Weekly Plurus Strategies Update on Infrastructure and Reconciliation; Appropriations, Emergency Spending, and the Debt Limit; and the Crowded Fall Agenda
While Congress is technically still in recess, things in Washington have been anything but slow with a crowded agenda taking shape for the fall. Here’s the latest we are picking up on infrastructure and reconciliation; appropriations, emergency spending, and the debt limit; and the crowded fall agenda.
Crowded Fall Agenda
This week, the Biden Administration stares down a number of challenges on a short timeline. First, the budget resolution set a September 15 deadline for committees to respond to reconciliation instructions. It will remain a massive challenge for Congress to cobble together a reconciliation package by September 27, the date by which House Speaker Nancy Pelosi (D-CA) has said the House will vote on the bipartisan infrastructure bill. Democrats are on edge and acknowledge that if these intertwined efforts unraveled, we could very well be looking at President Donald Trump back in the White House come 2024 and Republicans holding gavels after the 2022 midterms.
There are the added complications in that the current surface transportation authorization is due to expire on September 30 and the Highway Trust Fund will be exhausted in the coming weeks. If Congress can pass and President Joe Biden signs the bipartisan infrastructure bill by the end of the month, there will be nothing to worry about. However, if infrastructure comes off the tracks, another short-term extension will be needed.
Simultaneously, we are approaching the end of the fiscal year on September 30 and little progress has been made on FY22 appropriations. Democrats are likely to try to attach the debt limit to a continuing resolution (CR), along with other priorities, including emergency spending, that might help attract Republican support, even though Republicans have made it clear they do not plan to offer their support for either increasing or suspending the debt limit.
Senators arrive back in Washington next week, with Members of the House to follow a week later. This leaves precious few days for Congress to address these priorities before the upcoming deadlines, not to mention that the surging delta variant, expiration of COVID relief programs, damage from Hurricane Ida and wildfires, the Afghanistan withdrawal, and the 20th anniversary of 9/11 remain at the top of the news cycle. As if September was not already busy enough, Speaker Pelosi has also indicated the Fiscal Year 2022 (FY22) National Defense Authorization Act (NDAA) will be on the House floor the week of September 20, and Senate Majority Leader Chuck Schumer (D-NY) has promised to bring up stalled voting rights legislation in the Senate. Buckle up for a wild ride ahead!
Infrastructure/Reconciliation
This week we saw additional House committees, including Ways and Means; Science, Space and Technology; Education and Labor; Small Business; Agriculture; and Homeland Security marking up their reconciliation bills. The House Oversight and Reform Committee reported its component of the reconciliation package last week and the House Natural Resources Committee continued its markup that began last week today. The Ways and Means Committee will continue its markup next week. The House Energy and Commerce and House Transportation and Infrastructure Committees will also hold markups early next week.
The reconciliation bill will be separated into 16 bills, which will eventually be the subtitles that are reported to the Budget Committee. At this point, it’s unclear what comes next. We have been told there are clear disagreements between the House and the Senate over what we will see in the House Energy and Commerce reconciliation bill and no one is quite sure yet how things will all play out. The House Energy and Commerce markup is scheduled to begin at 11AM on Monday and to span until 9PM or 10PM if it looks like the committee is not close to wrapping up. Alternatively, if an end is in sight, the committee could work straight through Tuesday morning until the markup is over.
We were also able to speak this morning with an Environment and Public Works (EPW) Committee staffer who said the committee is coordinating closely with the House Transportation and Infrastructure Committee ahead of their markup next week and that they are “pretty well aligned.” At the moment, this staffer expects the House bill will undergo only “minimal changes” when it comes to the Senate, in some cases because the budget resolution charges to the Senate committees (EPW; Commerce, Science, and Transportation; and Banking, Housing, and Urban Affairs for transit) do not line up exactly with the House Transportation and Infrastructure Committee’s numbers. We are hearing the House Transportation and Infrastructure Committee’s bill is completely written and it is now “pencils down” since they are marking up next week.
As of today, there are just 18 days until Speaker Pelosi’s September 27 deadline for the House to vote on the Senate-passed bipartisan infrastructure bill. Privately, the Democrats we are connecting with tell us they are skeptical that a reconciliation package is ready for a vote by September 27. This date was never engraved in stone and the Speaker certainly has some flexibility to adjust it but doing so may come with the risk of moderates walking away from Democrats’ reconciliation effort, especially as moderates have said they will not vote forreconciliation without first voting for the infrastructure bill. While moderate House Democrats have been relatively quiet since last month’s standoff on the budget resolution, it is also believed that they oppose $3.5 trillion in reconciliation spending and may be coordinating with Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) to bring the topline down.
Relatedly, you might have seen that over the weekend Sen. Manchin penned an op-ed saying that he will not support a $3.5 trillion package and calling for “a strategic pause” on Democrats’ rapid movement on the reconciliation bill, citing concerns about inflation and increasing federal debt. Speaking of, the updated Producer Price Index, a key measure of inflation, will also be released tomorrow. While this could pile on additional pressure to reduce topline spending on the reconciliation package, the White House appears confident that Sen. Machin can ultimately be persuaded to support reconciliation. Similarly, Leader Schumer rebuked any notion that Democrats would hit pause on President Biden’s agenda and Sen. Bernie Sanders (I-VT) has also been bullish on preserving the robust topline. However, the rumor mill is running ramped with suggestions that Sen. Manchin might only support a reconciliation bill that tops our somewhere between $1 trillion and $2 trillion.
Our Democratic sources tell us they believe the final topline for reconciliation is likely to be somewhere around “$2.9999 trillion.” This would allow some Democrats to message that theprice tag for the package is less than $3 trillion, while giving progressives some flexibility to still take a victory lap on a $3 trillion package. We are also hearing that the White House is playing some role in trying to coordinate conversations between House and Senate committees and to ensure that both sides of the Capitol are working off of the $3.5 trillion topline. At present, it seems that any cuts that will need to be made will be contemplated much later in the process. It is also possible that that cuts actually result in a scaling back of the timeframes for certain programs rather than straight out elimination of entire programs or other Democratic priorities.
Offsets remain a key piece of the conversation, as determining whether or not the package will be paid for will be a key factor in solidifying Democratic support. Current estimates suggest that Democrats might be able to raise somewhere between $1 trillion and $2 trillion in revenue and to generate additional savings through reforms to prescription drug pricing. Speaker Pelosi has said the reconciliation package will be more than half paid for. How this all plays out is likely to impact the reconciliation measure’s topline.
Despite the fact that the House seems to be moving first on reconciliation, Sen. Ron Wyden (D-OR) has been very forward leaning in putting a stake in the ground on what tax provisions theFinance Committee might be considering as pay-fors. Meanwhile, Rep. Richard Neal (D-MA) has played his cards closer to the vest and we are not expecting to see much detail on the Ways and Means Committee proposal until sometime this weekend. So far, the committee has only released its proposals on family and medical leave, retirement, childcare, trade, elder care, nursing, and Medicare expansion. In case you missed it, Reps. Stephanie Murphy (D-FL) and Henry Cuellar (D-TX) wrote to Speaker Pelosi this week threatening to withhold their support for the reconciliation measure unless everything is entirely paid for, with the exception of climate change programs.
Democrats have also struggled on how they intend to message the reconciliation package. In other words, it’s not just about the topline number, but also about the substance of thepackage. For example, we have spoken with a number of Democratic staffers who thought it might be wise for Democrats to focus on just a few key issues that would resonate most with voters ahead of the midterm elections. Instead, those holding the pens seem to view reconciliation as a catch-all bill that will include provisions on everything from healthcare, to childcare and other workforce issues, to climate change. Meanwhile, the GOP seems to have landed on a targeted set of talking points opposing reconciliation as an expensive, Democrat-only strategy to interfere in various sectors of the recovering economy. In fact, Republicans on some committees, including House Agriculture and Senate Finance, have urged their committee leadership to abandon partisan reconciliation markups.
Another challenge for Democrats will be parliamentary procedure. We caught up with one Democratic Senate chief of staff who reported that some committees are requesting scores on the legislation they have drafted in response to reconciliation instructions. As the Senate prepares for the inevitable “Byrd bath,” the idea is that having this information from theCongressional Budget Office (CBO) would better position committees to make the argument that what they are proposing is germane for reconciliation.
We also picked up that the White House is going committee to committee and trying to clarifying what is and is not considered “double dipping” with the bipartisan infrastructure bill. Some Members of the Gang of 22 (G22), like Sen. Mark Warner (D-VA) for example, are not as concerned about double dipping. Meanwhile, there is a sense that Members like Sens. Sinema and Manchin “might make an issue of it.” Of course, the Democratic Senators who were not involved in the bipartisan infrastructure negotiations feel like most of the money in theinfrastructure bill will go to red and purple states and are most focused on winning additional money for blue states.
More broadly, we continue to monitor how the dynamics between the White House, theSenate, and the House could impact the overall environment for getting reconciliation done. At this point, it is quite obvious that the House holds a grudge about essentially having to swallow the Senate’s bipartisan infrastructure proposal. While we are hearing that the White House may now also be deferring a bit more to Senate committees in reconciliation, the truth of thematter is that even though Democrats face tight margins in both bodies, the 50/50 split in theSenate necessarily dictates that the upper chamber is likely to have greater influence in thereconciliation process. In fact, most staffers tell us that they anticipate the reconciliation package will follow the model that was used to pass the American Rescue Plan Act earlier this year.
To be honest, we have been scratching our heads a bit about why House leadership is pushing ahead with reconciliation markups, which could ultimately force some of the most moderate Members of the Democratic caucus to walk the plank on tough votes that at the end of the day could all be for nothing once the Senate acts. Based on our conversations with House Democratic leadership, we have gathered the thinking may be that this is such a massive bill that it necessarily has to go through the committee process and Democrats want to at least create the appearance that the package is moving through regular order. Additionally, one staffer told us that it is committee chairs who have been really pushing for markups because they felt “abandoned” on the bipartisan infrastructure bill. Democrats may also want to create some daylight between the process they use to move their reconciliation bill and what we saw when Republicans used the reconciliation to advance the Tax Cuts and Jobs Act (TCJA) back in 2017.
Despite all of the variables that will make the next few weeks tricky, nearly every Democrat we have spoken with remains cautiously optimistic that both infrastructure and reconciliation get done, primarily because both are considered too important for Democrats to fail. Of course, it is unlikely that both of these issues get wrapped up by the end of September and that theinfrastructure and reconciliation conversations continue into October or potentially beyond. Even if the House passes its reconciliation bill later this month or early next month, there could still be weeks of negotiating before a reconciliation bill is on the floor in the Senate, even though staffers tell us that efforts are underway to preconference the House and Senate bills as much as possible. In fact, we are hearing that Leader Schumer is not even tentatively planning to put a reconciliation package on the floor until the week of October 4. It was a busy August, but things are about to get even crazier!
Appropriations/Emergency Spending/Debt Limit
Even before Congress gets to infrastructure and reconciliation, it is expected there will first be action on a CR, emergency spending, and the debt limit. As you are likely aware, earlier this week, the Biden Administration asked Congress to pass billions in aid for natural disaster recovery and Afghan refugee resettlement as part of a stopgap funding measure by the end of the month. Hurricane Ida funds would likely total $10 billion while the White House requested $14 billion for other natural disasters, such as Hurricanes Laura and Delta in 2020, as well as $6.4 billion for Afghans. Leader Schumer has vocalized support for passing emergency relief funding by the end of September.
Administration officials have not said how long the CR should be and our sources on Capitol Hill tell us the date for the CR is “still TBD.” We are hearing that Democratic Senate appropriators are pushing for December 3 and Republicans might be advocating for a CR through December 10. We have also confirmed that Speaker Pelosi is on board for a December date, although one staffer to a senior leadership Member told us there are some who are pushing for a CR into October, which he said is “insane.” Of course, there’s another camp that would prefer the CR to extend into March, although we’ve heard a March CR is more likely next year because of the midterm elections.
Also worth noting, the White House has not specifically requested that lawmakers attached a debt limit measure to the funding measure. On Thursday, Treasury Secretary Janet Yellen sent a letter to Speaker Pelosi and other Congressional leaders warning that lawmakers need to raise or suspend the debt limit by the effective deadline sometime in October. Treasury has been using extraordinary measures to continue to finance the government on a temporary basis such as delayed payments since the debt limit was reinstated on August 1.
In response, Democrats do not appearing to be backing down on their plan to raise or suspend the debt limit on a bipartisan basis, rather than acting through reconciliation. Speaker Pelosi has emphasized that reconciliation will not be the vehicle for addressing the debt limit but has also declined to say whether Democrats will attach a debt ceiling measure to the CR that would need to be signed into law by September 30 to avert a government shutdown. The stakes are high.