Many Republicans have said that a multi-trillion dollar spending bill could exacerbate inflation and undermine the U.S. economy. Labor Department data Wednesday showed the consumer price index in July increased 0.5% from June and 5.4% from a year ago. That’s a less rapid pace than in previous months, but it adds fuel to those concerns.
Translating the budget framework into law will require Biden and Democratic congressional leaders keeping their party’s moderate and progressive wings marching together. -Bloomberg
Yet, legitimate questions remain over whether the bill can pass in the first place, while a September showdown over the debt ceiling will further complicate Congressional efforts to hammer out a deal.
The overall $4.1 trillion economic agenda – consisting of $550 billion in new spending and the $3.5 trillion Democrat wish list – is on a two-track path. While the $550 billion infrastructure legislation passed the Senate on a bipartisan basis, the larger package already has opposition from several key Senate Democrats, while House Speaker Nancy Pelosi has vowed not to advance the $550 billion plan without the other.
On Wednesday, the Senate advanced Biden’s agenda by passing a budget blueprint on the $3.5 trillion plan by a narrow straight party-line vote. Yet, hours after the blueprint passed, Sen. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) said they couldn’t support the bill.
As Bloomberg notes, here’s what’s ahead for a process that could take us into 2022.
Pelosi is interrupting the House’s summer recess by calling lawmakers back to Washington on Aug. 23 to vote on the Senate’s budget resolution – for which she’ll need almost unanimous Democratic support to overcome what’s likely to be significant GOP pushback. Meanwhile, in response to demands by House progressives, Pelosi has put the infrastructure bill on ice until the Senate produces a budget package that addresses social programs and climate change.
Both chambers will begin submitting exact policies and precise language to be included in the massive budget package. Former Democratic Senate Staffer Zach Moller predicts the House will likely go first, as House Democrats are already compiling changes they want to see in the Senate’s final version of the reconciliation package.
The Senate-passed resolution sets a nonbinding Sept. 15 deadline for committees in both chambers to submit proposals to their respective budget panels.
The Senate Finance Committee has jurisdiction over the heart of the package, including the tax hikes on the wealthy and corporations. Other committees can increase the deficit by about $1.75 trillion combined over a decade — meaning up to half of Biden’s plan could be debt-financed. -Bloomberg
And while there’s no deadline on the economic agenda, Democrats also realize they’re racing the November 2022 midterm season, and want various social handouts to take effect this fall so voters can benefit from it before casting their ballots.
Debt ceiling battle
Lawmakers have until Sept. 30 to hammer out unfinished regular government spending bills, or produce a stopgap bill to keep agencies running through at least October or early November. This could include temporarily suspending the debt limit, however doing so could trigger a government shutdown.
As we noted yesterday, Republicans are planning to go “scorched earth mode” over the debt ceiling. On Tuesday, the Wall Street Journal reported that 46 Senators have signed a pledge to force Democrats to raise the debt ceiling via budget reconciliation – a process which doesn’t rely on at least 10 GOP Senators to pass legislation.
In the letter, the Republicans said that Democrats need to take responsibility for the consequences of their spending, including the $1.9 trillion coronavirus-relief package that passed the Senate earlier this year without any Republican support. CBO said last month that faster economic growth spurred by the relief bill will likely offset the measure’s entire cost, and estimated that deficits over the next decade will be slightly lower than last projected in February, before the bill passed. –WSJ
“Democrats, at any time, have the power through reconciliation to unilaterally raise the debt ceiling, and they should not be allowed to pretend otherwise,” reads the letter, which adds that Republicans won’t be a party to boosting the debt limit via stand-alone bills or any other vehicle.
Other obstacles for Democrats include the fact that they can afford just three defectors in the Senate on a party-line vote (via reconciliation).
…not all Democrats are on board with the $3.5 trillion package, even though they all voted for the framework. Some, like Kyrsten Sinema of Arizona and Joe Manchin of West Virginia, say they’re uncomfortable with the price tag or the size of the tax hikes Biden has proposed to help pay for it.
Manchin has also said he disagrees with Democrats who want to target fossil fuels — setting up tension for a key piece of the legislation.
Schumer asserted Wednesday Democrats would ultimately unite, but he acknowledged it wouldn’t be easy. -Bloomberg
Meanwhile, Republicans will do their best to cause fractures within the Democratic party – and will argue that higher taxes and spending will lead to inflation. According to the report, Republicans can also use special Senate rules to force nearly unlimited amendments trying to undermine individual provisions.
I am one who believes that neither party wins with government shut down or certainly government default so I lean toward being a little more optimistic that the latter will be avoided,” said former Senate Budget Committee Republican staff director Bill Hoagland, adding “But this is really an uncertain time.”
Via Zero Hedge