Weekly Plurus Strategies Update on Infrastructure, Appropriations, and Other Activity in Washington
As we head into the weekend and the Senate begins its July 4 recess, here are our latest insights on infrastructure, budget and appropriations, and other activity in Washington.
Infrastructure
White House negotiators and a bipartisan group of Senators have now reached an agreement on the framework for an infrastructure package. Back from his first overseas trip, President Joe Biden and his staff inserted themselves into infrastructure negotiations. On Monday, President Biden met separately with Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), both who have been involved with the bipartisan infrastructure effort in the Senate and will be key votes not only on a potential bipartisan package, but also a reconciliation measure.
Members of the “Gang of 21” continued to meet this week to flesh out their infrastructure framework, with the goal of making significant progress before the July 4 recess. On Tuesday, Assistant to the President Steve Ricchetti, White House Director of Legislative Affairs Louisa Terrell, and National Economic Council (NEC) Director Brian Deese were on the Hill for infrastructure meetings with the original Group of 10 Senators, marking the first engagement between the bipartisan team and White House representatives. On Wednesday, Ricchetti, Terrell, Deese, along with Office of Management and Budget (OMB) Director Shalanda Young and Domestic Policy Council (DPC) Director Susan Rice, hosted Speaker Nancy Pelosi (D-CA) and Leader Chuck Schumer (D-NY) at the White House for an infrastructure discussion before returning to the Hill for additional meetings with the Group of 10.
On Wednesday evening, news broke that a deal was clinched, although details had yet to be released ahead of a meeting between Senate negotiators and President Biden on Thursday. It is now clear the package will total $1.2 trillion over eight years, with $579 billion in new spending. This includes $312 billion in transportation spending (roads and bridges, safety, public transit, passenger and freight rail, electric vehicle (EV) infrastructure, airports, and ports and waterways) and $266 billion in other infrastructure, including $55 billion for water infrastructure, $65 billion for broadband, $21 billion for environmental remediation, $73 billion for power infrastructure, and $47 billion for resilience.
There is now also an agreed upon list of pay-fors. These offsets include reducing the Internal Revenue Service (IRS) tax gap, unemployment insurance program integrity, redirecting unused unemployment insurance relief funds, repurposing unused 2020 emergency relief funds, state and local investment in broadband infrastructure, allowing states to sell or purchase unused toll credits for infrastructure, extending expiring customs user fees, reinstating Superfund fees for chemicals, extending the mandatory sequester, selling from the Strategic Petroleum Reserve, public-private partnerships, and bonds.
With 21 Senators, including 10 Democrats and 11 Republicans, thought to be supportive of the bipartisan framework, it remains uncertain whether or not there are 60 votes for a deal to clear the Senate. Progressives hesitate to throw their support behind a bipartisan bill until there are stronger assurances that Democrats will have the votes to move a follow on reconciliation package. Others have been noncommittal until there is legislative language. Meanwhile, Sens. Manchin and Sinema have not yet hinted at how the progress on their bipartisan effort has impacted their willingness to support a reconciliation bill. They are likely to see even greater pressure to support reconciliation, although the same might be said for Members on the left who will likely be pressed to vote for the bipartisan bill, even if it is something they ultimately find underwhelming. In all likelihood, the extremes of the Democratic party will need to rely on one another to pass both bills, as one is unlikely to advance without the other and President Biden has said he will only sign the bills in tandem. Though a challenge, this could truly present an opportunity for Democrats to govern from the middle.
There are also a lot of questions about how the White House/Gang of 21 agreement interplays with other pieces of a surface transportation reauthorization that have already started moving, although Speaker Pelosi has said that whatever is in the bipartisan agreement will be “subtracted” from the surface transportation deal. At some point, it seems like the bipartisan framework will need to be turned over to committee staff to hammer out these details and begin the technical and complicated process of drafting bill text.
Speaking of reconciliation, we are beginning to hear a lot of chatter about the need for Leader Schumer to sit down with Sens. Manchin and Bernie Sanders (I-VT) to sketch out what Democrats might be able to achieve under the expedited procedures. While details have started to leak about what Sen. Sanders may want included in the instructions for a $6 trillion reconciliation package, even his Budget Committee staff admits this topline may be too ambitious. Some Democrats, including Sens. Jon Tester (D-MT) and Mark Warner (D-VA), have already come out and said that a $6 trillion package may be too large.
Given the dynamics at play, we are certainly more optimistic than we were last week that there will ultimately be a two-step process on infrastructure that includes passage of a bipartisan measure and a Democrat-only reconciliation bill, although hurdles remain. We now predict we could see bipartisan legislation that is some combination of a highway bill and perhaps the Manchin-Barrasso energy infrastructure bill that was considered during a legislative hearing in the Senate Energy and Natural Resources Committee this week. In fact, the packaging of the energy bill with the surface transportation bill might be Sen. Manchin’s price for his support for a later reconciliation package. Our instincts tell us the September 30 Fixing America’s Surface Transportation (FAST) Act (highway bill) expiration, could force action on this bipartisan measure.
On reconciliation, the challenge will be for Democrats to put together a package that is appropriately tailored in size and scope to keep the caucus united. Assuming Democrats may need to use reconciliation to address the debt limit, this could create the urgency needed to get a reconciliation package through Congress by late summer or early fall. Politically, this timeline would seem to work to President Biden’s advantage, as it would allow him to claim major victories well ahead of the midterm elections, while still carving out time for Congress to address other must-pass priorities, such as appropriations, the National Defense Authorization Act (NDAA), and other items that might get lumped into a year-end package.
In light of the infrastructure developments this week, Leader Schumer has said it is his goal for the Senate to both vote on a surface transportation bill and pass a budget resolution to kick off the reconciliation process in July. We are expecting a busy Senate recess over these next few weeks, as we anticipate committees will begin putting pen to paper on potential reconciliation items during the break so that Democrats are ready to move quick on reconciliation once committees receive their instructions.
Speaker Pelosi has also indicated the bipartisan and reconciliation efforts are linked, saying the House will not take up comprehensive infrastructure legislation until the Senate has passed both a bipartisan measure and a reconciliation bill that can be used to advance President Biden’s goals. Regardless, the House is still on track to pass its surface transportation bill, the Investing in a New Vision for the Environment and Surface Transportation (INVEST) Act, on the floor next week. Over 200 amendments have already been filed. Additionally, the House will take up water infrastructure legislation, including the Assistance, Quality, and Affordability Act and the Water Quality Protection and Job Creation Act, next week.
Budget/Appropriations
As noted above, Sen. Sanders has now outlined his vision for a $6 trillion budget resolution that includes not only pieces of President Biden’s American Jobs Plan and American Families Plan, but also measures on prescription drug pricing and a lowered eligibility age for Medicare. In particular, Sen. Sanders has said he wants to spend nearly $300 billion in FY22 to expand Medicare coverage for dental, vision, and hearing and another $200 billion to lower the Medicare age to 60. His proposal also includes elimination of the State and Local Tax (SALT) cap deduction, which is estimated to cost another $120 billion. This is on top of funding for public housing, EVs, roads and bridges, passenger and freight rail, and climate change, as well as other human infrastructure investments.
We connected with Sen. Sanders’ Budget Committee staff. Since we are past April 1, both chambers would be permitted to go straight to the floor with the budget resolution instead of through committee. We have been hearing that the House was going to go through committee, but the Senate was considering immediately putting their bill on the floor. However, after talking with a Sanders staffer, it sounds like the Senate Committee is still preparing its own budget resolution. The staffer who we spoke with said it is still early in the process, and they haven't connected with their House counterparts yet. For now, the Senate Budget Committee’s main focus is trying to figure out the size of the reconciliation package. We continue to hear the House Budget Committee is planning to markup their budget resolution the week of July 12 with a floor vote planned for the week of July 19.
Another complicating factor for reconciliation is that we are likely to see a “September crunch” on the $28 trillion debt limit, as this is when extraordinary measures are likely to expire, requiring Congressional action to either raise or suspend the debt limit. While Democrats have the option to increase the debt limit under reconciliation, it is unclear if Democrats can suspend the debt limit using the reconciliation process. In order to suspend the debt limit, it is possible Democrats would need to find 10 Republican votes in the Senate. House Leader Kevin McCarthy (R-CA) has said that Republicans are unlikely to be cooperative on the debt limit unless Democrats undertake efforts to cut government spending.
In the meantime, the House Appropriations Committee began its FY22 subcommittee markups this week, advancing the Financial Services and General Government (FSGG); Legislative Branch; Military Construction, Veterans Affairs, and Related Agencies (MilCon-VA); and Agriculture, Rural Development, Food and Drug Administration (FDA), and Related Agencies bills to the full committee. While you would be hard-pressed to find anyone who thinks the House and Senate can reach agreement on all 12 appropriations bills before the October 1 start of the fiscal year in order to avoid a continuing resolution (CR), the House still plans to hold floor votes on its bills during the last two weeks in July, which is when we may also see Senate Appropriations Committee markups. We continue to think we will see a CR through mid-December.
Endless Frontier Act/USICA
This week, we had an opportunity to speak with the staffer in Leader Schumer’s office who is handling the U.S. Innovation and Competition Act (USICA). This staffer said that Senate leadership is encouraging industry to press the House on USICA. He said the “big request” is for the House to take up its USICA response as soon as possible. More specifically, there is an effort underway to encourage Democrats to go directly to Speaker Pelosi so that she is hearing from as many Members of her caucus as possible.
While this staffer’s view was that the House is “not going to pass USICA outright,” the plan is for the House to pass something that would trigger a conference committee, which Leader Schumer hopes to conclude by August. He went on to express concern that if USICA slips to the fall, there will be “a more partisan environment and it will quickly turn into the end of the year.” Further, the staffer said if the bill slips to next year, moving legislation will be difficult because of the midterms, and this would “increase the risk of there being no final bill.”
Legislative Calendar
With a crowded legislative agenda, we are starting to hear rumors that Leader Schumer may shorten the August recess by keeping the Senate in session during the week of August 9. An official determination has yet to be made on the recess schedule, but we are hearing that Members and staff are being told to keep their schedules flexible for that week, and some Democrats are even asking for the Senate to remain in session.