11.30.2021 Washington Update

With their success in the November elections, Republicans are teeming with optimism about the mid-term elections in 2022.  Democrats continue to bleed retirements in competitive seats, while fretting about President Biden’s poll numbers.  And they face a brutal December of division over the “Build Back Better Act.”  What could go wrong?

Who knows?  In political terms, the mid-terms are light-years away.  The standard Republican talking point we hear—a defensive mechanism, no doubt—is, “Things look great, but we sure have the capacity to screw it up.”  True, but facts don’t lie.  Democrats are the party in power heading into a mid-term, led by a beleaguered President.  They hold majorities in the House and Senate by the skin of their teeth.  And the political headwinds appear daunting: GOP-dominated redistricting; crime becoming a major national issue; ongoing anxiety over COVID-19; and inflation running riot.

Barring some unforeseen political wave, Republicans are preparing for monumental gains, at all levels of government.  Is it premature to be measuring the drapes?  Again, maybe.  To be sure, the Senate picture is still mixed.  With Gov. Chris Sununu (R-NH) choosing not to challenge Sen. Maggie Hassan (D-NH), Republicans winced.  But don’t count out New Hampshire.  And there are other opportunities—Georgia, Nevada, Arizona.  Depending on the national mood, there could be others.  As one GOP pundit put it, “We will probably have some accidental senators come 2023.”

House Republican gains lie somewhere between 30 and 70 seats.  If the concerns now capturing the nation’s attention remain a year from now, our bet is on GOP pickups closer to the higher end of the range.  Among other things, we’ll be watching inflation.  As Milton Friedman said, “Inflation is always and everywhere a monetary phenomenon.”  But it’s also a political wrecking-ball that by itself can flatten the party in power.

This is the backdrop to December 2021.  Reconciliation now sits in the Senate, which is busy commencing the parliamentary intrigue known as the “Byrd bath.”  Items to be adjudicated before the Parliamentarian and her staff include immigration, prescription drug prices, labor standards, and energy.  This can be a mind-numbing process, dictated in good part by precedent and budget scoring conventions.

Far more interesting is what’s going in the minds of Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ).  Far be it for us to know.  We can only go by what they say.  For starters, Sen. Sinema was blunt about the House bill: “So, that’s not the agreement the president put out in his framework several weeks ago.”  Of course! you might say.  The bill will change in the Senate.  That’s not news.

But how will it change?  Sen. Bernie Sanders (I-VT) has his own ideas.  “Now the legislation comes to the Senate,” he said, “where I hope to see it strengthened in a number of ways.”  Can Bernie Sanders agree with Joe Manchin on what “strengthened” means?  Manchin holds considerable leverage in this process.  And his political fortunes are entirely different from those of Sanders, Rep. Alexandria Ocasio-Cortez (D-NY), and Senate Majority Leader Chuck Schumer (D-NY).

Consider the numbers: according to a recent West Virginia poll, Manchin has a 61 percent approval rating.  President Biden?  32 percent.  And 74 percent said Manchin should oppose the Build Back Better Act.  Said Republican pollster Mark Blankenship, “I think that’s what’s recognized here is that Senator Manchin is listening to the people of West Virginia.”

As we’ve said from the beginning, this is the fundamental debate that matters most for this bill (and maybe much else).  Getting Joe Manchin and Bernie Sanders, along with AOC and House progressives, to agree on final text is a tall order.  It can be done, but it will be painful getting there.

The coming weeks will come down to finding agreement on paid family leave, climate change, fossil fuels, immigration, drug pricing, healthcare benefits, the SALT tax deduction, and several other issues.  Manchin and Sinema are key, but the reality is that Senators Maggie Hassan, Mark Kelly (D-AZ), Raphael Warnock (D-GA), and Catherine Cortez Masto (D-NV), all of whom face voters next year, have much more riding on this legislation.

 

Senate and House Floors – Facing a Friday deadline to continue funding the government, the House and Senate are expected to pass another short-term funding resolution extending to January.

Schumer is also trying to finish the FY 2022 National Defense Authorization Act early this week.  Senate Armed Services Committee Chairman Jack Reed (D-RI) and Ranking Member Jim Inhofe (R-OK) continue to negotiate an agreement on amendments.  Many Republicans would like to have roll call votes on their priorities and are not ready to call it quits. (There was a 3:30pm filing deadline today for all first-degree amendments to the NDAA.)

 

Debt Limit – While Schumer and Senate Minority Leader Mitch McConnell (R-KY) have had initial conversations about how to address the debt limit, most Senate Republicans remain adamant that Schumer and the Democrats must raise the debt limit on their own.  “I don’t think that anybody is willing to take that vote again when there’s a path forward that doesn’t require it,” said Sen. John Thune (R-SD).

There is still no firm “X-date,” or the day when Treasury’s extraordinary measures to avoid default run out.  While Treasury Secretary Janet Yellen has (softly) floated December 15, that is also the day cash will start coming in from estimated corporate taxes, potentially pushing the X-date further into 2022.