Weekly Plurus Strategies Update on Infrastructure, Appropriations, and Other Activity in Washington
Please find our weekly report with the latest insights on infrastructure, the Fiscal Year 2022 (FY22) appropriations cycle, and other activity in Washington, included below.
Infrastructure
While it remains uncertain exactly what the infrastructure endgame looks like, clearer scenarios for the path forward are emerging. Earlier this week, the bipartisan group of ten Senators (Sens. Rob Portman (R-OH), Bill Cassidy (R-LA), Mitt Romney (R-UT), Susan Collins (R-ME), Lisa Murkowski (R-AK), Joe Manchin (D-WV), Kyrsten Sinema (D-AZ), Jon Tester (D-MT), Jeanne Shaheen (D-NH), and Mark Warner (D-VA)) continued to work towards consensus on a compromise proposal that can attract 60 votes in the Senate. While we are still awaiting the unveiling of a formal proposal, we continue to hear that the bipartisan plan could be in the range of $1.2 trillion, of which roughly $579 billion would be new spending. The bipartisan plan is expected to focus on hard infrastructure and include new spending on electric vehicles (EVs) and broadband, while leaving out the soft infrastructure proposals included in President Joe Biden’s American Families Plan.
On Wednesday, 11 more Senators (Sens. Richard Burr (R-NC), Lindsey Graham (R-SC), Rounds (R-SD), Thom Tillis (R-NC), Jerry Moran (R-KS), Todd Young (R-IN), Chris Coons (D-DE), Maggie Hassan (D-NH), John Hickenlooper (D-CO), Mark Kelly (D-AZ), and King (I-ME)) signed on to the proposal, bringing total support to 21 Senators, including 11 Republicans. Sens. Roger Wicker (R-MS) and Fischer (R-NW) have also indicated they could be gettable votes on bipartisan infrastructure plan once more details are made available, although it seems the Gang of 20 intends to keep details close to the vest until more support is secured. On the periphery, it is very clear that Leader Mitch McConnell (R-KY) is seeking to deny the White House a bipartisan victory, so we would caution not to underestimate his influence in keeping members of the Senate Republican conference off any final compromise bill.
One of the biggest remaining unknowns is whether or not this group of 21 Senators, Congressional leadership, and the White House will be able to strike a deal on pay-fors to cement the bipartisan agreement. Rumors that the group had been considering indexing the gas tax for inflation led to push back from the White House, which has committed to not raising taxes on individuals. Additionally, Democrats oppose repurposing unspent COVID relief funds or tapping resources for enhanced unemployment assistance. There also continue to be hints of discussion around taxing EVs. We believe the White House might view this as an unacceptable tax increase. Meanwhile, Republicans have drawn a redline at undoing any of the 2017 Tax Cuts and Jobs Act (TCJA) corporate tax cuts. It seems that an infrastructure financing authority might remain on the table, along with public-private partnerships, municipal bonds, beefed up tax enforcement, and customs user fees.
Despite this seemingly positive development, it is uncertain if the increase in support for the bipartisan proposal will be enough. President Biden and Leader Chuck Schumer (D-NY) have yet to weigh in on the bill, even though Democratic members of the Gang of 20 briefed White House staff on the proposal on Wednesday. Additionally, it is possible the final compromise runs the risk of losing the support of some Senate Democrats. In particular, some more progressive Members have already started to stake out opposition to a potential deal. Sens. Ed Markey (D-MA) and Jeff Merkley (D-OR) have vowed to oppose a bipartisan agreement if it does not include robust provisions to address climate change and Sens. Bernie Sanders (D-VT) and Elizabeth Warren (D-MA) have voiced their support for a single, comprehensive deal that includes both hard and soft infrastructure components.
The angst amongst progressives is also clearly growing in the House, as several more left-leaning Democrats are threatening to block a bipartisan, Senate-negotiated deal, without reassurances that Sens. Manchin and Sinema will be on board for a follow on reconciliation effort to move the Democratic priorities and pay-fors that will be left on the cutting room floor in bipartisan discussions. For now, Sens. Manchin and Sinema appear to be keeping their powder dry, increasingly putting Leader Schumer and Speaker Nancy Pelosi (D-CA) in the position of trying to manage Members in the caucus to prevent them from attacking fellow Democrats. Our instincts tell us that Democrats probably have a better chance of securing Sen. Manchin’s and Sinema’s support for reconciliation if bipartisan negotiations ultimately break down.
On Tuesday morning, Assistant to the President Steve Ricchetti and Acting Office of Management and Budget (OMB) Director Shalanda Young met with the House Democratic caucus to discuss next steps on infrastructure. The message conveyed was that the White House has no hard deadline for the bipartisan infrastructure talks to produce a deal. However, Members who attended the meeting got the impression the White House may reassess the status of the bipartisan negotiations within about a week to determine if any strategy changes are needed. The calendar does not bode well for much progress, as the Senate is scheduled to enter into the July 4 recess on June 24. In other readouts of the meeting, the White House seemed to take the position that a bipartisan agreement, even a small one, might be the best approach to paving the way for reconciliation.
Perhaps in response to some of the angst on the left, on Wednesday, Leader Schumer convened all 11 Democratic Members of the Senate Budget Committee to trigger the reconciliation process. Leader Schumer has said he is aiming for the Budget Committee to produce a budget resolution with reconciliation instructions on elements of both the American Jobs Plan and the American Families Plan that can pass the Senate in July. This would seemingly tee up a vote on an infrastructure package via reconciliation sometime this fall. In jumpstarting reconciliation, Leader Schumer made clear that the reconciliation process is on a parallel track to bipartisan negotiations, and that he hopes both a bipartisan bill and the budget resolution can pass the chamber during the post-July 4 work period. The House Budget Committee is expected to vote on its budget resolution the week of July 12, with a vote in the full House anticipated the week of July 19.
Sen. Sanders has been talking about a $6 trillion budget resolution that includes hard infrastructure, soft infrastructure, and drug pricing measures that would expand eligibility for federal health insurance coverage. Some progressives in the House are advocating for as much as $10 trillion in the budget resolution. With all the money Congress has already spent on COVID relief, we would be surprised to see spending levels this high.
Regardless, both the House and Senate continue their efforts to move surface transportation reauthorization legislation under regular order. The House Transportation and Infrastructure Committee marked up its highway bill last week, reporting it out of committee with two GOP votes. While the House Ways and Means Committee has yet to weigh in on the pay-fors, it remains possible the House could take up the bill without a tax title. Speaker Pelosi appears on track to accomplish her goal of getting an infrastructure bill through the House before July 4, as the House will vote on the INVEST Act before leaving town for recess.
In the Senate, the Environment and Public Works (EPW) Committee unanimously reported its portions of the surface transportation bill before Memorial Day. This week, the Commerce Committee reported its bipartisan rail and safety bill by a vote of 25-3. The Senate Banking and Finance Committees have yet to unveil their pieces for the surface transportation bill, but those components should be forthcoming.
Our sense is that the September 30 expiration of the current surface transportation reauthorization could force some action on infrastructure, whether it’s on a bipartisan highway bill or a larger, Democrat-only infrastructure package. Circumstances are changing by the hour, but at this moment, we are still a bit skeptical that the bipartisan plan can overcome the hurdles that will be needed for it to clear both the Senate and the House.
Budget/Appropriations
On Monday, as part of the rule for consideration of the Environmental, Social, and Governance (ESG) Disclosure Simplification Act and Authorization for Use of Military Force (AUMF) repeal on the floor this week, the House passed a deeming resolution setting topline spending for FY22 at $1.5 trillion. The move allows appropriators to advance their FY22 spending bills while work is still underway an FY22 budget resolution that includes reconciliation instructions for infrastructure. Topline allocations for each of the 12 bills have been decided, although they are yet to be publicly released, and are headed for a full committee vote on June 29.
Following Monday’s action, the House Appropriations Committee also announced its schedule for FY22 subcommittee and full committee markups. Subcommittee markups will be held from June 24-July 12, with full committee markups to take place June 29-July 16. House leadership is reserving the last two weeks in July for moving the FY22 appropriations bills on the floor, although it seems ambitious that all 12 bills can get done in this timeframe, especially given general unfamiliarity with earmarks. The bills are expected to make their way to the floor in the same order in which they are reported out of committee.
The Senate remains behind the House in drafting its FY22 spending bills. We continue to hear that Senate markups could be held in late July, although at this point, almost every staffer we talk to is resigned to the fact that we are likely to see a continuing resolution (CR) in late September that runs right up to the holidays in December. This could create the potential for a large package at the end of the year that includes at least some of the FY22 spending bills and other priorities, perhaps even infrastructure and competition and innovation legislation, that does not make it to the president’s desk earlier this year.
In terms of what happens in December, one Democratic Senate staffer told us there could potentially be two minibuses, one that could be passed and agreed to with mostly Democratic votes and not a lot of GOP support, and a second for the “lightning rod bills (Defense, Homeland Security, Labor-Health and Human Services (Labor-HHS), and Commerce, Justice Science (CJS)),” which might not get done and continue on CRs through the end of the year. It was this staffer’s view that “the way to do appropriations is to go down the middle in order to split the difference between the progressives and the hawks.”
In our conversation with Leader Schumer about the FY22 appropriations process, he admitted he is “worried” about a CR and expressed frustration that the appropriations process is “not getting the attention it has in past years.” He said he hopes there will be “four corners” negotiations between Leader Schumer, Leader McConnell, Speaker Pelosi, and Leader Kevin McCarthy (R-CA) to figure out topline numbers. Once this happens, leadership can leave it to the committees to “fill in the details.” These talks haven’t happened yet, but Leader Schumer emphasized that he is urging these negotiations to get going and that he is leaning on the White House to push for them to get started.
Endless Frontier Act/USICA
On Tuesday, in response to Senate passage of the U.S. Innovation and Competition Act (USICA), the House Science Committee advanced the National Science Foundation (NSF) for the Future Act and the Department of Energy (DOE) Science for the Future Act. Together, the two bills authorize $128 billion over five years for NSF and DOE, with $14 billion set aside to help stand up a new agency dedicated to developing technologies to help the U.S. stay ahead of its international rivals, principally China. So far, the House’s approach to the innovation and competition agenda differs from the Senate-passed bill, as it focuses on the core functions of the two agencies with a more modest allocation of funds for a new technology directorate. In addition, the House legislation will not include some of the provisions directly targeting China, such as restrictions on research money for universities. Before these bills come to the House floor, it is likely they may be combined with bills from other committees, including the House Small Business Committee and the House Foreign Affairs Committee. A package could also eventually include provisions on climate change.
Many of the House staffers we have spoken with seem to be shifting their thinking on next steps. A week ago, Democrats seemed convinced the House would pass its own unique bill, forcing a conference committee with the Senate. Now, especially in light of the 68-32 vote on USICA in the Senate, House staffers seem to be of the mindset that House leadership may instead try to incorporate provisions of the Senate legislation into the House package, resulting in more of a “ping pong” with the Senate.
We joined a call with Leader Schumer this week and he had a bit of a different view. Leader Schumer observed the House is “a little less enthusiastic” about the Senate bill, although he acknowledged that the bills reported out of the Science Committee include “some of the elements of the original Senate Endless Frontier Act.” Leader Schumer emphasized that President Biden is supportive of the Senate bill and said he believes there should be a conference committee with the House, especially because there is strong bipartisan support in both chambers.
In case you missed it, last Friday, Reps. Eddie Bernice Johnson (D-TX), Frank Lucas (R-OK), Deborah Ross (D-NC), and Mike Waltz (R-FL) introduced the National Science and Technology Strategy Act, which would require the Office of Science and Technology Policy (OSTP) and the National Science and Technology Council (NSTC) to create a national science and tech strategy. It would also require the president to submit an annual report to Congress on national research priorities, as well as potential threats to U.S. scientific leadership.