Weekly Plurus Strategies Update on Infrastructure, Appropriations, and Other Activity in Washington

It’s been an action-packed week since Congress returned from recess. Please find our weekly report on the latest insights we’re picking up on infrastructure, appropriations, and what we might expect during this work period.

Infrastructure

Unsurprisingly, President Joe Biden pulled the plug on his infrastructure negotiations with Sen. Shelley Moore Capito (R-WV) on Tuesday evening. After multiple conversations at the end of last week and early this week, it is our impression that the White House and Sen. Capito were just too far apart on new spending and pay-fors for negotiations to continue.

Following the breakdown in these talks, it sounds like the infrastructure process is now on three somewhat related tracks: one aimed at working with the Gang of 20 on a bipartisan infrastructure bill; one that will be used to move Democratic priorities under reconciliation; and one that utilizes the normal committee process to produce a surface transportation reauthorization bill given that the current extension is due to expire on September 30.

First, despite gripes from progressive Democrats, President Biden is now turning to negotiations with a subset of the Gang of 20 Senators to see what might still be possible on a bipartisan bill. After ending talks with Sen. Capito, President Biden spoke with Sen. Bill Cassidy (R-LA), who along with Sens. Mitt Romney (R-UT), Rob Portman (R-OH), Lisa Murkowski (R-AK), and Susan Collins (R-ME), is participating in this subgroup. President Biden and Sen. Cassidy reportedly discussed a proposal that would be in the ballpark of half a trillion dollars in new spending. Of particular note, Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), who will be key votes on any infrastructure package, are a part of the subgroup on the Democratic side.

We spoke with Sen. Sinema’s office and were told that the Gang of 20 has had a smaller group of 4-6 Members meeting recently. While we have not been able to confirm for sure which Senators were meeting, we have been led to suspect this even smaller group included Sens. Romney, Portman, Sinema, and Manchin. We have been told this smaller group has been meeting twice a week while in session and once a week when the Senate was in recess. Essentially, they were “lining up in the wings” as Sen. Capito began meeting with the president. From the start of these early negotiations, the group’s goal has been to reach bipartisan consensus on “hard infrastructure.” As noted above, the group has recently expanded and could reach the full 20 Members in the process.

We are also hearing the early discussions in this group of 4-6 Members produced a list of 4-6 potential pay-fors. However, since the group has now gone back up to the 20 Senators, they will need buy in from all 20 Members, and tax increases have already been taken off the table. Staffers who we consulted do not think they will get to pay-fors in this agreement, and therefore those provisions will be done in reconciliation. Speaking of pay-fors, we are hearing that Rep. Richard Neal (D-MA) will be meeting with House Ways and Means Members on Monday to discuss infrastructure pay-fors. In addition to our expectation that the bipartisan group will not produce much on pay-fors, we expect only minor climate provisions, such as hydrogen, director air capture, and nuclear, to be included in the proposal.

While most of the negotiations on a bipartisan deal will necessarily take place in the Senate, the House Problem Solvers Caucus, consisting of 29 Democrats and 29 Republicans, has also put a stake in the ground on infrastructure. Following the end of talks between President Biden and Sen. Capito, the bipartisan group announced it had reached agreement on a roughly $1.2 trillion infrastructure proposal that includes roughly $762 billion in new spending over eight years. The House Problem Solvers plan would include $518 billion for highways, roads, and safety; $64 billion for bridges; $155 billion for transit, $25 billion for electric vehicles (EVs); $120 billion for Amtrak passenger rail; $41 billion for airports; $25 billion for waterways and ports; $74 billion for drinking water and wastewater systems; $71 billion for the electric grid and clean energy programs; $45 billion for broadband; and $10 billion for veterans’ housing. The Problem Solvers have not yet settled on pay-fors.

Late last night and this morning, news broke that at least ten Members of the Gang of 20 had reached an agreement on an infrastructure proposal. The deal would cost $974 billion over five years, including $579 billion in new spending. While the compromise would be fully paid for, our sense is that the proposed pay-fors, which include unspent COVID-19 relief aid and indexing the gas tax for inflation, would be nonstarters for the White House. Since only five Republicans are currently on board with this proposal, we could see the bipartisan group’s effort continue a bit longer.

Our sense is that the White House will need to allow time for these new bipartisan efforts to play out in order to get the support of Sens. Manchin on Sinema for whatever ultimately happens on infrastructure. In the meantime, President Biden has also directed Leader Schumer to start the reconciliation process. Committees have been directed to identify items within their jurisdiction that can pass under reconciliation so that most of the legwork is completed if and when there is a complete pivot to a partisan process. At this point, it feels likely that something will happen under reconciliation, but it is unclear if the reconciliation bill will be one big bill that includes both hard and soft infrastructure and is paid for by corporate tax increases or if it will be a relatively smaller follow on measure to a bipartisan transportation bill that implements the Democratic priorities and pay-fors rejected by Republicans.

While bipartisan negotiations continue, and as Senate Majority Leader Chuck Schumer (D-NY) prepares for reconciliation, there will still be a regular order process on the surface transportation reauthorization bill. As you know, the Senate Environment and Public Works (EPW) Committee has already unanimously reported a drinking and wastewater infrastructure bill, as well as its portions of the highway bill. The Commerce Committee will markup the Surface Transportation Investment Act on June 16. Sen. Ron Wyden (D-OR) has also been speaking with Sen. Tom Carper (D-DE) about the Finance Committee’s contribution on pay-fors.

The House Transportation and Infrastructure Committee marked up its water and surface transportation bills this week. The water bill attracted five GOP votes, while the transportation bill gained the support of two Republicans. Leader Steny Hoyer (D-MD) has indicated the INVEST in America Act will be on the House floor the week of June 28. Rep. Peter DeFazio (D-OR) has said he views the surface transportation bill as separate from President Biden’s infrastructure proposal, but it is possible the highway bill becomes the vehicle for other infrastructure provisions.

We understand that President Biden is supportive of House Speaker Nancy Pelosi’s (D-CA) plan to try to move an infrastructure bill through the House before month’s end. Depending on how bipartisan negotiations play out, it remains possible that an infrastructure bill in some form reaches President Biden’s desk before the August recess. However, our instincts are that a reconciliation package is likely slipping into the fall.

As filler for the calendar, we expect Leader Schumer to start putting message bills on the Senate floor that he knows will not attract enough votes for cloture as part of a strategy to build support for eliminating the filibuster. Votes might be scheduled on the Equality Act, the John Lewis Voting Rights Act, and the American Dream and Promise Act, but similar to this week’s vote on the Paycheck Fairness Act, all of these bills would be expected to fail to advance.

During the week of June 14, the House is expected to vote on the Corporate Governance Improvement and Investor Protection Act and a repeal of the 2002 Authorization for the Use of Military Force (AUMF). During the week of June 22, the House will vote on three resolutions of disapproval to reverse regulatory actions under the Trump Administration, including an Equal Employment Opportunity Commission (EEOC) rule on discriminatory practices, an Environmental Protection Agency (EPA) rule on methane emissions, and an Office of the Comptroller of the Currency rule on state regulation of lenders. The House is also expected to vote on the Protecting Older Workers Against Discrimination Act and the Inspectors General Independence and Empowerment Act.

Endless Frontier Act/USICA

Perhaps restoring some hope that bipartisanship is possible, after a normal order process that included debate of amendments on the floor, this week the Senate passed the Endless Frontier Act/U.S. Innovation and Competition Act (USICA) by a vote of 68-32. Combining legislation produced by the Commerce, Banking, Foreign Relations, Homeland Security and Governmental Affairs (HSGAC), and other committees, the final package would invest nearly $250 billion in U.S. manufacturing and innovation efforts to enhance U.S. competitiveness vis-à-vis China. In addition to $190 billion in research spending, the bill includes $52 billion for implementation of the CHIPS Act and to support auto manufacturers suffering from the global semiconductor shortage, as well as Sen. Klobuchar’s bill to hike merger filing fees to increase resources for antitrust enforcement. Now attention turns to the House response.

We spoke with Rep. Stevens’ staffer this week. She confirmed that the House Science Committee, along with House Energy and Commerce, was waiting for more direction from House leadership on next steps, especially as it was her impression that Speaker Pelosi was “not all that jazzed” about the Senate bill. It was this staffer’s view that the House will ultimately put together its own innovation proposal, even though the White House appears to be supportive of the Endless Frontier Act/USICA. She went on to say that she believes the House bill will ultimately be a package that combines the National Science Foundation (NSF) for the Future Act, a Department of Energy (DOE) Office of Science reauthorization bill, and “some other cats and dogs.”

The House Science Committee will hold a full committee markup of the NSF for the Future Act and the DOE Science for the Future Act on Tuesday and it is possible that some innovation bills see their way to the House floor before the end of this month. While most of the staffers we spoke with believe the House is not going to pass the Senate bill in its current form, there are other staffers who believe it would be more strategic for the House to take up Senate bill and “blend in House pieces, resulting in more of a ping pong.” One staffer expressed concern that if the House “goes off to do its own thing,” it might actually cede power to the Senate or otherwise “screw up a good bill.”

Budget/Appropriations

Now that President Biden’s Fiscal Year 2022 (FY22) budget request is out, budget hearings are in full swing in the Appropriations Committees. We picked up some intel that Sen. Patrick Leahy (D- VT) may be eyeing late July for holding FY22 subcommittee markups. Despite the fact that markup dates are now being talked about, the mood is still fairly pessimistic that the spending bills get done before the start of the new fiscal year. This is due in part to the fact that Democratic and Republican House and Senate appropriators have yet to start talks on topline spending levels. These negotiations are likely to be tough, as Republicans are seeking similar increases in defense and non-defense spending and President Biden has proposed only a 1.7% increase for defense compared to a 16% increase in non-defense spending. Sen. Richard Shelby (R-AL) has even said that he suspects multiple continuing resolutions (CRs) are likely this year. Rep. John Yarmuth (D-KY) has said at least one CR will be needed.

In the meantime, Rep. Yarmuth is expected to imminently introduce a deeming resolution so that House appropriators can work on their bills. For the time being, the House appears committed to passing all 12 of its FY22 appropriations bills on the floor in July. The deeming resolution will be separate from the FY22 budget resolution, which will include reconciliation instructions for infrastructure. While Rep. Yarmuth has said he is moving full steam ahead on a budget resolution and a vote may be possible before the end of this work period, a more reasonable expectation might be that it gets done before the August recess. For now, we expect the budget resolution to include reconciliation instructions for both President Biden’s $2.3 trillion American Jobs Plan and $1.8 trillion American Families Plan.

Another issue that has yet to be addressed is the debt limit. As you might recall, the suspension of the debt limit expires on August 1, but the Treasury Department has authorities to push back that date using extraordinary measures. While Democrats hope to address the debt limit before they are up against the end of the fiscal year, we are also starting to hear they could pursue a short-term extension on the suspension before tackling the issue this fall.