August 6, 2021
What to expect in Washington (August 6)
Infrastructure bill – The Senate continued to process the $1 trillion bipartisan infrastructure bill (HR 3684) Thursday, which would provide about $550 billion in new spending above current levels on roads, bridges, transit, broadband and other areas. An effort to wrap up the bill earlier than expected by moving a group of agreed-upon amendments and working through the night ultimately failed. Majority Leader Chuck Schumer (D-NY) filed cloture on the bill in the afternoon, setting up a vote to cut off debate, and announced on the floor shortly before midnight that the Senate would reconvene at noon on Saturday for the cloture vote, which will have a 60-vote threshold. “And then we will follow regular order to finish the bill,” Schumer said. On Friday, several senators are expected to attend the funeral in Wyoming of former Senator Mike Enzi (R-WY), who died after a bicycling accident. Schumer said the Senate had voted on 22 amendments to the infrastructure bill so far but did not manage a single amendment vote on Thursday: “We have been trying to vote on amendments all day but have encountered numerous objections from the other side.”
Several news sources reported that the senator who objected to expediting consideration of the bill was freshman Bill Hagerty (R-TN). The release of a Congressional Budget Office (CBO) analysis yesterday projecting that the infrastructure bill would not come close to paying for itself (see below) likely did not help the bipartisan push to finish action on Thursday night. A Hagerty spokesman told Politico that the senator “cannot in good conscience agree to expedite a process immediately after the CBO confirmed that the bill would add over a quarter of a trillion dollars to the deficit.” Presuming cloture is invoked Saturday on the substitute amendment to the underlying bill offered by Sens. Rob Portman (R-OH) and Kyrsten Sinema (D-AZ) -– which contains the 2,700-page text negotiated by the bipartisan group -- the Senate will then have up to 30 hours of “post-cloture debate,” then a vote on adopting the substitute amendment, then up to 30 more hours before another cloture vote on the bill as amended. The final passage vote could come on Monday or Tuesday, perhaps earlier if all senators agree to yield back time.
Under Schumer’s timetable, after the infrastructure bill is completed, the Senate will immediately turn to a motion to proceed to the Democrats’ $3.5 trillion, fiscal 2022 budget resolution, followed by up to 50 hours of debate culminating in what is likely to be a late-night marathon “vote-a-rama” of amendment votes sometime next week. It is possible the House could interrupt its August recess to come back and vote on the Senate-passed budget blueprint. The budget resolution, when passed in identical form by both chambers, unlocks the 51-vote budget reconciliation mechanism, and House and Senate committees will work to flesh out their assigned pieces of the massive, Democrats-only bill in September and October.
CBO estimate - The bipartisan group’s assertion that their infrastructure bill was “fully paid for” took a hit on Thursday when the CBO released an estimate predicting HR 3684 would increase the federal budget deficit by $256 billion over 10 years. Among the bill’s pay-for provisions, CBO said two would produce far less revenue than Senate negotiators had thought. The Portman-Sinema group had said the bill would save about $210 billion by repurposing unspent funds from previous pandemic relief bills, but CBO said those provisions would only reduce outlays by about $13 billion over 10 years. The group also had contended the bill would spur economic growth leading to $56 billion in new revenue, a feature called dynamic scoring, but the CBO analysis did not include any estimate of the bill’s macroeconomic impact. A statement in response to the report by Sens. Portman (R-OH) and Sinema (D-AZ), the bill’s lead negotiators, said, “The new spending under the bill is offset through a combination of new revenue and savings, some of which is reflected in the formal CBO score and some of which is reflected in other savings and additional revenue identified in estimates, as CBO is limited in what it can include in its formal score.”
Amendments to the infrastructure bill considered thus far include:
Cryptocurrency – The Wall Street Journal reported that Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Pat Toomey’s (R-PA) amendment to the cryptocurrency tax reporting provisions of the infrastructure bill could open the door to compromise on the issue, which Sen. Portman (R-OH) was warming to. “Our amendment makes clear that reporting does not apply to individuals developing blockchain technology and wallets,” said Wyden. Politico reported August 4 that “the administration, which had advised the larger bipartisan group of lawmakers who put together the infrastructure plan,” was resisting changes to the provisions. Late August 5, it was reported that the Administration supported a new cryptocurrency amendment by Portman and Sens. Mark Warner (D-VA) and Kyrsten Sinema (D-AZ), though details were unclear. A vote on one or both crypto amendments, if they take place, would likely happen Saturday or Sunday.
Debt limit – Politico reported earlier this week that Democrats have decided not to include an increase to the nation’s borrowing authority in their $3.5 trillion budget reconciliation bill, and instead planned to put the debt limit measure in a continuing resolution (CR) to keep the government running before funds expire on September 30. Such a process would likely require 60 votes, with Democrats essentially daring Republicans to vote against the bill, with economic catastrophe resulting if the U.S. were to default on its debt for the first time in history. Democratic moderates reportedly requested that the debt limit measure not be included in the reconciliation bill. But on the Senate floor Thursday morning, Minority Leader Mitch McConnell (R-KY) said Senate Republicans would not vote to increase the debt ceiling. “If our colleagues want to ram through yet another reckless tax and spending spree without our input, if they want all this spending and debt to be their signature legacy, they should leap at the chance to own every bit of it,” McConnell said. “So let me make something perfectly clear: if they don’t need or want our input, they won’t get our help with the debt limit increase that these reckless plans will require. I could not be more clear. They have the ability to control the White House, to control the House, to control the Senate. They can raise the debt ceiling.“ Democrats pointed out that Republicans had voted to suspend the debt limit with little fanfare during Donald Trump’s presidency. “To create a fake crisis at this moment with this much going on in the world and this much going on in this country, with us coming out of Covid and dealing with the variant, would be the epitome of irresponsibility,” Sen. Mark Warner (D-VA) said. “I just point back to how we treated it under Trump.“
Derivatives – Finance Committee Chairman Wyden on August 5 introduced the Modernization of Derivatives Act. The bill would change the tax treatment of derivatives, generally requiring mark to market treatment, and make changes to the straddle rules. The bill would also extend ordinary tax treatment to debt investments held by insurance companies. “While working folks pay tax with every paycheck, wealthy investors exploit gaping holes in the tax code to avoid paying tax on profits from their bets on financial markets. It’s a double standard, and we’re going to put an end to it,” Wyden said. “Under my bill, wealthy investors would pay tax on their gains every year—just like working people do.” Chairman Wyden previously released a discussion draft of the proposal in 2016, and a bill in 2017.
Carried interest – Also August 5, Chairman Wyden and Sen. Sheldon Whitehouse (D-RI) introduced the Ending the Carried Interest Loophole Act addressing both re-characterization of income from wage-like income to lower-taxed investment income and deferral of tax payments. “Previously introduced bills address half of the problem—re-characterization of income,” a press release said. “The Joint Committee on Taxation (JCT) estimates that Wyden’s bill would raise $63 billion over 10 years, whereas previously introduced bills that did not address deferral of tax payments would raise just $15.6 billion over 10 years.” Under the bill: