Holiday Congressional Deadline Extravaganza
On Capitol Hill, it is likely the future of the American economy and President Joe Biden’s agenda will be decided by a series of deadlines facing Congress in the next few months, many of which line up with holidays and recesses. We are hearing from all directions that discussions will come down to the wire and that members of Congress can look forward to (or dread) a busy holiday season.
Infrastructure and Reconciliation
The keystone pieces of President Biden’s agenda have a non-binding deadline of October 31, which may have many at the White House and House Democratic leadership feeling spooked. Congressional leadership had initially faced a September 27 deadline to pass the bipartisan Infrastructure Investment and Jobs Act. This agreement had been negotiated by ten moderate Democrats who had threatened to withhold their budget resolution and reconciliation votes for the Build Back Better Act without passage of the infrastructure plan first.
Tensions in the House boiled for the month leading up to the September 27 deadline, with Rep. Josh Gottheimer (D-NJ), the leader of the ten moderates, and Rep. Pramila Jayapal (D-WA), chair of the Congressional Progressive Caucus, releasing competing statements saying that their members would not vote for one bill without passage of the other. The progressives opposed moving the Senate-passed bipartisan infrastructure bill without prior passage of the Build Back Better reconciliation bill. The moderates opposed the passage of Build Back Better without passing infrastructure first.
Things came to a head in the House the week of September 27, when Speaker Nancy Pelosi (D-CA) announced that she would be decoupling the votes for the two bills and the House would vote on infrastructure on its own on September 30. Speaker Pelosi famously proclaims that she does not bring bills to the House floor that won’t pass, and the planned vote was canceled after a week of threats from the Congressional Progressive Caucus saying they would not vote to pass infrastructure without an accompanying reconciliation vote. The decision to delay the vote until October brought condemnation from moderates in the House and the Senate, saying that the infrastructure bill should not be held up by reconciliation and that both bills can pass separately. Sen. Kyrsten Sinema (D-AZ), a key author of the infrastructure bill, released a particularly strong statement of disappointment.
We feel it is unlikely that the reconciliation package will be ready to pass both the House and Senate by October 31. The Senate has a busy calendar for the remainder of the year, and it is possible that Senate leadership will not negotiate a final package with the White House and House leadership until Thanksgiving or later. Speaker Pelosi and Senate Majority Leader Chuck Schumer (D-NY) undoubtedly feel pressure to finalize these two signature bills for President Biden to sign before the end of the year so as to have accomplishments to tout when the energy in Congress turns to the 2022 midterm elections. However, it is possible the fate of both bills could slip to Martin Luther King Day, Presidents’ Day, or even Easter.
Debt Limit
After weeks of “the sky is falling” headlines related to an increase of the federal debt limit, on October 12, Congress approved a $480 billion increase in federal spending along party lines. The $480 billion increase is meant to extend the Treasury’s ability to pay back U.S. receipts through December 3, but the additional increase was larger than originally expected. The new amount, as well as the “extraordinary measures” the Treasury has taken over the last few months, has led to a consensus around sometime in February being the new doomsday date when the United States would default on its debts.
Once again, there is no clear path forward on a long-term solution. Republicans, many of whom consider themselves fiscal hawks, do not want to be seen raising the federal debt limit because they believe it will appear hypocritical. Additionally, there’s the possibility that their intransigence will force Democrats to use reconciliation to specify the exact amount that they want to raise the debt ceiling, which lends itself well to attack ads come campaign season.
On the other side of the aisle, Democrats do not want to raise the debt limit via reconciliation because Republicans could easily portray them as irresponsible spenders. Beyond the optics of increasing the debt limit, negotiations became more complicated when Democrats attempted to tie the federal debt limit increase to a continuing resolution (CR); this effort failed when Senate Republicans indicated they would not sign off on a “dirty” CR. Democrats hoped that by attaching the budget extension to the debt limit, they would be pressuring Republicans to pass both to avoid the risk of a government shutdown and economic collapse double-whammy.
Republicans want Democrats to use the reconciliation process and include the debt limit in the Build Back Better package. The problem - as Democrats argued back in late September - is that they would not have enough time to go through the arduous reconciliation process in time to prevent a default. There are also rumors that some moderate Senate Democrats oppose using reconciliation to prevent the federal government from defaulting on its debt. Given Republican stonewalling on the issue, Democrats began to float around the idea of “nuking” the 60-vote filibuster to suspend the debt limit. Even though Democrats would be breaking the filibuster for this one unique circumstance, it has the potential to become a “slippery slope” problem for Republicans who see Democrats as beginning to completely abolish the filibuster in the Senate.
Republican Minority Leader Mitch McConnell (R-KY) does not want Democrats to abolish the filibuster, but he saw pressure on Sens. Manchin and Sinema, who seemed as though they may have been willing to get rid of the filibuster for the exclusive ability to raise the debt limit. Given this concern, it’s believed that Leader McConnell made the political calculation to give Democrats the time they need to go through the reconciliation process to raise the debt limit. However, Leader McConnell has also promised Democrats there will be no Republican support for raising the debt limit in the Senate. The bottom line is that as December 3 approaches, Democrats are likely to have to tackle this issue by themselves. However, this is Washington DC, and anything is possible when you have more than a month to resolve a contentious issue like federal deficit spending.
FY22 Appropriations/Government Shutdown
For American holiday shoppers, Black Friday will be the day after Thanksgiving. In Washington, DC, Black Friday will come one week later, on December 3, when Congress must again take votes to avert a default and total government shutdown. Due to competing priorities that have kept appropriators from negotiating topline defense and non-defense spending levels, the Fiscal Year 2022 (FY22) appropriations process was not completed at the end of September. As was widely anticipated, Congress passed a CR, with some additional money for hurricane relief and Afghan refugees, to fund the government through to December 3. Unlike the debt limit issue, which involved a lot of gamesmanship, the CR was fairly easy to pass once the debt limit was removed from the package.
One reason the government came, once again, to the brink of a government shutdown is because this year’s budget was late, and Congress moves slowly when there is a lot of money at stake. Additionally, negotiations became more difficult with Congress also juggling three other major legislative priorities at the same time.
The House has passed a majority of its FY22 bills. While there has been little action in the Senate, with just three FY22 spending measures advancing out of committee and Senate Democratic appropriators recently posting the other nine bills, the hope now is that with nine additional weeks, Democrats can focus entirely on passing their reconciliation package and infrastructure before the end of October. Democrats can then spend the month of November ironing out an FY22 omnibus that can pass before the December 3 deadline.
Given the limited number of days Congress is expected to be in session, as well as ongoing legislative distractions, it is unclear whether appropriations action in the Thanksgiving timeframe is an achievable goal. We increasingly hear rumors that Congress might once again kick the can down the road with another short-term CR that expires just before Christmas. Alternatively, there is some thinking that progress can be made on certain bills, while other more controversial appropriations vehicles may have to continue on a year-long CR. This would represent a missed opportunity for Democrats to eliminate some Trump-era policies. At this point, we also cannot rule out that FY22 appropriations will roll into next year and that the FY22 and FY23 cycles will take place simultaneously around the spring holidays.