11.16.2021 Washington Update

Reconciliation – Now that the Congressional Budget Office will finish its score of the House reconciliation bill by COB Friday, will the 5 House Democrats who demanded a full CBO score before voting on it resist pressure from leadership and progressives to vote this week?

Time will tell.  More time for the “Build Back Better Act” is necessary, but it’s no friend to the majority.  Whatever happens with House moderates—Will they wait for CBO? Will they demand more changes?  Will they balk on final passage? —one thing is certain: the process around reconciliation, not to mention the messy politics, will drag well into December, possibly right up to Christmas, testing the patience of those exhausted with the entire effort.

Consider what lies ahead:

  • Assuming the House passes the bill, possibly sometime this weekend, or even early next week, it will be held at the desk for the required “privilege” scrub, to ensure it conforms to Senate rules.
  • Byrd Rule challenges (for the most part) haven’t formally commenced—and won’t until the Senate Parliamentarian has final language and CBO scores in hand—and could take weeks to finish.
  • The Senate will make additional changes, some substantive (and controversial), which, among other things, could complicate CBO and Joint Tax Committee’s scoring efforts.
  • The House will have to vote again on whatever the Senate (inevitably) changes and (possibly) passes.

Senate Minority Leader Mitch McConnell (R-KY) said it best: “Whatever the House does is irrelevant.  The final bill is gonna be written in the Senate, and it’ll be written by two people.”  With his typical wry succinctness, McConnell seized on a central fact, and indeed, a potentially fatal flaw, in this entire process.

Which leads to the politics.  With inflation raging—see the CPI numbers released last week—and showing no sign of abating (i.e., it’s not transitory), throwing an additional $1.75 trillion on the fire may not be the tonic the economy needs.  This seems to be Sen. Joe Manchin’s (D-WV) position.  “From the grocery store to the gas pump,” Manchin tweeted last week, “Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day.”

During his press conference earlier this month, Manchin was equally emphatic:

Throughout the last three months, I have been straightforward about my concerns that I will not support a reconciliation package that expands social programs and irresponsibly adds to our nearly $29 trillion in national debt that no one else seems to care about. Nor will I support a package that risks hurting American families suffering from historic inflation.

Inflation is no doubt the issue of the day, and it’s not just Manchin’s fixation.  Republicans from House Minority Leader Kevin McCarthy (R-CA) to McConnell and the rank-and-file are pouncing on it—fingering the BBA as a major cause of consumer woes.  As winter approaches, it won’t just be the price of bacon and gasoline spurring complaints; home heating prices (propane, natural gas) are expected to skyrocket.  Energy policy will quickly become top of mind, including provisions in reconciliation (e.g., the methane tax) to make it more expensive.  Expect to hear more on this, from Manchin, Republicans, and perhaps others, in the coming weeks and months.

But that’s not all.  Senate Budget Committee Chairman Bernie Sanders (I-VT) continues to push for health care changes that Manchin and Sen. Krysten Sinema (D-AZ) may not abide.  Sen. Bob Menendez (D-NJ) wants immigration provisions that could (again) run afoul of the Parliamentarian.  And what happens if House progressives see their priorities diluted or deleted in the Senate bill?  Maybe all this comes together in the next five weeks, and celebration in the Rose Garden is within reach.  But the road ahead looks bumpy to say the least.

Appropriations – Speaking of bumpy roads, the outlook for a deal on FY 2022 spending is bleak.  When Congress returns from Thanksgiving break, expect another continuing resolution to keep government funded until Dec. 17th (or thereabouts).  Barring any breakthrough on negotiations, which seems unlikely at this stage, we may see another CR extending to January, or even February.

A few weeks ago, Democrats released their draft spending bills, replete with favored policy riders, and have since demanded Republicans provide detailed counterproposals.  For their part, Republicans say the riders are “poison pills” that must be discarded before they will begin discussions on topline numbers for defense and nondefense spending.

Some Republicans, such as Senate Appropriations Committee Ranking Member Richard Shelby (R-AL), are speculating about a year-long CR, and seem perfectly fine with it.  “We could be headed for a yearly CR,” Shelby said.  “A lot of people would like that. One that keeps all the riders off, you know? Think of that from our standpoint.”  Rep. Mike Simpson (R-ID), a senior Republican House appropriator, said, “If they want to have the Trump budget for another year, that’s fine with me.”

Complicating discussions are the questions surrounding reconciliation, which includes hundreds of billions in new federal spending.  For many, it seems futile to negotiate annual appropriations bills until reconciliation is completed.

Debt Limit – Meanwhile, the debt limit remains a constant background irritant.  Just when it rears its ugly head is anyone’s guess, but it seems the so-called “X date” will come later in December, and possibly in January or February.  But Treasury Secretary Yellen, and seemingly the entire financial community, wants the issue resolved quickly.  Waiting until after Christmas—if that’s even feasible—seems politically risky, but the crowded Senate calendar may not allow any other option.

The 11 Republicans, including McConnell, who voted for the last short-term debt limit deal, continue to signal unwillingness to help Senate Majority Leader Schumer (D-NY) again.  Thus, forcing Democrats to raise the debt limit via reconciliation, something they are loath to do, seems likely.

To make that process more palatable, Senators Lindsey Graham (R-SC) and Pat Toomey (R-PA) are working on an expedited process.  To wit: During the Senate Budget Committee markup, Republican members would abstain from filing amendments, which would help get the legislation to the floor more quickly.  Republicans could then limit amendments under the ensuing vote-a-rama, limiting debate time (note: given germaneness requirements, there’s not much Republicans could do under Budget Committee jurisdiction anyway).

 NDAA / Senate Floor – Hundreds of amendments have been filed to the Senate’s FY2022 National Defense Authorization Act, which is expected to be considered on the Senate floor this week. The Senate Armed Services Committee continues to work on an amendment package, while simultaneously working on pre-conferencing with their counterparts on the House Armed Services Committee.

 Schumer has also teed up the following nominations to be considered:

  • Graham Steele to be an Assistant Secretary of the Treasury
  • Robert Bonnie to be Under Secretary of Agriculture for Farm Production and Conservation, and
  • Brian Eddie Nelson to be Under Secretary for Terrorism and Financial Crimes

The Senate may also proceed to a vote on the confirmation of Jonathan Kanter to be an Assistant Attorney General, at a time to be determined.