05.25.21 Washington Update

Infrastructure – Senate Republicans provided more specifics last week on their $589 billion infrastructure package, but to no end. The White House’s $1.7 trillion counterproposal, released last Friday, made clear that no deal is in sight.

Beyond the disagreement over the top-line number, the White House counteroffer dismissed using new user fees to pay for the bill, which Republicans favor. The White House is insistent that corporate tax increases should pay for infrastructure investments.  Note, the corporate tax rate, which Democrats want to use to help pay for infrastructure, is also caught up in international negotiations at the Organization for Economic Cooperation and Development (OECD).  Treasury Secretary Yellen is trying to find common ground on a Global Minimum Tax and by extension a resolution to taxes on digital services.

This gets to the many challenges ahead.  Tax increases are the red line that Republicans simply won’t cross.  By the same token, House Democrats want to include a laundry list of spending and policy priorities that strain the conceptual limits of what constitutes infrastructure.

Adding fuel to the fire, House Republicans, not without justification, smell blood in next year’s midterm elections.  Cutting deals with Democrats on President Biden’s top priorities is not their recipe for regaining the majority.  Senate Minority Leader Mitch McConnell (R-KY) likely feels the same way, which is why it’s unlikely 10 GOP senators will break ranks.

As a result, this is likely the last week of bipartisan talks on infrastructure given the President’s Memorial Day deadline.  Senators head home at the end of the week.  The last, best hope for a bipartisan deal could hinge on whether President Biden reengages personally, with fewer staff and cabinet officials involved.  But even that, for all the foregoing reasons, is likely a bridge too far.

Once bipartisan talks end completely, the White House will turn attention to Senators Kyrsten Sinema (D-AZ), Joe Manchin (D-WV), Jeanne Shaheen (D-NH), Maggie Hassan (D-NH), Mark Warner (D-VA), Chris Coons (D-DE), and Tom Carper (D-DE)—with the goal of solidifying 50 votes for a potential reconciliation bill.  Democrats will need to quickly start the development of their budget resolution and reconciliation instructions in order to get a partisan reconciliation bill through this summer.  The Senate Finance Committee has scheduled a markup this Wednesday that attempts to promote more clean energy development which is viewed by many as a start of the Democrat’s infrastructure push.

House Democrats are eager to begin drafting reconciliation outlines.  House Majority Leader Steny Hoyer (D-MD) hinted that House committees may start drafting language this week, “so that they can be ready to move ahead on — in whatever way we decide.”

On a separate track, Senate Environment and Public Works Committee Chairman Tom Carper (D-DE) and Ranking Member Shelly Moore Capito (R-WV) announced an agreement on a $303.5 billion multi-year “Surface Transportation Reauthorization Act,” that will be marked up on Wednesday.  House Transportation and Infrastructure Committee Chairman Peter DeFazio (D-OR) canceled plans this week to mark up his yet-to-be-released surface transportation bill.  The House Democratic proposal is now expected to be marked up in late June.  T&I Ranking Member Sam Graves (R-MO) introduced his own competing reauthorization bill, the “Surface Transportation Advanced through Reform, Technology & Efficient Review (STARTER) Act.”

For those who think highway reauthorization is the likely bipartisan alternative to an uber-infrastructure bill, consider that the House and Senate are on different planets.  A conference committee, which will have to deal with, among other things, earmarks, will be contentious, and therefore could take months.  Not to mention the fact that, in addition to EPW, other Senate committees with jurisdiction over highways—Commerce, Banking, and Finance—have yet to markup their respective bills.  In short, having a highway bill signed into law by September 30, the deadline for funding the federal highway program, appears to be a tall order.  Which means an extension, of possibly a year or more, is very much in the cards.

 

China – This week, the Senate will continue debating amendments to the “United States Innovation and Competition Act” (formerly the “Endless Frontier Act”).  Hundreds of amendments have been filed and cloakroom staff for Majority Leader Chuck Schumer (D-NY) and Minority Leader McConnell continue to negotiate.  While the vote was 86 to 11 to begin debate on the legislation, many Senate Republicans may vote against the final package. These Republicans have a variety of concerns, including provisions related to prevailing wages, funding allocations and various disagreements on trade policies.

 

Appropriations – The White House Office of Management and Budget is expected to release its full fiscal year 2022 budget on Friday. The announcement will not only trigger work on a potential reconciliation bill, but also mark the start of the regular appropriations process.  Absent a budget resolution, House members could agree to “deem” top-line defense and non-defense discretionary spending figures to allow appropriators to start drafting bills.

Senators have the following Appropriations Subcommittee deadlines to submit their funding requests:

Agriculture                                                                                 June 17

Commerce Justice Science                                                      June 18

Defense                                                                                      July 9

Energy and Water                                                                     June 16

Financial Services and General Government                       June 22

Homeland Security                                                                   June 28

Interior and Environment                                                       June 24

Labor, Health and Human Services, Education                   July 8

Legislative Branch                                                                    June 15

Military Construction and Veterans Affairs                         June 21

State, Foreign Operations                                                       June 29

Transportation, Housing and Urban Development            June 23

 

In the House subcommittee and full committee markups are expected on the following dates:

Subcommittee Markups: June 24, June 25, June 28, June 30, July 12

Full Committee Markups: June 29, June 30, July 1, July 13, July 15, July 16

 

Nominations – In addition to debating the China package, the Senate will consider the nominations of Chiquita Brooks-LaSure to be Administrator of the Centers for Medicare and Medicaid Services (CMS) and Kristen Clarke to be an Assistant Attorney General at the Department of Justice.