johnson said yesterday he continues to focus on national issues such as “border security, cybersecurity and critical infrastructure protection … during the 116th Congress.” (Committee News Release, Jan. 9)
- The Roundtable's Homeland Security Task Force (HSTF) and Real Estate Information Sharing and Analysis Center remain focused on information sharing and working with law enforcement and intelligence agencies to encourage measures that businesses can take to more effectively mitigate and manage risk from a variety of physical and cyber threats.
Sen. Lindsey Graham (R-SC) will Chair the Senate Judiciary Committee .
Immigration and Visa Policy:
- The House and Senate Judiciary committees have oversight over immigration-related issues such as the EB-5 investment program, visas to attract workers at all skill levels, and tourist visa reforms advocated by the Visit U.S. coalition to boost international travel to our country.
- The House Judiciary Committee will be chaired by Rep. Jerrold Nadler (D-NY) with Rep. Doug Collins (R-GA) as ranking member. Sen. Lindsey Graham (R-SC) takes the gavel of the Senate Judiciary Committee from Sen. Chuck Grassley (R-IA), with Dianne Feinstein (D-CA) returning as Ranking Member.
Many national policy issues affecting CRE that fall within the jurisdiction of these committees in the 116th Congress will be discussed at The Roundtable’s next State of The Industry business meeting and policy advisory committee meetings on Jan. 29-30 in Washington, DC.