November 12, 2021
What to expect in Washington (November 12)
The November 10 Labor Department report of inflation rising 6.2% over the last 12 months could affect the Build Back Better Act reconciliation bill. Senator Joe Manchin (D-WV), who has been raising inflation concerns for months in calling for a smaller bill, said in a tweet: “By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse. From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day.”
The effects of the inflation report aren’t clear-cut. The Washington Post reported that a senior Administration official “disputed any notion that the president’s economic agenda — either the recently passed bipartisan infrastructure deal or the pending Build Back Better legislation — would exacerbate the inflationary problems. Instead, the official argued Biden’s agenda would help alleviate the problem because both pieces of legislation are focused on increasing economic capacity.”
Reconciliation timing – Axios cited unnamed sources in reporting that Senator Manchin could call for a delay in the package for the remainder of the year as Congress faces the expiration of government funding December 3 and the need to address the debt limit sometime in December. Manchin wants detailed analyses of the spending and tax provisions under the reconciliation bill, also sought by House moderates.
The Congressional Budget Office this week said some reconciliation estimates would be ready soon and others will take longer. Progressive Democrats said they expect moderates – who withheld support pending CBO estimates – to support a vote next week even if the estimates aren’t complete. Speaker Pelosi (D-CA) also expects House consideration next week after getting close to a vote last Friday, December 5. Majority Leader Chuck Schumer (D-NY) targeted the week of November 15 for Senate consideration, which Senator Manchin previously said was possible, though that was before the House holdup and inflation news.
The New York Times reported that the “timing is uncertain in the Senate, where a vote is likely to be changed or delayed in response to Mr. Manchin’s concerns,” in a story focused on the White House message that the spending package can actually reverse rising inflation. “The White House says the provisions of the bill that put money in families’ pockets, such as child care help, are not simple stimulus. They will allow caregivers into the labor market, they argue, an investment in the economy’s future that will allow it to produce more with time. That makes the new program different from the spending passed earlier this year.”
There is no deadline for the social spending reconciliation bill, though Democratic leaders will almost certainly want it wrapped up before the end of the year if not sooner. All this year, there has been a sentiment among Democrats to act big while they hold power in Washington and to avoid time-consuming disputes like those on climate and the Affordable Care Act (ACA) a little more than a decade ago. A separate NYT political memo said: “Democrats now have a Washington trifecta — command of the White House and both chambers of Congress. If the results of last week’s elections in Virginia and elsewhere are any indication, they may not retain it after next November’s midterm elections… The unusual structure of American government, combined with the electorate’s reflexive instinct to check the party in power, makes it hard for any party to retain a hold on both the White House and Congress for long.”
Tax gap – CBO is responsible for estimating the spending portions of the reconciliation plan, as well as the IRS enforcement funding initiative aimed at combating the tax gap. The latest Biden framework counted $400 billion in tax gap savings, though a top Ways & Means Democratic staffer said this week that the savings may be less than that; included as a footnote because revenue from such funding isn’t scoreable under budget rules; and possibly make the difference between the bill being fully paid for or not.
IRS Commissioner Charles Rettig made the case for the $80 billion funding boost in a November 11 Washington Post editorial. “The status quo is untenable: It’s frustrating to taxpayers, it’s frustrating to our employees and it’s frustrating to me,” he wrote. “Today, we have fewer than 15,000 people to handle more than 240 million calls received in the first half of this year alone. We have fewer auditors than at any time since World War II.”
Energy - Senator Manchin said Thursday he opposes a proposal in the House reconciliation bill that would give union-made U.S. electric vehicles a $4,500 tax incentive. Manchin's comments came at an automaker event to announce an investment in West Virginia manufacturing. “We shouldn’t use everyone’s tax dollars to pick winners and losers,” he said.
Debt limit – Democratic leaders were still saying prior to this week’s congressional recess that addressing the debt limit should be bipartisan and that they don’t have plans to deal with the issue in the context of the reconciliation package. Treasury Secretary Janet Yellen said this week, “I believe that both Republicans and Democrats should do it. It's a kind of housekeeping chore.” Republicans have indicated they are not inclined to support an increase or suspension in the limit.
Infrastructure – President Biden and Senator Manchin have been highlighting the benefits of the Infrastructure Investment and Jobs Act (H.R. 3684), which will be signed in a ceremony on Monday, November 15. Tax provisions in the bill include:
The bill is available here.
A Senate summary is available here.