Weekly Plurus Strategies Update on Infrastructure and Reconciliation; the CR, Debt Limit, and Appropriations; and Other Legislative Activity
There’s been no rest for the weary this week in Washington as we careen towards deadlines for a vote on the bipartisan infrastructure bill, two fiscal cliffs, and other key expirations. Here are our latest insights on infrastructure and reconciliation; the continuing resolution (CR), debt limit, and appropriations; and other legislative activity.
Infrastructure/Reconciliation
Though most Democratic leadership staffers and Members we’ve connected with this week aren’t sure exactly how the stars will align in the coming days, the majority seem optimistic that House Democrats will vote on and pass the Senate-passed bipartisan infrastructure bill next week. As a reminder, to break the impasse on passing the budget resolution last month, House Speaker Nancy Pelosi (D-CA) guaranteed moderates a vote on the infrastructure bill by September 27.
Progressives are pushing back on voting on the infrastructure bill before a vote on a $3.5 trillion reconciliation package. It is clear, however, that reconciliation is certain to drag out beyond next week’s self-imposed infrastructure deadline. In fact, progressives have said that at least half of their 96-Member caucus is poised to vote against infrastructure if the vote takes place before reconciliation, though it is not clear how much of this is bluffing. The progressive flank of the House Democratic caucus has been bolstered by 11 Senators (Sens. Cory Booker (D-NJ), Kirsten Gillibrand (D-NY), Mazie Hirono (D-HI), Ed Markey (D-MA), Jeff Merkley (D-OR), Alex Padilla (D-CA), Bernie Sanders (I-VT), Brian Schatz (D-HI), Tina Smith (D-MN), Elizabeth Warren (D-MA), and Sheldon Whitehouse (D-RI)) who issued a statement yesterday reaffirming support for linking the infrastructure vote to reconciliation.
There are rumors that somewhere around a dozen GOP House Members might be willing to join Democrats in passing the infrastructure bill, although most Democrats are skeptical these Republicans will come along until there are 218 Democrats to vote for the bill, especially as President Joe Biden’s approval rating continues to dip. It has also been suggested that House Republicans may feel more confident voting for the infrastructure bill if they genuinely believe that reconciliation is dead. It is now clear that House Republican leadership is whipping votes against the infrastructure bill if Democrats continue to link it to the $3.5 trillion reconciliation package. This dampens the prospects that Speaker Pelosi will have enough GOP votes to make up for Democratic defections.
In the meantime, the White House is engaging directly with Congressional Democrats to whip votes for the infrastructure bill. National Economic Council (NEC) Director Brian Deese and White House Director of Legislative Affairs Louisa Terrell have also been dispatched to Capitol Hill to meet with Members who are wavering. On Wednesday, President Biden held separate meetings with moderates, progressives, and Democratic Congressional leadership. Readouts from these meetings suggest no real breakthroughs. The president pressed moderates on an acceptable topline number for reconciliation and was met with pushback that the work on pay-fors should determine the size of the package.
Speaking of offsets, this morning, Senate Majority Leader Chuck Schumer (D-NY), Speaker Pelosi, Sen. Ron Wyden (D-OR), and Rep. Richard Neal (D-MA) announced an agreement on a framework to offset reconciliation. The deal does not enumerate topline numbers for revenue and spending. Instead, it strikes consensus on the tax proposals that are on the table for discussion as negotiations move forward. The idea is that this outline can now be used to negotiate with moderates on developing a reconciliation framework that can assure progressives on voting for the bipartisan infrastructure bill next week.
Meanwhile, during yesterday’s meeting at the White House, progressives urged the president to ask Speaker Pelosi to delay the vote on infrastructure, which could also be a plausible path forward. Candidly, some staffers believe that progressives may be overthinking their leverage. Our sources tell us that House progressives are likely to win some kind of concession in these talks, although it is not clear yet what that might be, especially as the reconciliation package is likely to be shaped in large part by the more moderate Senate where the vote margins are even tighter. At the end of the day, the thinking is that it will be hard for progressives to resist arm twisting by the president on his top legislative priority and that Speaker Pelosi will also do as she always does to keep the pressure on. It would also be precarious for Democrats to oppose an infrastructure bill that includes many things that Democrats could message as wins heading into the midterm elections.
At the moment, House Democratic leadership appears committed to proceeding with the vote on the infrastructure bill next week. We are hearing rumblings that a vote could slip from Monday to Tuesday if an extra 24 hours is all that is needed to secure 218 votes for passage. While there is a sense of cautious optimism that Democrats will pull a rabbit out of the hat, we suspect the infrastructure bill will be up for a vote, regardless of whether or not the votes materialize.
In part, this is due to the fact that the House is scheduled to vote on a motion to concur with the Senate amendment to the Infrastructure Investment and Jobs Act originally passed by the House. If the vote goes down, the bill will remain pending at the Speaker’s table and the House could take up another motion – for example, a motion to concur, a motion to refer the bill to the House Transportation and Infrastructure Committee, or a motion to request a conference – at any time. There is also some chatter that Speaker Pelosi could promise progressives that she would hold the infrastructure bill at the desk once it passes and only send it to the president for signature once there is progress on reconciliation. In our view, we don’t see how this tactic provides any benefits. It is also worth noting that Sen. Kyrsten Sinema (D-AZ) has threatened to vote against reconciliation if the House vote on the bipartisan infrastructure bill fails.
Another issue we are tracking is the looming expiration of the FAST Act (the current surface transportation authorization) on September 30. The bipartisan infrastructure bill was drafted with the intent of enactment before the start of the new fiscal year, potentially creating complications if another short-term extension of the surface transportation bill is needed. If an amendment is ultimately required to reconcile funding because the timelines do not sync up, it is possible the bipartisan infrastructure bill would need to go back to the Senate for another vote. There are fears that Senate Republicans may not be as inclined to be supportive on a second vote. Perhaps the state of play on the FAST Act will also help convince Democrats to vote for the bipartisan infrastructure bill in the House next week.
In the meantime, Speaker Pelosi, Majority Whip Jim Clyburn (D-SC), and Rep. John Yarmuth (D-KY) have been clear that as they continue to assemble the reconciliation package, it will not move forward in the House without the topline haircut that will be necessary to secure support from all 50 Democrats in the Senate. In a sense, this could be an olive branch to moderates, who want to avoid voting on legislation that has no chance of passing in the Senate, as well as veteran lawmakers who learned lessons from taking tough votes on the Affordable Care Act (ACA). Additionally, Speaker Pelosi has emphasized that further adjustments may be needed to the reconciliation package to ensure it complies with the Byrd rule.
While Sen. Sanders and House progressives continue to message that $3.5 trillion is a floor for reconciliation, down from the $6 trillion they initially envisioned, the reality remains that the final topline is likely to be lower. Just how much lower remains an open question. Debates over the size of the package continue as Sen. Joe Manchin (D-WV) has called for a pause on reconciliation, potentially suggesting that the bill could drag out into spring 2022. It seems that Sen. Manchin has now started to walk back these comments, perhaps in light of the fact that all legislating that happens before the midterm elections will likely be completed by the end December. We anticipate the administration will make a significant shift from legislating to regulating at the start of the year.
Efforts to pre-conference and Byrd bath reconciliation provisions continue as the House Budget Committee works towards assembling a comprehensive package. However, any substantive changes to resolve disagreements between the House and Senate will need to be made by the Rules Committee. We are hearing that disagreements remain over drug pricing, climate change provisions, elder care, and free community college. However, the House Budget Committee is planning to proceed with a reconciliation markup on Saturday, potentially teeing up a House vote on reconciliation next week.
For now, Democratic infighting remains on full display. However, just one day in politics can feel like an eternity and we still have four days to go before a potential infrastructure vote on Monday. The next several days should be quite telling, so buckle up for the ride!
CR/Debt Limit/Appropriations
Infrastructure and reconciliation are not the only two issues sucking up oxygen in the room. Congress is also staring down two fiscal cliffs: the September 30 end of the fiscal year and the need to lift or suspend to the debt ceiling as the Treasury Department runs out of extraordinary measures to keep the U.S. Government from defaulting on its debt.
We hear the drop-dead date for addressing the debt limit is likely to come sometime in mid-October and Treasury Secretary Janet Yellen has continued to beat the drum for swift, bipartisan action. Secretary Yellen has warned that a default would lead to a historical financial crisis and impede upon U.S. economic recovery from the pandemic. Already this week, we are seeing markets react to Democrats’ and Republicans’ high stakes game of chicken. As a result, former treasury secretaries have personally called on House and Senate leadership to work together to extend the nation’s borrowing authority without delay in order to avoid serious economic and national security harm.
These warnings have been rebuffed by Republicans, including Rep. Kevin Brady (R-TX), who requested that the administration provide a structured plan for government spending to encourage bipartisan talks on the debt limit. Senate Minority Leader Mitch McConnell (R-KY) and other Republicans have subsequently held press conferences to make clear they are not kidding on Democrats having to raise the debt ceiling without GOP support. Sen. Pat Toomey (R-PA) has also dismissed the fact that the Treasury Department would allow the federal government to default on its debt, instead suggesting the administration would act to prioritize debt payments and delay other payments as necessary.
Earlier this week, Democratic Congressional leadership indicated they would proceed with trying to address the debt limit as part of the spending bill to keep the government functioning as work continues on Fiscal Year 2022 (FY22) appropriations. On Tuesday, the House passed on a party line vote a CR through December 3 that also includes a debt ceiling suspension to December 16. Additionally, the House-passed legislation includes $28.6 billion to assist states recovering from hurricanes and wildfires, as well as $6.3 billion to resettle Afghan refugees.
The House package is expected to be dead on arrival in the Senate, where Leader McConnell remains adamant that the unified Democratic government must act on the debt limit on its own, even though GOP lawmakers voted three times during the Trump presidency to suspend the debt limit and added $7.8 trillion to the federal debt. In fact, Leader McConnell and Sen. Richard Shelby (R-AL) have introduced their own CR that does not include the debt limit. Sens. Susan Collins (R-ME), John Kennedy (R-LA), Lisa Murkowski (R-AK), and Bill Cassidy (R-LA) may be gettable votes on the House-passed CR, although in recent days, the Louisiana Senators have suggested the emergency spending in the bill may not be enough to win over their support. This underscores that there is no pathway to the ten votes that would be needed for Senate passage. Also worth noting, the White House seems to be unwilling to offer Republicans anything in exchange for their cooperation on the debt limit. Despite being destined to fail, the Senate is expected to vote on the House-passed CR that includes the debt limit early next week.
On Monday or Tuesday, we would have hesitated to rule out a brief government shutdown. Our thinking was that a temporary shutdown might allow Democrats to shift the blame on Republicans. However, recent polling finds that voters would point fingers at Democrats. Speaker Pelosi has since indicated that Democrats will pass a CR without the debt limit attached if that’s what it takes to keep the government funded. Regardless, the Biden Administration has now initiated the routine procedures for directing federal agencies to prepare for a possible shutdown.
It is widely recognized that Democrats could use reconciliation to address the debt ceiling on their own. However, as the hour gets late, there are concerns about how quickly Democrats will need to pivot to avoid a default on U.S. debt. Because the budget resolution outlines how the current reconciliation effort is to be used to address taxes and spending, it would need to be modified to also serve as the vehicle for the debt limit. On Wednesday, Rep. Yarmuth warned that a new reconciliation process to raise the debt limit probably could not be completed in time to stave off a default. However, this claim has been disputed by Republicans, including Leader McConnell, who has argued that reconciliation could be used to raise the debt limit in just a week’s time.
For now, we predict that the debt limit will ultimately be stripped from the CR and that the relatively clean CR will pass, punting appropriations activity until December. However, this could force Democrats to adjust their plans for reconciliation to address the debt limit and to urgently move the package before the Treasury Department’s extraordinary measures are exhausted. This will be a tall order in a short matter of time. Alternatively, we cringe to think that some incremental Budget Control Act (BCA)-type plan might be needed to bring both sides together to boost the debt limit and control government spending.
While the CR and the debt limit will come to a head first, we are also monitoring what comes next in FY22 appropriations. While we had hoped to see the Senate Appropriations Committee proceeding with additional markups this week, the process has now stalled, with Republicans indicating they will not cooperate on advancing the FY22 spending measures until there is an agreement on topline numbers for defense and non-defense programs.
In light of this development, Senate Appropriations Committee Democrats met on Tuesday to discuss next steps. Coming out of the meeting, we heard from staff there is some thinking that Democrats might have to do what they did last year and “post their bills in lieu of markups and go to conference from there.” One Appropriations Committee staffer told us this would be “disappointing since it does not allow full consideration of Senate priorities, including earmarks.”
NDAA
The House passed the FY22 National Defense Authorization Act (NDAA) last night by a vote of 316-113. The bill authorizes $779 billion for defense programs at the Department of Defense (DoD) and other agencies. Notably, it includes a 2.7 percent pay raise for service members and reforms how sexual assault cases are adjudicated within the military. Additionally, the House NDAA contains significant authorizations around the Special Immigrant Visa (SIV) program for Afghan allies, security assistance for Ukraine, and measures to counter Chinese influence in the Pacific arena. The House finished up consideration of the 476 amendments that were made in order by the Rules Committee with a series of recorded votes on 20 different amendments late last night. Also this week, the Senate Armed Services Committee (SASC) released the legislative text and committee report for its NDAA. While the Senate floor schedule remains fluid, we are hearing rumors the NDAA could be on the Senate floor during the second week of October.
Voting Rights
As if there is not already enough on the Senate agenda for next week, Leader Schumer indicated he may allow a cloture vote on a compromise voting rights bill agreed to by Sen. Manchin. While the Freedom to Vote Act leaves out some of the broad changes included in the House-passed For The People Act, it includes provisions aimed at protecting U.S. elections from interference, dark money, partisan gerrymandering, and voter suppression. More specifically, the proposal includes provisions to enact automatic voter registration through state motor vehicle agencies, make election day a public holiday, and mandate at least 15 days of early voting in every state. It also touches on redistricting and mandates more transparency from super PACs.
The exact timing of a vote is unclear, as Sen. Manchin has indicated he is still hopeful that he can recruit GOP support. However, Leader Schumer has warned Republicans that if they block the voting rights bill, he would be willing to look for a workaround of the filibuster in order to move the legislation with just Democratic support. Sen. Manchin has said that Congressional inaction on voting rights is a nonstarter but has simultaneously opposed efforts to eliminate the filibuster.