Weekly Plurus Strategies Update on Infrastructure, the Budget Resolution, Reconciliation, and Other Activity in Washington
Happy recess…. well at least until the House is back in session the week of August 23. With Senate activity on the bipartisan infrastructure bill and the budget resolution, it’s been a crazy week. Here’s the latest we are picking up on what we might expect for the rest of August on infrastructure, the budget resolution, and reconciliation, as well as other upcoming action on voting rights, appropriations, and the debt limit.
Bipartisan Infrastructure Bill
After months of negotiations, on Tuesday the Senate passed the Infrastructure Investment and Jobs Act. The bill passed by a vote of 69-30, ultimately garnering the support of 19 Republicans. In its final hours, the debate was dragged out by Sen. Bill Hagerty (R-TN), who refused to accept procedural agreements to speed up the process.
Notably, the bill attracted the support of Senate Minority Leader Mitch McConnell (R-KY). Despite some initial thinking that he might try to pick GOP Senators off the bill with the goal of denying President Joe Biden a major victory, it seems the minority leader was ultimately convinced that supporting bipartisan legislation was necessary to prove that the Senate is not broken and to preserve the filibuster.
The bipartisan infrastructure bill now heads to the House, where there continues to be division within the Democratic caucus on how to sequence a vote on the bill with additional votes on the budget resolution and reconciliation package. One Democratic House chief of staff was under the impression that Speaker Nancy Pelosi (D-CA) is communicating directly with Senate Majority Leader Chuck Schumer (D-NY). She emphasized that the Speaker has a way of “shaping things” and her view was that the bipartisan infrastructure bill is most likely going to have to wait for a vote until after the Senate has passed not only the budget resolution, but also the related reconciliation package. One thing that might be helpful to Speaker Pelosi is that Rep. Peter DeFazio (D-OR) has now dropped his demand that the House and Senate conference their respective infrastructure bills.
Budget Resolution/Reconciliation
Immediately after the Senate passed the bipartisan infrastructure bill, Leader Schumer initiated debate on the $3.5 trillion budget resolution, revving a vote-a-rama into high gear. Though the Senate had reached an agreement to use less than the 50 hours of budget debate, more than 1,100 amendments were filed. Ultimately, only 46 amendments received votes, with just 28 adopted.
In the third vote-a-rama of the 117th Congress, we’ve observed a few patterns that might suggest what we are in for with the next inevitable vote-a-rama on the reconciliation package. In the votes that took place on Tuesday night and Wednesday morning, it was clear that Republicans sought to make Democrats walk the plank on issues that might make for good fodder on the 2022 campaign trail. It also seemed the GOP was able to effectively leverage the vote-a-rama to drive a wedge between Democrats on climate policy.
We anticipate this next vote-a-rama will be even more intense, as reconciliation amendments will have real impact considering that they will alter legislative text. It is our expectation that Republicans will try to make the vote-a-rama as painful as possible by filing and forcing votes on numerous amendments, while Democratic leadership is likely to encourage Democrats not to file amendments and to vote down any GOP proposals. At the end of the day, our instincts tell us that the reconciliation vote-a-rama will be a lot of political theater and that 99 percent of the substance is likely to get done before the package comes to the floor.
Around 4AM on Wednesday morning, the Senate passed the budget resolution by a 50-49 partisan vote. Sen. Mike Rounds (R-SD), who is caring for his wife who is receiving cancer treatment, missed the vote, although he made clear that he would have opposed the budget framework. Leader McConnell argued the budget resolution is the equivalent of Democrats playing “Russian roulette” with the economy. Budget Committee Ranking Member Lindsey Graham (R-SC) articulated the view of most Republicans that the budget resolution represents Democrats using infrastructure as “an excuse to raise taxes and expand government.”
The budget resolution directs 12 Senate committees and 13 House committees to respond to reconciliation instructions with legislative language no later than September 15. This means it will be a busy August for staff who are tasked with fleshing out the policy details. While there may be modifications made throughout the drafting and scoring process, we expect the final reconciliation package will expand Medicare coverage; lower the price of prescription drugs; extend child tax credits; provide paid family and medical leave; enact universal pre-kindergarten and tuition-free community college; expand tax incentives for clean energy, manufacturing, and transportation; establish a Civilian Climate Corps; provide lawful permanent status for qualified immigrants; create pro-labor incentives; raise taxes on profitable corporations and high-income individual; expand the SALT tax; and impose tariffs on carbon-intensive imports. Of course, any legislation drafted during the reconciliation process must comply with the Byrd rule, which requires that reconciliation provisions have actual budgetary effects.
Because the reconciliation instructions are quite vague, there is a lingering question of whether or not Democrats might try to “double dip” on issues that were previously addressed by the bipartisan infrastructure bill using the reconciliation process. President Biden had previously committed that the reconciliation package would not include items that were already negotiated as part of the bipartisan infrastructure talks in order to attract GOP support for the bipartisan bill. However, Democrats like Sen. Chris Murphy (D-CT) have now pointed out that the bipartisan agreement spans only five years and a ten-year budget resolution might allow Democrats some flexibility to address additional priorities in the reconciliation bill without them being considered duplicative.
Democrats intend to offset the massive spending package via corporate and international tax reform, increased taxes on high-income earners, Internal Revenue Service (IRS) tax enforcement, healthcare savings, and a carbon polluter import fee. While the goal is to pay for the entire $3.5 billion package, Democrats left themselves some flexibility allowing Senate committees to advance measures that would add nearly $1.75 trillion to the deficit and House committees to produce legislation that would allow $2 trillion to the debt. The discrepancies reflect differences in Senate and House committee jurisdiction. As Republicans up their accusations that Democratic spending is leading to inflation, Leader Schumer has doubled down on using tax increases to pay for the reconciliation package.
Despite all 50 Senate Democrats supporting the budget resolution, advancing the reconciliation package in the Senate could still be a challenge. For example, both Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have already put down markers expressing their concern about the overarching size of the package, which will make the details of how the reconciliation measure comes together all the more important. It is important to point out however, that both Senators voted for the $3.5 trillion budget resolution.
The path for the reconciliation package is also fraught in the House. On Tuesday evening, Majority Leader Steny Hoyer (D-MD) notified Members that the House will be called back to Washington the week of August 23 to vote on the budget resolution. Notably, his correspondence did not indicate whether or not the House might also vote on the bipartisan infrastructure bill this same week.
Reports we’ve received on Wednesday’s House Democratic caucus call suggest that Speaker Pelosi will have a tall task ahead in navigating the factions in her caucus. Moderate House Democrats are pressing the Speaker to vote on the bipartisan infrastructure bill as soon as possible. In fact, we are now hearing that somewhere between six and 10 moderates have privately threatened to vote against the budget resolution if the bipartisan infrastructure bill is not put on the floor for a vote first. We’d bet that House Democratic leadership is not too spooked by this threat, as Members have not yet come out publicly.
Meanwhile, progressives continue to make the case for waiting until the Senate passes a reconciliation package that is acceptable to the left flank of the party before taking up the bipartisan infrastructure bill. For now, Speaker Pelosi appears to be towing the progressive line on linking the bipartisan infrastructure bill to the Democratic reconciliation package and moving the two bills together. Our instincts tell us that the political stakes are too high for Speaker Pelosi not to be able to find a way to keep her caucus united on the bipartisan infrastructure bill, the budget resolution, and reconciliation.
At this point, we don’t see infrastructure and reconciliation being wrapped up until sometime this fall. Leader Schumer has said that he would like the reconciliation package enacted in September. For now, this timeline seems ambitious.
Voting Rights
In his correspondence to Members, Leader Hoyer indicated the House will also be hold a vote on the John Lewis Voting Rights Act, in addition to the budget resolution, during the disruption in the recess the week of August 23.
Before adjourning the Senate until September, Leader Schumer also teed up a vote for mid-September on voting rights. Under current rules, Leader Schumer will need all 50 Democrats and at least 10 Republican Senators to move elections reform legislation forward. Unless there are drastic shifts over the August break, we can’t imagine this will be achievable and our best guess is that Leader Schumer might use this vote to continue to wear down members of his own party who are hesitant to tweaking the filibuster, especially now that the Senate is past a vote on the bipartisan infrastructure bill.
FY22 Appropriations
Despite infrastructure and reconciliation being in the spotlight this week, Fiscal Year (FY22) appropriations remain on the Congressional “to-do list.” With the legislative agenda for the fall shaping up to be quite busy, we continue to be pessimistic that appropriations get done much before the end of the calendar year. Earlier this week, we connected with Rep. Rosa DeLauro’s (D-CT) chief of staff. On the topic of appropriations, this chief said that with President Biden’s budget coming out late, it should have been clear that a continuing resolution (CR) is the path forward. She went on to say the fact that the House got nine of the 12 FY22 spending bills done (10 if you count the security supplemental) is already a "minor miracle." While a CR is inevitable, this chief said the big question for the CR is “how long.”
Debt Limit
On Tuesday, 46 GOP Senators signed a letter committing that they will not vote to increase the debt ceiling, whether as part of a standalone bill, a CR, or any other vehicle. Notably, Sens. Susan Collins (R-ME), John Kennedy (R-LA), Lisa Murkowski (R-AK), and Richard Shelby (R-AL) did not sign the letter. Sen. Kennedy has expressed that he plans to offer a “budget reform” plan that has the potential to be attached to a debt limit deal. Sen. Graham initially planned to offer a GOP proposal to weigh changes to Social Security and Medicare as part of a bipartisan debt limit deal but canceled plans to release that proposal, ultimately joining the Republican letter.
It was unsurprising this week that the $3.5 trillion budget resolution unveiled and passed by Senate Democrats made no mention of the debt limit, as we continue to hear that Democrats are targeting the CR as the vehicle for suspending the debt limit. Ahead of the release of the budget resolution, Treasury Secretary Yellen urged that both sides of the aisle to work together again to either increase or suspend the debt limit. President Biden also said this week that he is not worried about the debt limit, as he believes Congress will not allow the U.S. Government to default on its debt.