Weekly Plurus Strategies Update on Infrastructure and Reconciliation; the CR, Debt Limit, and Appropriations; and Other Legislative Priorities
It’s been a crazy week in Washington and things are only going to get busier. Here’s our weekly update on infrastructure and reconciliation; the CR, debt limit, and appropriations; and other legislative priorities.
Infrastructure/Reconciliation
Though reconciliation is far from the finish line, significant progress was made this week with all 13 House committees invoked by the budget resolution meeting the September 15 deadline to report legislation that the House Budget Committee will now cobble into a reconciliation package. House committee chairs, with the exception of Rep. Richard Neal (D-MA), are expected to brief the full House Democratic caucus on their pieces of the reconciliation package tomorrow. Among the highlights in this week’s markups:
House Ways and Means Committee: Democrats have passed on a 24-19 vote a package that raises roughly $2.1 trillion in revenue resulting from tax increases on individuals and corporations, as well as revenue raised from tougher tax enforcement and prescription drug pricing reform. For now, the State and Local Tax (SALT) deduction has yet to be addressed, although we suspect this will come later in the reconciliation process. The Ways and Means Committee bill also includes new tax incentives addressing everything from electric vehicles (EVs), to education grants, to clean energy, to childcare. Despite the activity in the Ways and Means Committee, the House and the Senate remain far apart on tax provisions, including the top income tax rate and the capital gains rate. Ongoing disagreement over pay-fors is likely to complicate how the final reconciliation package ultimately comes together.
House Energy and Commerce Committee: The reconciliation legislation reported out of committee by a 30-27 vote includes $1 billion for a new Federal Trade Commission (FTC) bureau dedicated to privacy violations, data security, and identity theft. Additionally, the bill adds $4 billion to the Federal Communications Commission’s (FCC) Emergency Connectivity Fund to bolster internet connectivity for schools and libraries; sets aside $10 billion for theCommerce Department to monitor and identify manufacturing supply chain weaknesses; and allocates $10 billion for grants in support of Next Generation 911 systems. The bill would also transfer $50 million from the Spectrum Relocation Fund to the Secretary of Commerce for activities aimed at improving federal spectrum use. Also worth noting, three Democrats – Reps. Scott Peters (D-CA), Kurt Schrader (D-OR), and Kathleen Rice (D-NY) – voted against Democrats’ drug pricing proposal, which was ultimately approved by House Ways and Means Committee Democrats with the exception of Rep. Stephanie Murphy (D-FL). This provision is estimated to provide roughly $700 billion in offsets. The committee also voted to extend Affordable Care Act (ACA) insurance subsidies to more low-income Americans and people living in states that declined Medicaid expansion. Additionally, the committee approved $150 billion for a Clean Energy Performance Program (CEPP) and $13.5 billion for EV infrastructure.
House Homeland Security Committee: Of particular interest, the House Homeland Security Committee’s reconciliation legislation, passed on a party line vote, provides $865 million forthe Cybersecurity and Infrastructure Agency (CISA) to ramp up its cybersecurity programs, including $400 million to assist federal agencies with multi-factor authentication, endpoint detection and response, improved logging, and security cloud systems; $100 million forcybersecurity workforce development and education; and $210 million for general operations and support. GOP lawmakers were especially disappointed that the Democratic package does not address ransomware.
House Agriculture Committee: The committee advanced a bill worth approximately $90 billion on a vote of 27-24. The bill includes $40 billion for forestry and $18 billion for rural and tribal communities to access clean water, renewable energy, and biofuels infrastructure.
House Transportation and Infrastructure Committee: The committee’s $57.3 billion contribution for reconciliation boosts funding for rail, transit near affordable housing, and carbon emissions programs. Reported out of committee on a 37-29 vote, the House Transportation and Infrastructure Committee bill notably allocates $10 billion for high-speed rail and $4 billion to lower transportation emissions.
House Financial Services Committee: The committee advanced its portions of thereconciliation package by a vote of 30-24. The bill provides $272.3 billion for affordable housing construction, repairs and vouchers; $37.5 billion for weatherization assistance grants; and $10.9 billion for home ownership programs. The bill also contains a provision to eliminate debt for the National Flood Insurance Program.
With his domestic priority agenda hinging on both infrastructure and reconciliation getting done, President Joe Biden upped his engagement this week, likely a welcome departure from the White House’s recent occupation with COVID, Afghanistan, and natural disasters. On Wednesday, President Biden met separately with Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), who will have tremendous leverage over what ultimately makes it into thereconciliation package. In particular, to the dismay of progressives, Sen. Manchin has said that he will not support a $3.5 trillion reconciliation bill and could walk away from a package that costs more than $1.5 trillion. In response, Sen. Bernie Sanders (I-VT) came out swinging, saying he would not support a bill that falls below $3.5 trillion.
Despite Sens. Manchin and Sinema serving as potential spoilers in the reconciliation process, most Democrats have been slow to criticize them, as their votes will be necessary to move any reconciliation package to President Biden’s desk. Sen. Manchin has played his cards close to thevest in terms of what priorities might cause him to budge and support a higher topline. We also hear that Sen. Sinema continues to have concerns about “double dipping” between thebipartisan infrastructure bill and reconciliation.
This week we had the chance to join an event with the Problem Solvers Caucus. The consensus among these moderate Members was that Speaker Pelosi will not put anything up for a vote on the House floor that does not also have the votes to pass the Senate. Additionally, the Problem Solvers reported that there is a lot of serious talk about “keeping Members from having to walk the plank” on tough votes. Consistent with this strategy, Rep. Jared Golden (D-ME) emphasized that the Problem Solvers have conveyed that they will not vote for anything unless they know they have “the thumbs up” from the Senate side. Similarly, Rep. Ed Case (D-HI) said that House leadership will have to worry about votes on both the reconciliation rule, as well as the final floor vote. At both stages, he urged that moderates would want to know where the Senate stands on the House bill.
To send a clear message to both moderates and progressives, President Biden is expected to speak from the White House this evening about the importance of uniting to address priorities for voters, such as prescription drug prices, internet affordability, and childcare costs. Despite the president’s use of the bully pulpit, the prospects for a vote on reconciliation package before the September 27 deadline House Speaker Nancy Pelosi (D-CA) has set for a vote on thebipartisan infrastructure bill remain slim.
In addition to guaranteeing this infrastructure vote to moderates to break last month’s logjam over the budget resolution, Speaker Pelosi also committed to preconference the reconciliation package with the House as much as possible. It turns out that “pre-conference” means different things to different people. To date, it sounds like pre-conference efforts have been focused on coordination between House committees and their Senate counterparts. Some committees, like Senate Commerce and House Energy and Commerce, appear to be aligned on priorities, but others, like Senate Finance and House Ways and Means, remain miles apart.
Most staff who we have consulted think that pre-conferencing will get Democrats at least 80 percent of the way there, but that the Senate will ultimately make changes to whatever it receives from the House and then send the amendment legislation back to the House foranother vote. This will entail negotiations with key Members, like Sens. Manchin and Sinema. Of course, the legislation that returns to the House is also likely to see a diminished topline, although it’s not yet clear what the number will be and how the slash will affect the priorities enumerated in the House reconciliation bill. Both Senate Majority Leader Chuck Schumer (D-NY) and Speaker Pelosi face challenges ahead in managing their caucuses. We expect these debates will drag out in the weeks ahead.
CR/Debt Limit/Appropriations
As you know, the debt limit has been reached and the Treasury Department is relying on extraordinary measures to keep the U.S. Government from defaulting on its debt. Treasury is likely to exhaust these tactics come mid-October. While Democrats have made clear the debt ceiling will not ride on the reconciliation package, next steps for either suspending or raising the debt limit remain unclear.
The federal government faces not just one, but two fiscal cliffs as government funding will expire on September 30. The House Rules Committee is set to consider a continuing resolution (CR) on Monday and House Majority Leader Steny Hoyer (D-MD) has indicated he would like to bring the stopgap spending measure to the floor next week. Details remain elusive, but it is our belief the CR will run through December 3 or 10. It could also potentially include roughly $20 billion in emergency spending for disaster relief and $6.5 billion for the Afghanistan withdrawal, and potentially the debt limit. In particular, the inclusion of hurricane resistance could make it difficult for Republicans from states like Louisiana and Mississippi to vote against the package. A CR that includes only emergency spending (and not the debt limit) may even have enough Republican support to reach the president’s desk. However, it remains questionable that a CR that includes the debt limit could attract the 60 votes needed forpassage in the Senate.
In the meantime, Democrats and Republicans are engaged in a high stakes game of chicken to see who might blink first. Treasury Secretary Janet Yellen called Senate Minority Leader Mitch McConnell (R-KY) this week to encourage bipartisan cooperation on the debt limit. Leader McConnell responded that the unified Democratic government would have to use the tools at its disposal (i.e., reconciliation) to raise the debt ceiling on its own without the support of Republicans. More generally, Democrats are pushing messaging to emphasize the amount of debt incurred during the Trump Administration, as well as bipartisan efforts to suspend thedebt limit for two years back in 2019. Regardless, Leader McConnell appears dug in. However, there may be some cracks around the edges, as Sen. John Kennedy (R-LA) has hinted that he might still put forward a debt limit proposal tied to budget reforms and Sen. Richard Shelby (R-AL) has expressed interest in exploring what concessions the GOP could win if Republicans engage in bipartisan debt ceiling talks.
Despite the suggestion we heard earlier this week that the House might try to attach the debt limit to the bipartisan infrastructure bill and send the package back to the Senate for a vote, these rumors have died down in recent days. While the endgame for the debt limit remains unclear, we spoke with one Democratic Senate chief of staff who believes the CR will ultimately carry disaster relief funding and the debt limit. Otherwise, we are told the CR is likely to be “as clean as possible.” This senior staffer also confirmed that the FY22 Transportation, Housing, and Urban Development (THUD) and Legislative Branch bills will be the next to get marked up by the Senate Appropriations Committee. As a reminder, the committee reported its Agriculture, Energy and Water, and Military Construction-Veterans Affairs (MilCon-VA) bills before the August recess.
We also joined an event this week with Rep. Rosa DeLauro (D-CT). While we would characterize the congresswoman as an eternal optimist, she said that she “enthusiastically thinks” everything from appropriations, to infrastructure, to reconciliation, to the debt limit, will get done. On appropriations in particular, it was Rep. DeLauro’s view that community projects funding will “help grease the skids.”
How this all plays out will remain a mystery for the next several days. However, our instincts tell us Democrats might put a CR/disaster relief/debt limit package up for a vote in order to put Republicans on record and to message that the GOP is willing to shut down the government over the debt limit. Democrats would then have to tweak their debt limit strategy, assuming this vote fails. One Republican member of the Problem Solvers Caucus proposed the solution might be a short-term suspension of the debt limit into December, which both sides might be able to swallow and would buy more time to work out a compromise.
NDAA
As you know, the House is scheduled to consider the Fiscal Year 2022 (FY22) National Defense Authorization Act (NDAA) on the floor next week. Floor amendments were due to the Rules Committee on Tuesday and a staff meeting was scheduled for today to wade through more than 800 amendments. The Rules Committee is expected to meet on Monday to make amendments in order and to issue a structured rule for the floor debate. Most of theamendments that are adopted on the floor are expected to move in en bloc packages. As theNDAA has been signed into law for the past 60 consecutive years, it is a vehicle that is frequently targeted for amendments on a variety of issues. We will be monitoring next week’s Rules Committee and floor activity closely.
Voting Rights
Earlier this week, a group of Democratic senators introduced the pared-down bill on voting rights, campaign finance and government ethics. The new Freedom to Vote Act retains significant portions of the original For the People Act, but discards significant pieces and tweaks others, largely in an effort to placate Sen. Manchin and indulge his hopes of building enough Republican support to pass the bill. However, top GOP leaders, including Leader McConnell, continue to insist there is no need for new national election legislation and Sen. Manchin has reiterated his tune that there is no need for filibuster reform to move voting rights legislation. We’re hearing that there is little to no chance that the vote next week will succeed in advancing the bill.