The dysfunction in Washington, D.C., advances to the next level.
What does it mean for the wine industry?
By Michael Kaiser
To paraphrase Benjamin Franklin, “In this world nothing can be said to be certain, except death and taxes.” He was referencing the ratification of the Constitution. If he were alive today, he would add another certainty: a crisis of Congress’s own making.
Returning from recess to a shutdown
Every August, Washington, D.C. gets very quiet. Congress recesses for the month and everyone seems to go on vacation. Once Labor Day hits, kids are back at school and Congress returns from five or six weeks away. For the last 26 years, they have returned to D.C. with a looming deadline.
The funding for the federal government expires on September 30. In an ideal world, the House and the Senate would have already passed the bills needed to avoid this deadline. There are various forms of “must-pass” pieces of legislation every year but, at minimum, Congress must pass 12 appropriations bills to fund the federal government. The last time this was done was 1997. Bill Clinton was president and cell phones looked a lot different.
In the absence of these bills, Congress has passed what are known as continuing resolutions (CR) and omnibus appropriations bills. Like clockwork, it will return from the August recess and pass a CR that keeps the government funded at current levels. Ordinarily, the CR will run through around Thanksgiving. As that date approaches, Congress still will be no closer to an agreement, so another CR will be passed that lasts through right before Christmas. Then there will be a mad dash to the end of the year, and all of the appropriations bills will be combined into one bill that is thousands of pages and is a “Christmas tree” for unrelated provisions. (This was a benefit to our industry in 2017 and 2020, when the Craft Beverage Modernization and Tax Reform Act was part of the tax packages that “rode along” with the omnibus bills). More often than not, members of Congress and Senators will complain about how the process does not involve the rank and file. They never have enough time to read the bill and are usually given only a day or two to review it before the final vote.
This year was supposed to be different. When Rep. Kevin McCarthy (R-CA) was elected speaker on the 15th ballot, one of the concessions he made to his caucus was pledging to pass the 12 appropriations bills on their own. He also agreed that just one member of his caucus could ask for a vote to remove him (more on that later) if he reneged on any of his promises, such as not working with Democrats to pass a spending bill.
Debt ceiling deal reneged
To avoid a catastrophic debt default, President Biden and Speaker McCarthy agreed to cut spending for the next fiscal year. They agreed to specific numbers, but the Speaker then instructed the Appropriations Committee to ignore those agreed-to numbers and make more significant cuts. This led the House Appropriations Committee to pass their bills without any Democrat votes. Contrast that with the Senate Appropriations Committee, which passed virtually all of their bills out of committee unanimously.
Despite defying the Presidential agreement, the cuts did not go far enough for the more conservative wing of the House Caucus, leading to only three of the 12 bills being able to pass. The House up and left at the end of July and punted the votes on the rest of the bills to September. They returned from recess and could not pass any more of the bills. We seemed destined to be headed for a shutdown.
With the vote deadline approaching, the Senate worked on a continuing resolution that would fund the government through November 17, but the House was not going to take up that bill, due to it including funding for the war in Ukraine. At the last minute, Speaker McCarthy put up a bill that would keep the lights on through November 17, but did not have the Ukraine funding. On Saturday, September 29, a day before the deadline, the bill passed the House with bipartisan support, but many Republicans were furious over another CR. A crisis was averted, but for how long?
McCarthy booted: What’s next?
On October 3, Rep. Kevin McCarthy was removed from his position as Speaker of the House. Eight Republicans and every House Democrat voted to remove him. What was the reason for removal? McCarthy worked with Democrats to get the CR passed to avoid a government shutdown. The former speaker did the right thing in seeking consensus and was removed from his position because of it. With only about 20 legislative days left in the year, the House has a lot of work to do, with not a lot of time to do it. (At press time there is still no Speaker.)
As of the first week of October, the House had passed four out of the 12 annual Appropriations bills. The bills (Defense, Homeland Security, Military Construction and State/Foreign Operations) were all passed along party lines and are dead on arrival in the Senate. The funding levels of the bills are lower than what was agreed to between the House and the White House during the debt ceiling debate back in the spring. The House has tried to pass the USDA funding bill, but that failed on September 28, which does not bode well for the eventual extension and passage of the Farm Bill.
The lack of a Speaker has delayed any movement on the rest of the bills. Additionally, since the House has taken a hardline approach to its bills, they will not pass in the Senate and most certainly will not be signed into law by the President. Some form of compromise will need to happen, and that is looking less and less likely.
The Senate has not passed any of its individual bills after they came out of the Appropriations Committee. Unlike the House, virtually all of the bills passed out of the Senate Appropriations Committee unanimously. It is the Senate’s plan to pass “minibuses,” or three-bill packages. The first it plans to take up will include USDA, Military Construction and Transportation. Again, this package will not pass the House, unless whoever is named the new Speaker is willing to pass them with Democrat help, which seems highly unlikely.
Both the House and Senate want to avoid a massive omnibus appropriations bill at the end of the year. However, it looks like we are headed in that direction yet again. Odds are very high another continuing resolution will be needed by November 17. The conventional wisdom is that it will fund the government until right before Christmas. But that’s not certain either.
Why should the wine industry care about a shutdown?
If there is a government shutdown, the Alcohol and Tobacco Tax and Trade Bureau (TTB) would be closed except for very limited activities, such as tax collection. The TTB will not process or review any Certificate of Label Approval (COLA) applications, formula approvals, permit applications or laboratory service requests. The last government shutdown took place from December 2018 to January 2019, and TTB was closed for 35 days. Significant backlogs and delays in certain approval processes occurred after TTB reopened.
As the wine industry knows well, we are one of the few industries that somewhat likes its federal regulator. Our products cannot get to market without label approval, and if there needs to be a change in a federal permit, delays can be costly. WineAmerica works every year to make sure the TTB has the funding it needs to ensure it can do its job at the high level that it expects to. This year is no different. If the TTB does shut down, it will seriously impact our industry.
Additionally, disaster money may cease to be paid out if the USDA is not funded. It is currently wildfire season on the West Coast and that is a constant threat for vineyards there. The USDA has offered disaster assistance funding for vineyards that have seen fire and smoke damage, and if the government does shut down and there is another widespread fire event, wineries and vineyards will not be able to apply for any federal assistance. This is yet another example of how the federal government helps our industry.
It’s the hope of WineAmerica that a compromise can be reached to pass the bills needed to keep the government open, but it’s not looking good. There still is no House Speaker and nothing can progress until that happens. Congress is currently in a standstill. If you need a COLA approved you should submit it sooner rather than later so you can be ready for your early 2024 bottlings. In the meantime, WineAmerica will keep working to keep your interests protected in the hope there will be an eventual resolution.
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Michael Kaiser
Michael Kaiser is executive vice president and director of government affairs at WineAmerica, which represents wineries and associations from more than 40 states. For more information about WineAmerica and how to get involved, visit www.wineamerica.org.
