Climate, Tax, and Health Care Package, the American Innovation Act, and the Data Privacy Bill

Inflation Reduction Act of 2022:

August 9: GOP tempers expectations for Senate majority

Republicans are looking to manage expectations when it comes to winning back the Senate majority in November as Democrats rack up key legislative wins and some GOP candidates stumble. Senate Minority Leader Mitch McConnell last week also sought to manage expectations.

While neither Republican leader is conceding the upper chamber - Scott, in the same interview, said he was "Optimistic" - the tone stands in contrast to the confidence Republicans were expressing about the Senate earlier this year, as well as the near certainty felt within the GOP of retaking the House.

Out west Democrats have employed a strategy of hitting Arizona GOP Senate nominee Blake Masters and Nevada GOP Senate nominee Adam Laxalt over their views on the 2020 presidential election.

Sen. Gary Peters, who leads the Democratic Senate campaign arm, said earlier this year that his goal is a 52-seat majority after the midterms. Many within the GOP are pushing back on the idea that its prospects in the Senate are in real trouble.

"Every single Senate Republican who's up for reelection is going to now have to defend the fact that they just voted against capping the cost of insulin for folks on private insurance at 35 bucks," the Democratic operative said, referring to Republican votes against the Inflation Reduction Act.

August 7: What’s in the Climate, Tax, and Health Care Package

After months of painstaking negotiations, Democrats are set to push through a climate, tax, and health care package that would salvage key elements of President Biden's domestic agenda. The legislation, while falling far short of the ambitious $2.2 trillion Build Back Better Act that the House passed in November, fulfills multiple longstanding Democratic goals, including countering the toll of climate change on a rapidly warming planet, taking steps to lower the cost of prescription drugs and to revamping portions of the tax code in a bid to make it more equitable.

The tax credits include $30 billion to speed the production of solar panels, wind turbines, batteries, and critical minerals processing; $10 billion to build facilities to manufacture things like electric vehicles and solar panels; and $500 million through the Defense Production Act for heat pumps and critical minerals processing. The tax proposals were shaped by Senator Kyrsten Sinema, Democrat of Arizona, who resisted her party's push to increase tax rates on the country's wealthiest corporations and individuals.

To avoid the rate increase Ms. Sinema opposed, Democrats instead settled on a far more complex change to the tax code: a new 15 percent corporate minimum tax on the profits companies report to shareholders.

Democrats, to make up for the loss of revenue forced by that amendment, extended a limit on tax deductions for business losses that were enacted as part of the Trump tax cuts in 2017. She also forced the removal of a proposal supported by Democrats and Republicans that would have narrowed a tax break used by both hedge fund and private equity industries to secure lower tax rates than their entry-level employees.

The legislation would also bolster the I.R.S. with an investment of about $80 billion, hoping to recover additional tax revenue by cracking down on wealthy corporations and wealthy tax evaders.

August 7: Senate Democrats pass budget package, a victory for Biden

Democrats pushed their election-year economic package to Senate passage Sunday, a hard-fought compromise less ambitious than President Joe Biden's original domestic vision but one that still meets deep-rooted party goals of slowing global warming, moderating pharmaceutical costs, and taxing immense corporations. Cheers broke out as Senate Democrats held united, 51-50, with Vice President Kamala Harris casting the tie-breaking vote after an all-night session.

"Today, Senate Democrats sided with American families over special interests," President Joe Biden said in a statement from Rehoboth Beach, Delaware.

"Democrats have already robbed American families once through inflation, and now their solution is to rob American families a second time," Senate Minority Leader Mitch McConnell, R-Ky., argued.

Each tested Democrats' ability to hold together the compromise bill negotiated by Schumer, progressives, Manchin, and the inscrutable centrist Sen. Kyrsten Sinema, D-Ariz.Progressive Sen. Bernie Sanders, I-Vt., criticized the bill's shortcomings and offered amendments to further expand the legislation's health benefits, but those efforts were defeated.

Under special procedures that will let Democrats pass their bill by a simple majority without the usual 60-vote margin, its provisions must be focused more on dollar-and-cents budget numbers than policy changes. Democrats wanted to extend the $35 cap to private insurers but it ran afoul of Senate rules.

August 7: Seven Dems vote for GOP amendment, forcing Democratic scramble

Seven Democrats voted for the GOP amendment that would extend a cap on the SALT tax deduction.

Maverick Sen. Kyrsten Sinema on Sunday backed a Republican amendment to shield businesses that rely on capital investment from private equity groups from the 15 percent corporate minimum tax that Senate Majority Leader Charles Schumer included in the Inflation Reduction Act. The amendment would be paid for by a one-year extension of the cap on state and local tax deductions that was a key feature of the 2017 Trump tax cut and which Schumer pledged to repeal as majority leader.

Democrats quickly offered an amendment from Sen. Mark Warner after the passage of the other amendment to make changes to the bill that would make it more palatable. They said the amendment could scuttle the deal after Democrats stuck together throughout more than 14 hours of vote-a-rama to defeat amendments on both sides of the aisle, including an amendment from Sen. Bernie Sanders to provide a $300-a-month expanded child tax credit for the next five years.

"If any Democratic senator signed on to any of the amendments, it could be problematic," warned one Democratic senator who was dismayed to find out that Sinema is pushing for a change to the underlying bill. 

Proponents of the Thune amendment argue that the minimum tax included in the Inflation Reduction Act will wind up netting potentially thousands of businesses that accepted investment partnerships with private equity firms during the pandemic when credit from regular banks was tight.

August 7: Winners and losers from the Democratic tax, health care, and climate change bill

The Senate has passed a massive climate, tax, and health bill that is a big win for Democrats, who have been trying to get some version of the measure completed for much of President Biden's term in office. There are clear political winners and losers throughout the legislation, which makes changes to the tax code and provides large investments for efforts to fight climate change.

Sinema knocked out proposals to raise the corporate tax rate from 21 percent to 25 percent and raise the top marginal income tax rate on the nation's wealthiest individuals and families. Sinema used her leverage right up until the final passage of the bill by insisting that Schumer drop a proposal favored by Manchin to close the so-called carried interest tax loophole, which lets asset managers pay lower tax rates on income earned from profitable investments than many middle-class Americans do on regular income.

The original Manchin-Schumer agreement included a measure to close the so-called carried interest loophole that allows hedge fund and private equity managers to pay a 23.8 percent tax rate, well below the top tax rate of 37 percent.

Big box stores successfully pushed for a minimum corporate tax while also opposing Democrats' initial plan to raise the corporate tax rate from 21 percent to 25 percent. The bill includes provisions such as tax credits to encourage clean energy deployment, which could help shift the U.S. away from fossil fuels, as well as other programs aimed at combating climate change.

August 7: Senate passes Democrats' landmark tax, climate, drugs bill

The Senate passed a landmark tax, climate, and health-care bill, speeding a slimmed-down version of President Joe Biden's domestic agenda on a path to becoming law after a year of Democratic infighting that the White House was unable to control.

Senate GOP leader Mitch McConnell argued that "Hundreds of billions of dollars in tax hikes during a recession will kill jobs." The Senate vote was the culmination of a year and half of intra-party squabbling among Democrats about the scope of the bill, which Biden had once hoped would be so sweeping as to rival Franklin Delano Roosevelt's New Deal.

In the end, it came down to two holdout moderate Democrats, Senators Joe Manchin and Kyrsten Sinema, whose votes were essential in the 50-50 Senate and who balked at both larger tax increases and more spending.

The bill allows roughly $374 billion in climate and energy spending such as expanded tax credits for renewable energy projects. Government revenue will be raised from the establishment of a 15% corporate minimum tax on large firms, a 1% excise tax on the value of stock buybacks, and an $80 billion boost to the Internal Revenue Service for enforcement.

The minimum corporate tax would affect fewer than 150 companies in a given year. The tax on stock buybacks has largely been shrugged off by Wall Street analysts, though some have noted it could spur corporations to issue dividends over repurchasing shares to juice equity prices.

August 5: AICPA weighs in on Inflation Reduction Act

The American Institute of CPAs has sent comments to lawmakers in the House and Senate about the tax proposals in the Biden administration's climate, tax, and spending bill, which could be seeing a vote as soon as this weekend in the Senate.

Sinema opposed another provision that would eliminate the so-called "Carried interest" tax break that allows hedge fund managers and private equity fund partners to be taxed at lower capital gains rates rather than ordinary income rates.

The AICPA comment letter pertains to the earlier version of the bill introduced on July 27 by Manchin and Schumer, but it highlights some of the key issues the AICPA has identified, including the corporate alternative minimum tax, carried interest, and the enhancement of IRS resources, as the bill also provides $45.6 billion in funding for IRS enforcement.

In a letter to leaders of Congress's main tax committees, the House Ways and Means Committee and the Senate Finance Committee, the AICPA said it believes the corporate alternative minimum tax proposal violates several elements of good tax policy and could lead to unintended consequences that should be carefully considered.

"Among the many key conceptual differences between financial income and taxable income is the concept of materiality. Public policy taxation goals should not have a role in influencing accounting standards or the resulting financial reporting.” However, if the tax is enacted, the AICPA recommends the effective date be delayed until after the latter of taxable years starting after Dec. 31, 2023, or the date the Treasury issues proposed regulations to provide taxpayers with the needed time to fully analyze and comply.

"The AICPA believes that the Internal Revenue Service should be funded at necessary levels to allow it to handle all the duties required of it by Congress, including properly administering and enforcing our nation's tax laws as well as providing needed assistance to taxpayers and their advisors in a timely and professional manner," said the institute. "The AICPA is committed to the administrability of our tax system and to exposing the challenges to Congress and the IRS," said AICPA vice president of tax policy and advocacy Edward Karl in a statement Friday.

August 5: Schumer defends dropping carried interest tax change to win over Sinema

Senate Majority Leader Charles Schumer says he had no choice but to remove a provision closing the so-called carried interest tax loophole for money managers from his climate and tax reform bill because Sen. Kyrsten Sinema threatened to block the legislation otherwise. Dropping the carried interest tax provision from the Inflation Reduction Act cost $14 billion in projected revenue, but Schumer made up for it by adding an excise tax on stock buybacks that will generate $74 billion in revenue.

Schumer told reporters that he pushed hard to close the carried interest tax loophole, which allows asset managers to pay a lower effective income tax rate than many middle-income Americans, but Sinema told him she wouldn't vote to begin debate unless he dropped the provision.

The Wall Street Journal reported that Sinema told donors at a campaign fundraiser Wednesday night that it would be bad policy to hit the private equity industry with an increase in carried interest taxes at a time when the industry will be needed to finance infrastructure projects and semiconductor manufacturing.

The Democratic leader said he agreed to take out "Two pieces" of the corporate minimum tax provision, lowering the amount of revenue it will raise from $313 billion to $258 billion over the next decade.

"What we added is something that excites me and I think excites all Democrats and particularly progressives. We're adding in an excise tax on stock buybacks that will bring in $74 billion," Schumer said. Sinema touted the removal of the carried interest provision in a statement Thursday evening.

August 5: Democrats add stock buyback tax, scrap carried interest to win Sinema over

Democrats are including a tax on stock buybacks to make up for the revenue lost in their climate change package to win over Sen. Kyrsten Sinema, whose vote is a necessity to advance a centerpiece of President Biden's economic agenda. Senate Majority Leader Charles Schumer said Friday that the buyback tax will raise $74 billion, more than making up for the loss of a $14 billion tax on carried interest and a $55 billion tax on depreciation costs that were mandated by Sinema. Still, Schumer expressed confidence that all Democrats would support the stock buyback tax and noted that it's particularly popular with progressive lawmakers.

"We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate's budget reconciliation legislation. Subject to the Parliamentarian's review, I'll move forward," Sinema said in a statement Thursday evening.

Wall Street analysts said Friday that a 1 percent tax on share repurchases would likely slow down the buyback trend and prompt more companies to hike their dividends instead. House Democrats included a 1 percent buyback tax in their $2.2 trillion reconciliation package passed last year.

A write-up on the buyback tax included in the House-passed version of the Build Back Better Act by law firm Skadden Arps criticized the measure for being too broad. It described the language in the bill as "Broad enough that the tax might be triggered by certain acquisitions, split-offs, and other transactions."

"If the provision is enacted as drafted, publicly traded corporations will need to consider the excise tax in weighing the overall costs and benefits of their stock repurchase programs and in evaluating other corporate transactions that may involve 'repurchases.' As a general matter, the excise tax would make it more costly to engage in stock buybacks of all forms," the authors of the article wrote in 2021.

August 4: Inflation Reduction Act drops most of Biden’s proposals to tax the rich

Increases in individual income tax rates for high earners, increases in the estate tax, increased taxes on capital gains like stock and property holdings, a tax on billionaires, a plan to build out the net investment income tax and a surtax on high-income households are plans that have been scrapped from the Inflation Reduction Act.

"The administration proposed many, many tax increases that aren't reflected in this legislation," UCLA tax economist and former tax analyst for the Treasury Department Kimberly Clausing said Wednesday on a call with reporters.

Among the many proposals nixed from the current legislative package is a plan to restore the top income tax rate of 39.6 percent, brought down to 37 percent by the Trump administration's Tax Cuts and Jobs Act of 2017, as well as a 3 percent surtax on taxpayers with income of $5 million or more put forward by the House Ways and Means Committee in 2021.

Economist Kimberly Clausing said that the makeup of the Senate, which is split evenly along party lines, is the reason that more measures to tax the rich weren't included in the Inflation Reduction Act. White House economist Jared Bernstein traced the resistance to tax hikes on the rich beyond Congress, to the economic forces that act upon lawmakers through their constituencies.

Bernstein told CNBC last year regarding the Biden administration's budget proposals that plans to tax the wealthy are often thwarted by lobbying groups in Washington who solicit members of Congress on behalf of particular industry trade groups.

"So it's not only that these small investments will yield large returns. They create a fairer tax system and a fair tax system is important for a fairer society," Stiglitz added.

August 3: Automakers press U.S. Senator Manchin for changes to EV tax credit proposal

Automakers want Democratic Senator Joe Manchin to revisit his proposal to restructure the $7,500 electric vehicle tax credit, raising fears it could be largely unworkable because of new sourcing requirements for battery components and critical minerals. The proposal would lift the existing 200,000-vehicle cap on the $7,500 credit and impose new restrictions on automakers who have not yet hit that limit.

The joint proposal from Manchin and Senate Democratic Leader Chuck Schumer would also create a new $4,000 tax credit for used EVs.Automakers say privately the percentage targets for critical minerals and battery components sourcing are too high and rising too quickly.

EV startup Rivian Automotive Inc said the EV tax credit proposal "Will pull the rug out from consumers considering the purchase of an American-made electric vehicle" and added the "Final package must extend the transition period." Automakers including GM and Tesla Inc previously hit the cap and are no longer eligible for the existing EV tax credit.

Republican Senator Marco Rubio said on Tuesday he will file an amendment seeking to ensure EV credits can apply only if the EV battery's critical minerals are sourced in the United States or from a country with which the United States has a free trade agreement. The new EV tax credits, which would expire at the end of 2032, would be limited to trucks, vans, and SUVs with suggested retail prices of no more than $80,000 and cars priced at no more than $55,000.

August 3: Democrats’ plan would decrease the deficit by more than $100B: CBO

The Congressional Budget Office on Wednesday released estimates for Democrats' sprawling reconciliation plan, forecasting the legislation would lead to a net deficit decrease of more than $100 billion over roughly the next decade.

The estimates from the nonpartisan budget scorekeeper come as Democrats are moving quickly to pass the mammoth bill, dubbed the Inflation Reduction Act, later this week. The CBO's estimates projected the tax, healthcare, and climate plan would reduce the deficit between 2022-2031 by more than $101 billion.

Democrats had originally estimated the plan would contribute to more than $300 billion in deficit reduction; the estimates released by the CBO on Wednesday don't completely factor in the effects of all the proposed pay-for. Democrats have estimated, citing figures from the CBO and the Joint Committee on Taxation, that those components would raise over $600 billion in revenue.

A proposal to boost funding to the IRS to help bolster enforcement of tax laws would bring in $124 billion in revenue, though some experts have called that figure a lowball estimate. The CBO noted in its report that, as "a result of those increases in outlays, revenues would increase by $204 billion over the 2022-2031 period," eventually cutting the deficit by more than $300 billion in total.

August 2: Build Back Better born again (sort of)

In a surprise to most observers, Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-West Virginia,  announced a proposed reconciliation bill named the Inflation Reduction Act of 2022. Manchin had blocked previous attempts to pass Build Back Better, which was similar but more extensive in scope.

"That said, there are provisions that would impact particular taxpayers, both corporate and individual, as well as those concerned about drug pricing and energy and climate incentives." Jim Guarino, managing director at Top 100 Firm Baker Newman Noyes denoted. The main areas of the proposed legislation include, according to Guarino: A 15% corporate minimum tax on company book/financial statement income; Additional funding for the IRS; Changes to the carried-interest tax break; Health care changes; and, Incentives for renewable and clean energy.

"The additional IRS funding would be designed to enhance governmental enforcement by increasing tax examinations for corporations as well as high-income individual taxpayers," said Guarino.

Although the bill itself is a surprise, it does not contain a lot of surprises, according to Edward Renn, a partner in the private client and tax team at law firm Withers.

Jpg Chuck Schumer and Joe ManchinEric Lee, Al Drago/Bloomberg "The minimum tax is a book tax, and would only affect a relatively small number of corporations -those with more than $1 billion in revenue," he said.

"There are about 200 corporations of that size, and many of them already pay more than 15% in tax. There will have to be significant regulations before we know how it will work. The idea is that everyone should contribute, and pay at least 15%." The repeal of the carry rule is scored at saving $14 billion.

"I'm not convinced that she won't have a problem with it. It will be interesting to see if she's willing to let it go, or decides to prove that she's just as important as Senator Manchin." House Democrats who have wanted repeal of the SALT cap will likely support this despite the absence of repeal, Renn suggested: "They agree with the climate goals and social policy, so most will go along with it. They had said they would block it if it didn't repeal the cap, but this is not deemed to be individual tax legislation." "If you asked me two weeks ago, I didn't think anything like this would get done by the midterms," Renn said.

"It's hard to imagine that Sinema would say 'No.' If she demands something in return, that might lose some votes in the House. There are some in the Senate that are out with COVID, and they're not allowed to vote unless they're present in the chamber, but my sense is that they wouldn't have announced this publicly unless they were confident they had the votes." The biggest impact for the average tax practitioner will be the increased funding for the IRS, Harris believes.

August 2: Economists say reconciliation bill will lower prices for all Americans

A group of more than 120 economists is backing the climate, health care, and tax package that Senate Majority Leader Charles Schumer will bring to a vote this week. The economists said in a letter addressed to Schumer, Speaker Nancy Pelosi, Senate Minority Leader Mitch McConnell, and House Minority Leader Kevin McCarthy that the Inflation Reduction Act will reduce prices for American families while making "Crucial" investments in energy and health care.

They added that the legislation will quickly and noticeably lower health care costs by allowing Medicare to directly negotiate drug prices with pharmaceutical companies and capping out-of-pocket prescription drug costs at $2,000. It will lower health insurance prices for 13 million Americans by expanding the provisions of the Affordable Care Act, they said.

The economists said this would be the biggest step in fighting climate change yet and lower energy costs for families.

The signatories include Robert Rubin, a Treasury secretary under former President Clinton; Jack Lew, a Treasury secretary under former President Obama; and Mark Zandi, the chief economist for Moody's Analytics, economic research and consulting organization.

A Moody's analysis found that the package will "Nudge" inflation in the right direction and "Meaningfully" address climate change.

Economic News/Policy: 

August 8: Treasury sanctions crypto ‘mixer’ for aiding hackers laundering illicit funds

The Treasury Department imposed sanctions on Monday against cryptocurrency mixer Tornado Cash for helping hackers launder more than $7 billion worth of virtual currency since it launched in 2019. The Treasury Department also disclosed that Tornado Cash was used to launder more than $96 million of illicit cyber funds originating from the Harmony bridge heist and at least $7.8 million from the Nomad crypto theft.

"Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors regularly and without basic measures to address its risks," said Brian Nelson, Treasury's undersecretary for terrorism and financial intelligence.

A senior administration official said during a background call to reporters on Monday that the sanctions against Tornado Cash are the latest action the U.S. has taken to crack down on North Korea's ongoing illicit use of cryptocurrency.

The Treasury sanctioned another crypto mixer, Blender.io, in May, alleging that it was being used to launder money from hackers backed by North Korea's government.

In June, California-based crypto firm Harmony said that hackers stole $100 million in cryptocurrency from one of its blockchain bridges. The firm said at the time that it was partnering with law enforcement to try to track down the hackers and retrieve the stolen funds.

August 7: Economy Week Ahead: Inflation and Inventories in Focus

Tuesday: U.S. labor productivity is expected to have declined for the second straight quarter as higher compensation costs weigh on the efficiency of the labor force.

China could report higher inflation due to rising pork and vegetable prices, economists estimated. China’s National Bureau of Statistics is expected to report that suppliers’ prices eased in July.

Wednesday: The U.S. consumer-price index for July is estimated to show that price pressures eased on a monthly and annual basis. Consumer inflation accelerated to 9.1% in the 12 months ended in June, the fastest pace in more than 40 years.

Figures to be released by the Commerce Department are expected to show that inventories of U.S. merchant wholesalers rose modestly in July, signaling that companies continued to invest in restocking shelves.

Thursday: Economists estimated that prices paid by U.S. suppliers rose at a slower pace in July from the prior month but remained close to recent highs.

Workers’ filings for unemployment insurance are expected to have risen during the week ended Aug. 6. Jobless claims have been close to the highest point of the year in recent weeks.

Friday: The University of Michigan’s initial reading of consumer sentiment for August is expected to show a slight improvement from its final reading for last month.

August 7: Weak Growth, Tight Job Markets Are a Global Phenomenon

The unemployment rate remains close to a 40-year low, and almost half of companies say worker shortages are hampering production. In the years before the pandemic, Japan took steps to make it easier for mothers of small children to work, keep older workers on the job, and loosen restrictions on migrant labor, such as allowing foreign students to work 28 hours a week.

If there are fewer workers and job seekers, the labor market can remain tight even if growth is weak. There are signs that as vaccines cut the risk of severe illness or death from Covid, workers have returned to the labor force and migration has resumed.

Older people aren't yet returning to work in the U.S.: The labor-force participation rate of workers aged 65 or older has fallen to about 23% from 26% in early 2020.

Rapidly aging Germany and Italy are expected to lose millions of workers to retirement over the next decade, which suggests labor shortages will persist.

While sustained low unemployment is generally a boon, Japan's experience also shows the downsides: It means that the economy isn't able to quickly direct workers to growth areas, which can limit "Creative destruction"-the elimination of obsolete industries so that new industries can grow.

August 5: With Surge in July, U.S. Recovers the Jobs Lost in the Pandemic

U.S. job growth accelerated in July across nearly all industries, restoring nationwide employment to its pre-pandemic level, despite widespread expectations of a slowdown as the Federal Reserve raises interest rates to fight inflation. Employers added 528,000 jobs on a seasonally adjusted basis, the Labor Department said on Friday, more than doubling what forecasters had projected.

"Today's jobs report shows we are making significant progress for working families," President Biden declared.

The sector has been the slowest to recover its losses from the pandemic and remains 7.1 percent below its level in February 2020. Professional and business services followed close behind, adding 89,000 jobs across management occupations, architecture and engineering services, and research and development.

Paradoxically, fear of a downturn may be motivating more people to take jobs while they are still available, and stay put rather than leave. The number of people unemployed for 27 weeks or more sank to 1.1 million in July, while the share of people quitting their jobs has been steady or falling since February.

People over 55, in particular, have not gone looking for jobs in large numbers, even as bank accounts that swelled during the pandemic have been depleted and the falling stock market has taken a chunk out of 401(k) accounts, raising fears of inadequate retirement savings.

Global Trade:

August 4: U.S. Trade Deficit Narrows as Energy Exports Rise

The U.S. trade deficit narrowed sharply in June to its lowest level in six months as a rise in shipments of energy products pushed up exports, while cooling consumer appetite weighed on imports. U.S. exports of industrial supplies and materials, which include natural gas and petroleum products, rose 6.5% in June from a month earlier. Imports fell in June after rising slightly in May, a trend economists expect to continue in the coming months as U.S. growth decelerates.

The International Monetary Fund lowered its forecast for U.S. economic growth for 2022 to 2.3% from its April forecast of 3.7%. The U.S. economy grew 5.7% in 2021. Trade contributed to the economy with exports jumping 18% while imports increased 3.1%. Economists say trade's contribution to U.S. growth will likely wane as economic woes continue to deepen around the world, cooling demand.

Even though the U.S. remained a net importer of crude oil in 2021, higher domestic production and increased exports lowered net oil imports in 2021 to the second-lowest annual level since 1985, according to the U.S. Energy Information Administration. In June, the U.S. imported goods worth $661 million from Russia, led by iron and aluminum products, fertilizers, and crabs.

American Innovation Act:

August 3: American innovation is losing ground — here’s how we can once again lead the charge

The U.S. established the R&D tax credit in 1981 and for the next two decades remained at the top of the global leader board in terms of R&D incentives. R&D propels innovation and innovation drives the creation of good-paying jobs.

Until last year, thanks to the Republicans' Tax Cuts and Jobs Act, U.S. tax law allowed companies to fully write off qualified R&D costs in the year incurred. This represented a key incentive to locate R&D in the U.S. But beginning in 2022, the tax law will require that companies deduct their U.S. R&D costs across five years.

This is a disincentive to R&D investment. Economically it’s like giving our international competitors a head start. My colleague on the House Ways and Means Committee, Ron Estes from Kansas, has introduced legislation that would allow companies to continue to write off their R&D expenses. Congress should enact this commonsense reform immediately.

This is a disincentive to R&D investment. Economically it’s like giving our international competitors a head start. My colleague on the House Ways and Means Committee, Ron Estes from Kansas, has introduced legislation that would allow companies to continue to write off their R&D expenses. Congress should enact this commonsense reform immediately.

Currently, the U.S. provides a credit of up to 20 percent of incremental R&D costs. Doubling the R&D credit would provide a huge boost off the starting block. Another Ways and Mean member, Jackie Walorski from Indiana, recently introduced a bill that would do just that. Enactment of this bill would represent a major step toward America catching up to the competition.

Promoting startup companies is another way to compete in the innovation race. Finally, let's incentivize companies to move the results of R&D - intellectual property - back to the United States.

Republicans are fighting to foster American innovation by allowing American companies to benefit when they invest, improving the generosity of the R&D credit, returning R&D to the United States, and making America the most innovation-friendly economy in the world.

Energy and Environmental Policy/News:

August 5: China halts climate, military cooperation with the US over Pelosi visit

The Chinese Ministry of Foreign Affairs on Friday said that the country would halt its cooperation with the U.S. on military and climate matters in response to Speaker Nancy Pelosi's trip to Taiwan. The foreign ministry announced eight "Countermeasures" against Pelosi after she visited Taiwan "In disregard of China's strong opposition and serious representations."

China will no longer take part in the previously planned China-U.S. Theater Commanders Talk, the Defense Policy Coordination Talks, or the Military Maritime Consultative Agreement meetings. The government is also suspending cooperation on the repatriation of illegal immigrants, legal assistance in criminal matters, cooperation against transnational crimes, counternarcotics cooperation, and talks on climate change.

Republican FTC Commissioner Phillips to resign Biden says he's not worried about China's response to Pelosi's visit to Taiwan.

"Earlier Friday, the spokesperson for the foreign ministry announced sanctions against Pelosi for her"disregard of China's grave concerns and firm opposition" when she visited Taiwan, which Beijing claims sovereignty over. Following Pelosi's visit, China began conducting military drills in the waters surrounding Taiwan.

ICYMI: 

August 3: As Monkeypox Spreads, U.S. Declares a Health Emergency

The Biden administration on Thursday declared the growing monkeypox outbreak a national health emergency, a rare designation signaling that the virus now represents a significant risk to Americans and setting in motion new measures aimed at containing the threat. Mr. Biden has faced intense pressure from public health experts and activists to move more aggressively to combat monkeypox, which has infected more than 6,600 people in the United States.

Dr. Rimoin is one of the scientific advisers who urged the W.H.O. to categorize monkeypox as a "Public health emergency of international concern," a designation the organization has used only seven times since 2007.

In the United States, demands for stronger action against monkeypox have intensified recently and several states - California, Illinois, and New York - have declared their own health emergencies.

"A declaration of this monkeypox outbreak as a public health emergency is important but more important is to step up the level of federal, state, and local coordination, fill our gaps in vaccine supply and get money appropriated from Congress to address this crisis," said Gregg Gonsalves, an epidemiologist at the Yale School of Public Health and an adviser to the W.H.O. on monkeypox.

August 3: Corporate lobbying could imperil sweeping data privacy bill

Industry lobbying could imperil a comprehensive privacy bill that would fundamentally shift the way companies collect user data online. Since its introduction in June, the American Data Privacy and Protection Act has been one of the most lobbied bills in Congress, drawing attention from more than 180 corporate clients, including Amazon, Disney, and Target, according to data from research group OpenSecrets.

"The gist of the bill is to have companies not collect any more data than they need to provide you with the service that you're engaging with," said Sara Collins, senior policy counsel at Public Knowledge, an interest group that backs the bill.

Business lobbyists argue that the bill must override state privacy laws so that companies can comply with a national standard rather than a patchwork of regulations. Daniel Solove, a professor at the George Washington University Law School, said in many ways the bill as written is stronger than California's current data law.

Another key sticking point for some companies is the private right of action included in the bill, which would allow individuals to sue companies for violating their data privacy rights under the new law. Last week, he voted against advancing a bipartisan kids' data privacy bill, which includes some of the same provisions around minors' data as his own bill, out of the Senate Commerce Committee because he said the panel should be focused on the comprehensive proposal.

For Fun: 

August 4: The Cartwheel Galaxy Is the Webb Telescope’s Latest Cosmic Snapshot

Just as the Webb, in July, revealed the presence of even more distant galaxies hiding from our view, its photographs of Cartwheel magnified the detailed formation of stars within the galaxy's rings and the dozens of other star systems beyond.

Cartwheel's appearance comes from a collision of two galaxies that occurred hundreds of millions of years ago.

Kirk Borne, who was the principal investigator for the Hubble observation of the Cartwheel but was not involved with the Webb, said that the galaxy's strange shape, which formed by coincidence during the merger, has motivated astronomers to study it for decades.

Because a smaller galaxy crashed into a larger one - and straight through its middle - it was less disruptive to the shape of each galaxy, and both were relatively able to maintain their individuality.

"What changed the Cartwheel's shape was the influence of this other galaxy's gravitational field that changed the orbits of stars in the original Cartwheel galaxy," Dr. Rieke said.

Dr. Borne, who has studied other collisions of galaxies, described the smaller galaxy as a bullet that shot through the large one.

After the observation of the cosmic object in the 1990s, the scientists noticed a trail of hydrogen gas left behind that was following the smaller galaxy, which Dr. Borne called the "Smoking gun" indicating that it had kept moving after creating Cartwheel's new formation.