Weekly Plurus Strategies Update on Appropriations, Build Back Better, and USICA
Here’s the latest we are hearing on voting rights, fiscal year 2022 (FY22) appropriations, Build Back Better, and the U.S. Innovation and Competition Act (USICA).
Year One of the Biden Administration
Today marks the one-year anniversary of the Biden Administration, which has set the tone as Washington prepares for the slog to the midterm elections this November. In marking one year in office, President Joe Biden faces a multitude of challenges, including a stalled domestic agenda, inflation, evolution in the fight against COVID as omicron surges, and an escalation of tensions with Russia as Russian President Vladimir Putin ponders invading Ukraine.
Despite the downbeat mood amongst Democrats over the divisions within their own party, President Biden can still claim some wins, including last year’s $1.9 trillion COVID relief package, the $1.2 trillion bipartisan infrastructure framework (BIF), and slicing the unemployment rate by half. However, with the midterms on the horizon, the focus seems to be more on what the president is not getting done than what the Democratic White House and Congress have already achieved. This sentiment is felt around the breakdown in Build Back Better (BBB) negotiations, the Supreme Court decision striking down the administration’s COVID vaccine mandate, and most recently, the failure to advance voting rights legislation.
In recent weeks, President Biden’s popularity has plummeted, and as a result, we continue to see a mass exodus of Democratic incumbents, with additional retirement announcements this week from Reps. Jerry McNerney (D-CA) and Jim Langevin (D-RI). To date, 28 House Democrats have announced they will not seek reelection and more announcements could be on the way. Meanwhile, GOP Congressional leadership appears poised to do everything it can to further obstruct progress on the president’s goals, all while plotting an aggressive oversight agenda for when it presumptively holds the gavel in 2023. In the runup to the elections, the GOP is likely to lay out an agenda akin to Newt Gingrich’s “Contract with America” as its platform for this cycle.
As you might recall, President Barack Obama faced similar challenges heading into the 2010 midterms, having not received much credit for the economic stimulus package that he jammed through Congress and seeing his major domestic priority (the Affordable Care Act (ACA)) stall, only to be enacted and criticized as voters started to pay attention to the polls. If the Biden Administration and the broader Democratic party cannot determine how to notch some more wins and better message its victories, we wonder if history might be doomed to repeat itself, if Democrats losing control of one or both houses of Congress is not already a foregone conclusion.
Voting Rights/Filibuster Reform
As expected, last night’s attempt by Senate Majority Leader Chuck Schumer to enact a rules change to advance voting rights legislation flopped. As a quick procedural recap, the upper chamber considered as a message from the House an unrelated National Aeronautics and Space Administration (NASA) bill that carried the Freedom to Vote Act, which would expand ballot access, and the John Lewis Voting Rights Advancement Act, which would grant the Department of Justice (DOJ) authorities to require that states seek preclearance to make changes to their voting laws. This tactic allowed Democrats to evade a cloture vote that would otherwise be required to open floor debate.
Fiery floor speeches then ensued, with Democrats warning that the future of democracy hangs in the balance and Republicans accusing Democrats of fabricating a constitutional crisis for political gain and threatening any future possibility for bipartisanship in the Senate. Leader Schumer presented a two-part proposal that would tweak Senate rules by reinstating the talking filibuster and creating a carve out that would exempt voting rights legislation from the 60-vote threshold. The rules change was rejected by a vote of 52-48, with Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) unsurprisingly crossing the aisle to join Republicans in blocking the change, despite their support for the underlying bills. The Senate voted 49-51 to end debate on the legislation, with Leader Schumer changing his vote to no to allow the package to be called up again at a later time.
Though the floor action played out exactly as anticipated, Democrats’ next moves are uncertain, even as both Leader Schumer and House Speaker Nancy Pelosi have told their caucuses voting rights is not dead. While there has been some questioning of Leader Schumer’s strategy to take a doomed play to the Senate floor, it is possible that he views tackling voting rights as a moral imperative worth isolating the members of his caucus who have been holdouts on reforming the filibuster. Considering that filibuster reform is an issue that could linger, the silver lining might be that, when push came to shove, Leader Schumer was able to shore up support from Members who may have been wavering at the outset, including Sens. Chris Coons (D-DE), Tim Kaine (D-VA), Angus King (I-ME), Mark Kelly (D-AZ), and Jon Tester (D-MT).
Substantively, the action now shifts to a bipartisan group of moderates that includes Sens. Manchin, Sinema, King, Lisa Murkowski (R-AK), Susan Collins (R-ME), and Mitt Romney (R-UT), who are interested in looking at reforming the Electoral Count Act (ECA) and other potential election-related proposals. While the broader Democratic caucus could likely go along with an ECA reform effort, this clearly will not be viewed as a substitute for more meaningful action on voting rights. President Biden has also doubled down on his commitment to championing voting rights, suggesting potential executive action.
FY22 Appropriations/Emergency Supplemental
With both the House and Senate in recess next week, we anticipate things will ramp up further on appropriations when Members are back in town given the February 18 expiration of the current continuing resolution (CR). Both the House and the Senate are holding floor time for a funding bill during the second week of February. There are rumors that an agreement on how to handle topline spending and policy riders could be clinched as soon as next week. While appropriations leaders continue to report that they are having constructive conversations about preparing an omnibus ahead of the deadline, we are skeptical that Congress will be able to mitigate the need for another stopgap measure.
It makes sense that Republicans would be reluctant to negotiate an omnibus if BBB might still be resurrected, creating an opportunity for Democrats to fund programs at higher levels than what might be agreed to in an omnibus appropriations bill. Additionally, with President Biden scheduled to deliver the State of the Union (SOTU) on March 1, it seems politically strategic for the GOP to block the president from finalizing his Fiscal Year 2022 (FY22) budget. We can just see Republican responses to the SOTU drawing attention to the president’s inability to pass his budget.
Privately, some staffers tell us they suspect there will be another CR that runs through April 7, backing right up against the two-week Easter recess. It is also possible there is a CR that expires even before this date, depending on how Democratic leadership is feeling on the BBB. Whenever the next CR expires, it is possible that some appropriations bills could move, although there is simultaneously a scenario where some agencies will operate on a CR through the reminder of the fiscal year.
We are also hearing increasing talk of emergency supplemental appropriations for COVID and recent natural disasters riding on either a CR or an FY22 appropriations package. However, the White House has yet to make a formal request.
It is also far from certain that, during a midterm election cycle, Republicans will greenlight additional COVID relief. In fact, we are already seeing the GOP call attention to funds that remain available for state and local governments for pandemic recovery and request greater oversight of relief programs that have already been implemented. Our best guess is that if emergency appropriations eventually move, Republicans will insist on reusing previously appropriated funds rather than agreeing to significant new spending.
Build Back Better
Between the Biden Administration entering its second year and the failure to pass voting rights legislation this week, the pressure is building on Democrats to find a path forward on the president’s domestic policy agenda. While conversations between the White House and Sen. Manchin are ongoing, inflation continues to dampen the prospects for a BBB bill as large as the $3.5 trillion framework the White House initially envisioned or the $2.2 trillion package that the House passed in November. The $1.75 trillion offer Sen. Manchin made to the administration December might also now be too big for him to stomach.
Generally, Democrats appear to be coming to grips with the political reality that it might be better for them to partially pass the BBB agenda in some form, rather than be perceived as unable to lead. President Biden has even admitted he might now be willing to accept a package as small as $550 billion. While there is growing consensus about the need to utilize the reconciliation vehicle to pass something, how this plays out is still being determined.
There are some who believe that we might see Democrats whittle BBB down to a narrower bill that addresses top priorities, such as drug pricing, climate change (clean energy tax breaks), and universal pre-kindergarten. These programs could be compiled into a bill in the $1.2 - $1.5 trillion range, leaving potential tax pay-fors on the table. Notably, programs like free community college and the child tax credit might drop out. While such a package would fall short of progressives’ wish list, there is some thinking that Democrats might still be able to tout this as a good package that is better than a missed opportunity. And while some Members threaten they will not vote for a package that does not include state and local tax (SALT) deduction fix, our instincts tell us if a package comes together, it will ultimately secure enough votes to pass, regardless of whether SALT is included. While this process would ultimately result in a skinnier bill, the White House might still be able to message such a package as a historic achievement.
Alternatively, House frontliners have become more vocal this week in imploring a strategy of breaking BBB up into smaller pieces. This approach is something Senate moderates may have begun socializing as early as December. There are varying views on the political merits of breaking up BBB. Some argue that the House already has a record on BBB and that taking votes on pieces of BBB will result in no political gain. However, President Biden has now publicly conceded that Democrats may need to break up his social spending agenda in order to get as much of it passed as possible.
At this point, however, we are hearing that Speaker Pelosi is resisting a shift in tactics until it becomes clear that Sen. Manchin cannot be moved to support a comprehensive bill first. In other words, we believe the Speaker is taking cues from the White House on whether breaking up BBB might get Sen. Manchin to a better place. At this point, signs seem to point to the White House believing that a comprehensive deal is still possible, even if it is significantly curtailed from the original BBB framework.
The way we see this playing out is that there will be a skinny BBB bill, followed by votes on other BBB issues that are missing from the curtailed bill. We believe that piecemeal votes in the House on issues that play well with the Democratic base after a comprehensive package has passed could be an effective exercise in reinforcing that the president can keep Democrats together, even if these smaller bills are unlikely to ever get to 60 votes in the Senate.
Despite the urgency some Democrats may be feeling on BBB, we don’t see Democrats moving on from BBB any time soon. To the contrary, we are hearing that Democrats could still be looking at ways to move these social programs comes September. In the interim, we presume the White House is already exploring which pieces of the BBB agenda it might be able to enact via executive order.
U.S. Innovation and Competition Act (USICA)
We continue to hear rumors that a USICA/CHIPS/China competitiveness bill could soon return to the forefront of the legislative agenda. As you might recall, at the end of last year, efforts to attach this package to the NDAA collapsed, with Speaker Pelosi suggesting an informal effort to conference House and Senate bills, with the goal of enacting legislation early this year. The House strategy now seems to have shifted, with the House expected to drop its own package as soon as this week with the intent of moving to more formal conference negotiations with the Senate.
For now, the House effort to cobble together a package is being coordinated exclusively between Speaker Pelosi and Democratic committee chairs. Minority committee staffers we have spoken with have expressed some frustration that they are not clued in on what will be included in the bill. While some committees, like the House Science, Space, and Technology (HSST) Committee for example, are expected to have bipartisan components in the package, others, like the House Foreign Affairs Committee (HFAC) and Ways and Means Committee, are likely to have put forward more partisan bills for inclusion, potentially complicating how the overall package moves forward.
Currently, the timeline for action is fluid. If we see House bill text this week, it is possible a conference could be underway come February. Of course, how much can be achieved in conference depends on what comes out in the House bill and whether thorny politics means that a final compromise bill must be negotiated at the leadership level. It is no secret that moving this package is a priority for Leader Schumer, whose staff has said they are planning for final passage of a compromise bill before the two-week Easter recess in April. However, one Democratic House staffer who is close to the CHIPS Act told us he is more aligned with Speaker Pelosi, who is “not optimistic a final package can be negotiated that quickly given the various committees involved.” The good news is that another House staffer told us that “it feels like there is so much pressure to get CHIPS done, I can’t imagine it won’t happen.”
The administration, and the Commerce Department in particular, continues to beat the drum for swift action on CHIPS funding. In fact, we have been told the agency could release an RFI this week to solicit input in response to questions related to standing up the CHIPS Act, even before there are appropriations. Meanwhile, Secretary Gina Raimondo continues to lobby Members on both sides of the aisle in support of a package, as evidenced by her meeting with House Ways and Means Committee Democrats this week. This comes as the CHIPS Act sponsors are wrapping up a dear colleague to House and Senate leadership urging expedited negotiations and support for the $52 billion in CHIPS funding included in the Senate USICA bill.