The outlook from Washington

Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.

Kyle Glazier (00:03):
Hello and welcome to another Bond Buyer podcast. I’m Kyle Glazier, executive editor of the Bond Buyer, and I’m joined today by BDAs, that’s Bond Dealers of America’s Brett Bolton. Brett, thank you for being here,

Brett Bolton (00:16):
Kyle, it’s good to talk with you. Looking forward to this.

Kyle Glazier (00:19):
Alright, well one of the things we like to do here at the Bond Buyer as the year comes to a close is to look ahead to the coming year and what we can expect. So Brett, I know you’re very plugged in here to the Washington scene. Looking ahead to 2024, can you tell me a bit about BDAs priorities for the year, especially earlier in the year, and what should we be expecting and looking out for sure. Well,

Brett Bolton (00:46):
I’ve got to say 2023 set a pretty low bar as far as things go here in Washington dc So here’s looking up to a new year and hopefully some productivity out of Congress, but that’s yet to be seen. So 2024 is going to get off to a very interesting start. Newly minted speaker, Mike Johnson took a two-tiered approach for congressional spending, setting up a dual track battle. I believe it’s January 17th and then early February to keep the government open. So honestly, before we can get to any priorities of the BDAI think that Congress has approved, it can get across those two hurdles before we can get into any further legislative activity. As far as 2024 goes, it’s an election year. Yay. I can’t wait for that 2020 rematch to begin in earnest here soon. But it’s also a congressional election where 20 some odd Senate races I believe are up as well as every house seat as every two years happens.

(01:46):
So that definitely will slow down the legislative activity of next year. So with all that being said, all the politics aside, the BDA has taken an early approach for 2024 reeducate, I guess Capitol Hill for muni bond basics and muni bond priorities. So what do I mean by that? Looking ahead to 2025, we’re going to have the tax cuts and Jobs Act, personal tax cuts up for expiration. So we feel that the tax debates will really heat up next year into early 2025. So we want to remind our friends and colleagues up on Capitol Hill that the tax exemption is key to infrastructure financing throughout America and is a tool that should not be tampered with to pay for tax cut extensions. We also want to bring up the restoration of tax advancer fundings, which were removed in 2017. There are now Republicans on house ways and means committee, the tax writing committee on the house side that are in favor of bringing that back.

(02:46):
So I think that the more the conversations heat up, the more that can come back into the fold. We’re also looking generally at private activity bonds. As folks might remember in 2017, those were eliminated in the house bill to be saved by Senate Republicans. So that’s clearly something that’ll go high up on our priority list as well as raising the bank qualified debt limit from 10 to 30 tied to inflation. There’s a couple different pieces of legislations that have floated throughout the years that tied to different levels, but just to get that back into the conversation. So that’s generally what we’re looking for in 2024. Again, I think that just because of the politics of the year and the politics of last year, we’ve got to set our expectations that this will be mostly an educational year looking towards 2025,

Kyle Glazier (03:32):
Just so everybody who’s listening who may not be intimately aware with how these legislative progressions play out, it sounds like a lot of tax related priorities, right? It tends to be the case, right? That whenever Congress reopens the tax, any major tax issue, that it all kind ends up on the table in one way or another. Isn’t that the case? It does

Brett Bolton (03:56):
I mean, good or bad, it’s an all out brawl. I mean, everybody’s in their vine to get, say for us advancement funding back, but there’s plenty of other industries and provisions that folks feel belong in that tax package and plenty of other industries and provisions that also lost things in the 27 pack, 2017 pack package that were just bad policy decisions, frankly, that were cut much like advancer funding just to pay for the bill at a midnight hour. So it’s an all-out fight and everybody’s on the table and that’s key to remember. Everybody’s on the table and you just got to make sure that enough power players here in DC understand the importance of say, the tax exemption. While it might cost the federal government some money on the front end, it saves the tax federal taxpayer dollars. So just education is key. What folks really don’t know here about it in Washington DC staffers are 22 to 26 years old. So they don’t know, generally speaking what tax exempt financing is and what the benefits are, and they’re the ones that are briefing their members. So it’s key to get in, get in early, get in often, and just remind folks how important these things are.

Kyle Glazier (05:08):
I’m glad you mentioned that. Obviously 2024 is an election year. Of course most of the attention nationally is going to be on, as you said, the 2020 rematch, which is what we appear to be careening towards at the moment. For you, is the main impact that the lawmakers are just not present and focused as much as they would be in an off year?

Brett Bolton (05:36):
Yes, 100%. I don’t know what else to say there. I mean, 2024 is such a big fundraising year heading into the reelect, and again, there’s so many Senate seats up this year as well that so much of that chamber will be gone for so much of the year, and that leads up to August recess and election year, which is six weeks where they’re gone. So to really get anything big done, it’s usually before April. Before May, right? Throw in the dual track funding mechanism like I discussed earlier, that takes away six to eight weeks of legislating. And then it seems like we’re going to be going back into impeachment land here for the next couple months. So I mean, you’re really looking at what four to eight weeks of Congress here in DC working on meaningful legislation. So it really narrows opportunity for the next 12 months.

Kyle Glazier (06:31):
All right. Well hold that thought. We’re going to take it break for a word from our sponsor. Alright, we’re back with Brett Bolton of the BDA, Brett. Right before we went to that break, you mentioned the impeachment situation. Do you have concerns that Congress could get sidetracked by another impeachment proceeding? The Republicans in the house do seem very serious about trying to move ahead with it right now, despite what we would assume is a pretty obvious lack of support for conviction in the Senate or to get to that point. Does that impact the legislative agenda in a way similar to the election year? What can you say about that?

Brett Bolton (07:22):
I feel like I need some kind of disclaimer here, Kyle. So I’m just a simple tax lobbyist, right? And I’m not being political with my answers. So this is just generally my take. The house voted to start impeachment proceedings last week. They’re going to run full force into this. I think it will be interesting that there’s a ton of Biden, Republican, Biden District Republicans that are up for reelection in the house, including a large contended of New York Republicans. So my point being there, there’s only a two or three vote margin in the house and there’s 15 or 20 vulnerable, very vulnerable Republicans in the house that I struggled to see them getting the number to impeach. But again, as I mentioned, 2023 was such a crazy year. I’m kind of dumbfounded still at that. I don’t know what to expect. So if I’m sitting here pondering what the outcome it’s going to be, I guarantee you they’re sitting there on the hill talking and pondering and trying to play this out.

(08:20):
What’s going to happen? And your point is regardless, that is a big time suck, man. That is going to be a major distraction if they impeach him and then it goes to the Senate where there’s no chance that he gets convicted. But yet again, that’s another time suck. The Senate where things go to die slowly, I mean it’s going to be slow and steady, drip, drip, drip. So that takes away the already four to eight weeks of possible legislating here in 2024. And you, you’re really looking at a narrow calendar. So yeah, I think you’re right. Something’s going to happen whether he’s impeached in the house, convicted in the Senate, et cetera, et cetera. From my perspective, it doesn’t really matter. It makes our job harder to try to get through the noise, through the white noise, if you will, but it’s going to be a mess. It’s going to be a mess.

Kyle Glazier (09:13):
Well, that sounds depending on your point of view, I suppose.

Brett Bolton (09:18):
Yeah, very uplifting. I know, I’m sorry.

Kyle Glazier (09:22):
Well, what’s something we haven’t discussed yet that you think could surprise people in 2024? Are there any sort of dark horse developments that you think could occur even if the odds, even if you were handicapping the odds and you would say they wouldn’t happen, maybe even something that you mentioned briefly earlier that you think bears repeating?

Brett Bolton (09:45):
I mean, not too many big surprises. I am more hopeful. They passed the NDA last week, which was a big bipartisan package. Now they’re discussing border talks with Ukraine funding. I think that’s also a big development that they’re going to come together in a bipartisan matter and pass something likely at January. So I don’t want to always be the naysayer, as you know. I tend to be that way sometimes. I guess it’s the nature of my job, but I don’t want to slam the door shut on some kind of tax bill in 2024. Now that comes with a massive caveat. I don’t think any muni provisions would be in said tax bill, but the child tax credit, low income housing credit, stuff like that. I do think there is a better than fair shot that something of that magnitude passes in 2024. So while nothing that I’m working on will likely be impacted, it’s another good conversation, a good opportunity to have the conversation about the M provision. So we care for. So my point being that while odds are 50 50, I’d say that something passes that’s improved in the past six weeks. So that’s something to look forward to.

Kyle Glazier (10:59):
Would you say you’re more on guard than maybe you or other media lobbyists were in the past? Because you mentioned maybe not that much looming obviously as a surprise, but I think the perception is that it was a pretty big surprise what happened to the 2017 tax bill, right? Yeah,

Brett Bolton (11:21):
I think the industry learned a valuable lesson there across the board, myself and our issuer friends and other industry groups. I mean, we are taking an offensive approach to be defensive, if that makes any sense to you. There’s no point to sit here on our hands and say, I think the tax exemption safe. I think paths are safe, blah, blah, blah. Right? It’s time to get going. It’s time to get our membership up on Capitol Hill, get some true experts up talking to folks because there is a real, there’s a chance whether we really think it’s going to happen or not. I mean, that’s a top 10 tax expenditure for the federal government, the tax exemption. It’s a crazy amount of money. And if they were able to cut the salt exemption back in 2017, cut it advance for funding, I mean, those are popular provisions and they’re going to have to do something with salt, and that’s an expensive, expensive provision.

(12:12):
There are going to be opportunities where pay fors are needed. And it seems both parties have found religion on pay fors as the dead deficit has really exploded post covid. It’s a real thread and we have to take it seriously. So again, that brings me back to educational efforts, boots on the ground lobbying coalition efforts led by the public finance network. And our friends at GFOA really help enlighten and show members projects, tangible things that they can point to in their district like, Hey, this is important. We need to protect this. Because again, as I mentioned a few minutes ago, it’s an all out all and everybody’s on the chopping block every time these discussions happen. And I was putting together a document in the past 10 or 11 years. I mean, starting with the camp draft and the Obama budgets and 2017, there’s been multiple close calls clearly with 2017 being the closest call. So we’ve got to be prepared. While I’m optimistic we’ll be okay, it’s not time again to sit back and just let it happen.

Kyle Glazier (13:15):
Yeah. You mentioned salt. I mean, I believe you guys don’t take a position on salt. Correct. But what do you expect to happen there? As you said, the Congress has to do something about it, right?

Brett Bolton (13:27):
They do. They do. And Republicans with proceedings, and I know former speaker McCarthy’s leaving, so they have a two or three vote margin in 24. And again, we’re probably looking at 2025 for anything to happen old saw. So it just all depends, is the house going to flip? What’s the Senate going to do? And it is just a numbers game, but gut will tell you they’re going to have to fix salt, raise the cap, maybe. I don’t know. It’s going to be a political football, but that does have a ton of support, especially for Blue State Republicans. So that’s something to look out for. And I honestly think maybe we can have this conversation later in 2024. Again, I think that’ll be a good political barometer for what’s going to happen, how folks are talking about salt.

Kyle Glazier (14:12):
Yeah, let’s make it a plan to do that.

Brett Bolton (14:14):
Absolutely.

Kyle Glazier (14:16):
Alright, Brett, well, was there anything we haven’t talked about that did you wanted to raise while you’re here?

Brett Bolton (14:23):
We’ve covered a lot of ground. I do think one thing from 2023 that’s been lacking is a BQ bill, and I think there’s a good opportunity in 24 for that to be raised. Again, I don’t know what the tax package is going to look like in 24, but that’s a really relatively cheap provision. That’s good bipartisan support, and I think you can make the argument that rural America needs further funding and that would make it much easier to access that capital. So that’s something we’ve been raising and I know other organizations are raising, but other surprises, we can’t beat 2023 for surprises, Kyle. So I don’t know that I want to play that game and touch that flame of what I think could happen in 24. But again, I’m going to try to get rid of my pessimism at 24 and be optimistic towards 25, if that’s okay with you.

Kyle Glazier (15:12):
Absolutely. I’m not going to complain. Well, Brett, thank you. Thank you so much for joining us.

Brett Bolton (15:18):
It was a pleasure, Kyle. Thanks so much.

Kyle Glazier (15:21):
Thank you for listening to the Bond Buyer podcast. Please remember to rate us, review us, and subscribe at www.pondbuyer.com/subscribe from the bond buyer. I’m Kyle Glaser. Thank you for listening.