Weekly Plurus Strategies Update on Infrastructure, Reconciliation, Appropriations, and the Debt Limit

During the first part of this week, we felt stuck in “wait and see mode” as negotiators continued to try to resolve the outstanding issues in bipartisan infrastructure negotiations. However, the week took a turn with the announcement of an agreement on the bipartisan infrastructure framework on Wednesday. Perhaps we might still have an August recess! Here’s the latest we are hearing on the bipartisan infrastructure bill, the budget resolution and human infrastructure reconciliation package, Fiscal Year 2022 (FY22)  appropriations, and the debt limit.

Bipartisan Infrastructure Framework/Reconciliation

On Wednesday afternoon, Senate negotiators announced a deal on the bipartisan infrastructure agreement. The agreement includes $550 in new spending on infrastructure, including $110 billion for roads and bridges; $73 billion for electric grid upgrades; $66 billion for rail and Amtrak provisions; $65 billion for broadband; $55 billion for clean drinking water; $39 billion for transit; $25 billion for airports; $17 billion for ports; and $7.5 billion for electric vehicles (EVs). 

In the final hours of negotiations, we understand that some of the last issues to be resolved included transit funding, water provisions, Davis Bacon language, and broadband affordability, in addition to heated discussions on pay-fors. It now clear the bill will be offset primarily by $205 billion in unspent COVID funds; $56 billion in additional tax revenue anticipated using dynamic scoring; $52 billion from unspent unemployment benefits from states that ended enhanced payments early; $50 billion from recouping unemployment benefits claimed by fraudsters; $49 billion for delaying the Medicate rebate rule enacted under President Donald Trump; $28 billion from increasing tax reporting rules for cryptocurrency investors; $21 billion from fees on government-sponsored enterprise; $20 billion from future spectrum auctions and $67 billion from the recent C-Band auction; and $13 billion from a Superfund fee on polluting corporations.

Just hours after the deal was clinched, Senate Majority Leader Chuck Schumer (D-NY) pulled the trigger on the motion to reconsider last week’s failed cloture vote on proceeding to the infrastructure bill. Wednesday night’s 67-32 procedural vote, which reflects support from all 50 Democrats and 17 Republicans, including Republican Leader Mitch McConnell (R-KY), means the debate on the bipartisan bill will soon begin. While the vote margin looks promising, we have only just seen leaked bill text and an official Congressional Budget Office (CBO) score is forthcoming. We are also increasingly hearing concerns about inflation and Republicans who oppose the measure continue to grumble about the price tag. In other words, Senate passage of the compromise legislation is not yet guaranteed. 

Since the majority of legislative text was written before Wednesday’s formal announcement of an agreement, staff has been working feverishly to finalize bill language. We are expecting the text of the bipartisan agreement will imminently be offered as a substitute amendment. We anticipate the chamber will hold votes over the weekend and into next week on amendments and ultimately final passage. Both Members and staff seem just as motivated by the breakthrough in negotiations, as well as the prospects of the Senate remaining on track to begin its recess on August 9. 

Assuming the bipartisan infrastructure package secures the 60 votes required for it to advance in the Senate, Leader Schumer is then expected to quickly pivot to the budget resolution that includes instructions for Democrats’ $3.5 trillion human infrastructure reconciliation bill. If there is cooperation, the Senate could vote on final passage of the bipartisan infrastructure bill and take up the budget resolution as soon as Thursday. Shortly after the Senate achieved cloture on the bipartisan infrastructure bill, Sen. Bernie Sanders (I-VT) announced that Democrats have the votes to pass the budget resolution next week, signaling support from all 50 Senate Democrats. He predicted the vote on the reconciliation bill will not take place until September. 

Like the bipartisan infrastructure bill, passage of the reconciliation measure is not yet a sure thing. For one, Sen. Kyrsten Sinema (D-AZ) has indicated that she is unwilling to support a reconciliation bill with a topline as high at $3.5 trillion. However, Sen. Sinema did not indicate what spending level she can tolerate, leading to some speculation that her comments related to limiting spending were intended to help drum up GOP support for the bipartisan infrastructure bill. Sens. Joe Manchin (D-WV) and Jon Tester (D-MT) have also been tepid about their support, saying they will need to see the final package before making a commitment on how they will vote. As Leader Schumer will need to keep the Democratic caucus entirely united, reconciliation is bound to be a complicated process, with each Senator having influence and priorities he or she would like to see addressed. 

Another complicating factor for how both the bipartisan infrastructure bill and a reconciliation bill move forward is the dynamics in the House, which has largely been sidelined as the Senate Gang of 22 (G22) negotiated the bipartisan infrastructure agreement with the White House. The House is still planning to kick off its August recess at the end of this week, although it is possible Members could be called back to Washington for votes depending on how the action unfolds in the Senate. 

House Speaker Nancy Pelosi (D-CA) has repeatedly said that the House will not vote on a Senate-passed infrastructure bill until after the Senate also moves a reconciliation package. She has also warned that the House may not simply take up the Senate-passed bill and move it through the chamber without any changes. While we believe there may be Democratic leaders in the House who desire a conference process on infrastructure, the even tighter margins in the Senate make it difficult to believe the House will be able to really make its mark on the infrastructure bill. Aside from the politics on sequencing, Speaker Pelosi will also need to navigate the frustration in the Democratic caucus. 

For example, Rep. Peter DeFazio (D-OR) has been increasingly vocal about his disappointment that the surface transportation bill he shepherded through the House Transportation and Infrastructure Committee (House T&I) will be scrapped for the Senate infrastructure bill. At the very least, he has said the Senate infrastructure bill may need to be amended to include climate provisions and earmarks. Further, House progressives have threatened to vote against a Senate-passed bipartisan infrastructure bill if their priorities are not fully addressed. The progressive caucus has also cautioned that it may withhold it support for infrastructure until the upper chamber also sends the House the larger reconciliation bill. As most House Republicans are thought to oppose the bipartisan infrastructure bill, Speaker Pelosi will be walking a tight rope trying to keep her caucus aligned to deliver President Biden’s agenda. 

While the prospects for both vehicles – a bipartisan infrastructure bill and a reconciliation package – are certainly rosier today than they were last week, we will be monitoring closely over the coming days.

Budget/Appropriations

This week, the House passed its FY22 State Foreign Operations (SFOPs) Appropriations Bill by a vote of 217-212. Additionally, the House passed the FY22 Legislative Branch (Leg Branch) Appropriations Bill by a vote of 215-207. The House also completed its consideration of a seven-bill spending package that included the FY22 Agriculture (Ag); Financial Services and General Government (FSGG); Energy and Water; Interior; Labor-Health and Human Services (HHS); Military Construction-Veterans Affairs (MilCon-VA); and Transportation, Housing, and Urban Development (THUD) bills. The minibus advanced by a vote of 219-208. 

The House has yet to consider its FY22 Commerce, Justice Science (CJS); Defense; and Homeland Security Appropriations Bills, which are thought to be more controversial. While the House had been hoping to vote on its FY22 CJS Appropriations Bill next week, progress stalled due to opposition from policy unions on measures tying federal law enforcement grants to policy changes. This could complicate the bill’s path forward.

On Thursday, both the Senate and House passed a compromise $2.1 billion supplemental appropriations bill addressing Capitol security concerns exacerbated by the January 6 insurrection. As negotiating this package has consumed most of Sens. Leahy’s and Shelby’s time, the thinking is that the “decks have now been cleared” for the Senate Appropriations Committee to mark up its FY22 spending bills. Subcommittee markups of the Ag, Energy and Water, and MilCon-VA bills have now been noticed for Monday with a full committee markup planned for Wednesday.

Debt Limit

As the start of FY22 approaches, Treasury Secretary Janet Yellen has told lawmakers they need to either raise or suspend the debt ceiling to avert an economic crisis when they return from their August recess. The House is scheduled to return September 20 and the Senate a week earlier, just days before the start of the new fiscal year. With the current suspension of the debt limit due to expire tomorrow, at noon today, Treasury is expected to invoke its first extraordinary measures to stretch out the timeline for Congressional action. Coinciding with the start of FY22, Treasury’s cash and other extraordinary measures are expected to decrease by $150 billion on October 1 to large mandatory payments. CBO has said the effective deadline to address the debt ceiling will likely be in October or November, possibly earlier. 

Democratic lawmakers including Sens. Manchin, Ron Wyden (D-OR), and Sanders and Speaker Pelosi have expressed confidence that Congress will avert a crisis and that the debt limit can be raised to avoid default, but how and when are currently unclear. Leader McConnell’s recent comments that Republicans will not support an increase or suspension make it unclear whether that will force Democrats to address the issue through reconciliation. If we had to bet, we think the debt limit gets done on a continuing resolution (CR) that funds the government from the start of the fiscal year into mid-December. In the meantime, Sen. Lindsey Graham (R-SC) is set to release a proposal to tie a debt limit deal to the creation of a commission to consider the fiscal sustainability of Social Security and Medicare.