02.01.2022 Washington Update

Overview – “Build Back Smaller”?  “Build Back Smarter”?  New names for President Biden’s revised signature legislation haven’t taken hold.  And neither has a strategy for passing it.  This is not to say, as we’ve said repeatedly, that passing it can’t or won’t happen. Democrats want to pass something, at some point, before it’s too late.  “We need to get it done,” said House Majority Leader Steny Hoyer (D-MD).

Fair enough.  But temporal, substantive (and even appellative) considerations matter.  When is “too late”?  When do they “need to get it done”?  What, and not just from a gnomish CBO perspective, constitutes “smaller”?  More critically from a political perspective, what would be “smarter”?  Is “Build Back Better” still the right label?  We don’t know.  It’s up to the President and his party to figure that out.

But in politics, as in life, timing is everything.  Some may scoff at the prospect that come April (“the cruelest month”), no deal is done.  But House Speaker Nancy Pelosi (D-CA) recently said she didn’t want to “subscribe to any particular date” for passing the bill.  If that’s so, could it take several months until a final bill passes both chambers, maybe even this summer?  Is that even possible?

We understand some may see this scenario as absurd.  But Pelosi seems wise to avoid setting another drop-dead date for the bill’s passage.  First it was Halloween; then Thanksgiving; then Christmas; followed by January (no more child tax credit checks); and now, March 1st, Biden’s State of the Union address.

Suspecting negotiations might take months, therefore, is not unreasonable.  And by the way, Congress has other things to do.  Government funding expires February 18th.  Biden’s Supreme Court nominee will command considerable White House and member (and staff) attention—and precious Senate floor time (more on this below).  Thus, the nomination and attempts to forge an omnibus budget deal could add several weeks, at the very least, to the reconciliation schedule.

And then things might get dicey.  Oil prices could soon hit $100 a barrel and go even higher by summer (Bank of America: $117 by July).  Seven percent inflation could make even Paul Volcker blush (not likely), but for the purposes of passing reconciliation, skyrocketing pump prices in the near term could be fatal.  After all, inflation was a principal stated reason for Sen. Joe Manchin’s (D-WVA) opposition to Build Back Better.  Blaring placards on street corners displaying “$4.00 a gallon” have always obliterated even the best-conceived political plans.  So, $100-plus oil could waylay passage until June.

At that point, though, another bomb may drop.  The Supreme Court will likely issue its decision in Dobbs v. Jackson Women’s Health Organization—a decision that could seriously erode, or overturn altogether, Roe v. Wade.  Once that happens, the Senate could be paralyzed, more so than it has been already, by brutal partisan recriminations.  We would expect the Left to (again) press Senate Majority Leader Chuck Schumer (D-NY) to change the rules to pass abortion legislation, and the Left to level splenetic attacks against Manchin for opposing them.  We could then see the same legislative results: in other words, nothing.

The same perplexing dynamics from last year continue to beguile negotiations this year. Rep. Ro Khanna (D-CA) fired off a concessionary tweet (or was it?) over the weekend that “Manchin should have the pen” to rewrite the bill.  That prompted two thoughts.  First, neither Rep. Alexandria Ocasio-Cortez (D-NY) nor any other member of the Progressive Caucus retweeted in agreement.  Is silence here tacit agreement?

Second: Manchin said yesterday that a new revised bill should include things Khanna and company frankly really despise.  “We need reliability in energy.  And that means building pipelines that are having a very difficult time,” Machin told reporters.  Manchin added that the U.S. must “take care of what we have, and that means you’re going to use all the fossil industry in the cleanest-absolute possible versions that you can and that will help clean up the climate in the world.”

Some may note that Manchin, earlier this year, said that Build Back Better’s “climate thing [his words] is one that we probably can come to agreement much easier than anything else.”  But he didn’t say whether he supports, and it’s not clear that he ever did, the climate title’s methane tax, or the electric vehicle tax credit with generous add-ons for union-made vehicles.  Depending on where he lands, adding, via Manchin’s pen, provisions to promote pipelines and the fossil fuel industry could infuriate the likes of Sen. Bernie Sanders (I-VT), to name just one member.

Finally, the closer the reconciliation process gets to September 30th, the more the pressure increases to demonstrate that the legislation has meaningful budgetary impacts in this fiscal year.  Some parts of the bill in the waning months may not.  So, it’s entirely possible that some provisions (e.g., tax changes) may get scrapped or be written to apply retroactively to pass parliamentary muster.  Republicans could argue on solid ground that a majority, electing to push forward a bill that beats the September 30th deadline, without real impacts in fiscal year 2022, isn’t contemplated by the rules, and the practice, of reconciliation.

Maybe all this comes together swimmingly, and quickly.  The party in power feels a political imperative to get something done.  President Biden may be able to boast of a major legislative accomplishment in four weeks.  It’s possible.  But probable?  Our objective is merely to lay out the challenges that could lie ahead.  Things could get bumpy.  All the while, time beckons.


China – This week, House Democrats will consider their 2,912-page China package, the “America COMPETES Act.”

The package was developed without any input from House Republicans, who uniformly oppose the bill, owing to its lack of meaningful enforcement measures, its bewildering array of unnecessary government subsidies, and inordinate focus on climate change.  Republicans are particularly incensed that House Democrats have revived several provisions that were rejected during NDAA negotiations last year.

The purpose behind House passage is to get to conference with the Senate’s bill, the “United States Innovation and Competition Act,” or USICA, but the number of proposals and committees involved will inevitably complicate talks.  More than ten committees contributed to the House package, while the Senate’s provisions came from the Finance, Foreign Affairs, and Commerce committees.

One nettlesome task will be reaching compromise between the Senate Finance and House Ways and Means Committees on the eventual legislation’s trade title—as each has drafted language diametrically opposed by the other.  This balancing act could be spoiled by Senate Republicans, who are insisting on the deal cemented by Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID)—a deal that was critical in obtaining Republican votes.

Overall, Republican support could evaporate if the final bill strays too far from the bipartisan Senate package. Republicans, it would seem, have some leverage: they know the White House wants (and some would say, needs) a major legislative win before President Biden’s State of the Union address on March 1st.  So they will demand, with some wind at their backs, that whatever legislation emerges is free of any poison pills House Democrats may want.


Supreme Court – Senate Democrats have been united on President Biden’s Senate-confirmed judicial nominations, and that is not expected to change. The only outstanding questions are the timing of the nomination vote and whether all 50 Democrats stay healthy and in DC to vote quickly.  A nomination may come in the next two weeks, given the narrow field of candidates.

It’s true that Justice Amy Coney Barrett’s nomination took only 30 days; Senate Democratic leaders could accomplish a similar timeline.  However, by the time Justice Barrett’s nomination was announced, then-Senate Majority Leader Mitch McConnell (R-KY) and the Trump Administration had become a well-oiled machine in advancing SCOTUS nominations, having previously vetted and confirmed Justices Gorsuch and Kavanaugh (the latter process being especially brutal). If President Biden selects a nominee that has been recently confirmed by the Senate with bipartisan support, then that nominee could be confirmed by mid-March.


Appropriations – The February 18th government funding deadline is coming fast, with no deal in sight.  There will need to be some movement in negotiations this week, otherwise, a short-term continuing resolution, possibly until early March, will be needed. A deal on top-line spending can eventually be reached, but a deal on policy riders—most politically problematic for both sides being the Hyde Amendment—remain the biggest barrier to an agreement.


Senate Floor – This week the Senate will return to confirming judicial and Biden administration nominees.