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Hearings with Treasury Secretary Yellen in the tax-writing committees this week gave the impression that inflation could be used to make a case either for or against a reconciliation bill deal being discussed by Senator Joe Manchin (D-WV) and Majority Leader Chuck Schumer (D-NY). Senator Manchin and President Biden say addressing inflation is a top priority and Democrats have been united in messaging that it should be addressed with policies to reduce energy and health costs, which are main elements of the bill under discussion. But they are being hammered by Republicans who say the $1.9 trillion March 2021 American Rescue Plan Act (ARPA) caused inflation, which may make it difficult to defend even more new spending.

The June 8 Ways & Means Committee hearing was dominated by relitigating the need for, and inflationary effects of, the ARPA. Ranking Member Kevin Brady (R-TX) criticized the law and Secretary Yellen's downplaying of the bill's inflation risks at the time, saying "now we face a looming economic recession and high inflation, for perhaps years." Secretary Yellen said ARPA was "hugely successful" in confronting employment and other challenges and preventing a prolonged economic downturn but acknowledged that inflation is high. "The clean-energy proposals that were in the House-passed Build Back Better Act would end up lowering utility costs for households," she said. Secretary Yellen and some Committee Democrats asserted that high gas and food prices are attributable to the war in Ukraine, and that inflation is also high in other nations.

Chairman Richard Neal (D-MA) said the ARPA's expansion of ACA advanced premium tax credits was vital to "ensuring the safety and economic wellbeing of all members of the American family. Millions were able to enroll in a quality plan for $10 or less per month, and families saved an average of about $2,400 a year on their insurance premiums. Absent action, we will see more uninsured and higher health care premiums … " Secretary Yellen said the credits "really made a huge difference in the lives of working families," and extending the policy "would mean that the help that they have received over the last two years would continue to be available. It would put more money in their pockets to address everyday needs … It's resulted in a large expansion of coverage and lowered costs and I believe it should be extended."

The Ways & Means hearing demonstrated inflation challenges Democrats face. A June 8 New York Times story discussed "how today's rapid price increases, the fastest since the 1980s, pose a glaring political liability that looms over every major policy decision the White House makes — leaving Mr. Biden and his colleagues on the defensive as officials discover that there is no good way to talk to voters about inflation." It said, "How to portray the Biden administration's stimulus spending is far from the only challenge the White House faces. As price increases last, Democrats have grappled with how to discuss their plans to combat them."

The Wall Street Journal reported, "Frustration has been mounting within the White House as Mr. Biden's approval ratings remain stuck around 40%, gasoline prices hit record levels and advisers disagree over whether they misjudged inflation and helped fuel it with their own policies … After spending months engaged in intense negotiations with Congress over his domestic agenda — talks that ultimately collapsed when Mr. Manchin said he couldn't support Mr. Biden's broad proposal — the White House has taken a more cautious approach. Many Democrats now say they would take any deal produced by the latest talks with Mr. Manchin, a significant move away from what lawmakers from different factions of the party said in November."

Senator Manchin said after another meeting with Leader Schumer June 9, "We're talking. We'll see. I don't know. I have no clue" whether something will come together, Politico reported.

Senate Budget Committee Chairman Bernie Sanders (I-VT) said in a Politico article that Democrats need to do something: "You really can't win an election with a bumper sticker that says: 'Well, we can't do much, but the other side is worse.'" Senator Sanders wants to describe a grand plan for what Democrats could do in power in 2023, rather than pinning hopes on modest legislation between now and the midterms that some members are relying on to shift the political winds in their favor. "Say to the American people: 'Look, we don't have the votes to do it right now. We have two corporate Democrats who are not going to be with us,'" Sanders said. "The leadership has got to go out and say we don't have the votes to pass anything significant right now. Sorry. You got 48 votes. And we need more to pass it. That should be the message … "

Global tax — Secretary Yellen did say during the Ways & Means Committee hearing that she is confident the EU will adopt the Pillar Two minimum tax directive, which has thus far been blocked by Poland. "I'm very encouraged that most major economies are moving forward in adopting it. The European Union, I believe will adopt it soon," she said of the global tax agreement generally. "We've talked with Poland, and I'm very hopeful that Poland will soon decide that it's in their interest to agree to this. I've tried to explain to their senior leadership that it is not only in the U.S. interests, but also in Poland's interests to reduce the prevalence of tax shelters around the world, and it will help them compete better."

FTC regulations — Also during the hearing, Rep. Brad Schneider (D-IL) said of January 2022 foreign tax credit regulations, "I was glad to hear that the Treasury is considering issues we raised — a safe harbor on the royalties issue and additional guidance on the cost recovery provisions. And in light of the forthcoming guidance, which I applaud Treasury for providing, I do believe there's a case to be made for a modest delay in the effective date for certain of the coming FTC changes."

IRS leaks — Ranking Member Brady also raised the issue of IRS leaks following last year's report on "How the Wealthiest Avoid Income Tax," saying, "Today also marks one year since ProPublica first published illegally disclosed taxpayer information. They are using the data for a politically motivated agenda, and claim to have a vast trove of years and years of confidential taxpayer information. Yet neither Congress nor the public has gotten any answers from Treasury on how this private data was leaked."

Competition bill — Bloomberg reported of the USICA/COMPETES competition bill June 9, "Republicans who had worked with the administration on the measure are now balking at giving Biden a win ahead of the November election, with their party poised for big gains in Congress, the people said. Instead, they aim to write their own China bill after taking control of the House, Senate, or both." The story also noted that issues like gun safety have sidelined other work, including the chips bill. "'There needs to be a greater sense of urgency,' said Senator Mark Warner, a Virginia Democrat who is one of the authors of the chips legislation. 'I worry that there's some of us, this is our top priority, but it feels like for too many, this is their second.'"

Congress — Rep. David Kustoff (R-TN) has been selected to join the House Ways & Means Committee.

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