06.29.2021 Washington Update
Infrastructure – Despite a tumultuous week, defined by President Joe Biden’s topsy-turvy performance, the bipartisan infrastructure process continues apace. Staff to the “gang of 21” are putting pen to paper to flesh out the $953 billion framework, with the goal of completing a draft in two weeks, and hoping the bill hits the Senate floor before August recess.
That’s ambitious, to say the least, for several reasons. The first has to do with offsets or “pay-fors.” Some are controversial (e.g., reinstating the Superfund tax on petrochemical producers) and many are illusory—meaning CBO will not score them (see, for instance, “dynamic scoring”). If the bill produces a sizeable increase in the deficit, many Republicans could end up opposing it. On top of that, Republicans—many of whom are already irate over the recent leak of taxpayer files to ProPublica—won’t be particularly enthused by the prospect of paying for a bill by hiring more IRS enforcement agents to close the putative “tax gap.”
Second, GOP members are strongly opposed to tying the bipartisan agreement and the next ($2 trillion? $4 trillion? $5 trillion?) budget reconciliation package together. Senate Minority Leader McConnell (R-KY) is now trying to pressure Majority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA) to delink the two bills. While some Democrats may remain skeptical of the infrastructure agreement, it likely will need nearly every Democratic member’s support in the House and Senate.
The political fault lines underneath the infrastructure package are clearly cracking. Most House Republicans opposed the Senate gang’s infrastructure push from the start. House Minority Leader Kevin McCarthy (R-CA) stated that Democratic leadership “killed any opportunity” for a deal with his conference.
Pay close attention to the Republican members of the gang of 21 in the weeks ahead. Senators Lindsey Graham (R-SC) and Jerry Moran (R-KS) have already publicly expressed concerns—with Graham venting outrage—over Biden’s linkage of infrastructure and reconciliation. What’s not entirely clear is where Senators Thom Tillis (R-NC), Mike Rounds (R-SD), Richard Burr (R-NC), Todd Young (R-IN) and others involved will come down as the process unfolds.
Watch, too, progressives such as Rep. Pramila Jayapal (D-WA), who said the bipartisan infrastructure bill, “simply isn’t enough.” And of course, the ubiquitous Rep. Alexandria Ocasio Cortez (D-NY), who is agitating for a $10 trillion reconciliation bill. The longer the infrastructure agreement remains in limbo, the more time there is for lawmakers to feel the heat from constituents, outside groups, and the media.
Schumer and Pelosi want to pass the bipartisan infrastructure bill and the FY2022 budget resolution, with reconciliation instructions, out of the Senate in July. During August recess, House and Senate committees would then begin assembling the reconciliation package with the goal of holding votes before the end of September. The House would hold the bipartisan infrastructure bill at the desk until September, when it would be theoretically passed alongside the Democratic-only reconciliation bill. Sen. Joe Manchin (D-WV) says he would support a reconciliation bill as high as $2 trillion assuming it’s fully paid for, which of necessity likely means raising corporate and capital gains taxes, given the list of available offsets outside of tax hikes is woefully short.
Surface Transportation – This week, the House will vote on H.R. 3694, “The Invest in America Act,” a $715 billion surface transportation reauthorization bill. Traditionally, this legislation is developed in coordination with the Senate, but as we have previously noted, this year the House and Senate are on different planets when it comes to this issue. The House bill has been loaded up with the priorities of Democratic members, and House Republicans are actively whipping their members to oppose it. If the bill passes the House, expect a long and contentious conference committee with the Senate.