Spending Showdowns in Congress Test Pelosi’s Skills

Where’s EPA’s RFS details?

Washington Focus

The House and Senate are in session.

Lots of talk and background work continue on spending issues in Washington: (1) A stopgap spending (CR) bill before the new fiscal year begins Thursday, Oct. 1; (2) A decision on whether to pull debt suspension language from the CR (the Dems will yank the language as it’s the only way to avoid a gov’t shutdown); and (3) Negotiations among House and Senate Democrats regarding traditional and human infrastructure bills.

The following is a weekend update on the latest spending issues. Check Monday’s Policy Updates for even more on this spending saga.

Biden defends his social agenda bill, saying the cost will be zero. “Every time I hear this is going to cost A, B, C, or D — the truth is, based on the commitment that I made, it’s going to cost nothing,” President Biden said at a press conference Friday, trying to restore momentum to the reconciliation package, “because we’re going to raise the revenue” through tax hikes on the wealthy and corporations.
Timing. Biden expressed confidence that he would ultimately sign the pillars of his “Build Back Better” plan, but he acknowledged the legislative process is “just going to take some time.” He said he did not expect the plans to be completed until the end of the year, although he quickly backed off those comments, suggesting it could be sooner.

As for others on timing, House Majority Leader Steny Hoyer (D-Md.) sketched out a “possibility” that both a bipartisan infrastructure bill — which cleared the Senate earlier this year — and the second $3.5 trillion package could be voted on as soon as the coming week (very unlikely).

House Speaker Nancy Pelosi (D-Calif.) announced Saturday that she wanted House Democrats to pass the bipartisan infrastructure bill, the reconciliation package and government funding this coming week. “We will have a vote when we have the votes,” Pelosi said. But she wrote in a public letter that the House would take up both pieces of legislation in the coming week amid “intense dialogue” between Democrats. House Democrats will honor their commitment to moderates and vote early in the coming week on a $1.2 trillion bipartisan infrastructure bill, Pelosi said Friday. "It will come up on Monday," the Speaker said, regarding the traditional infrastructure measure. Whether the bill will pass, however, remains an open question. And liberals are already predicting it won't as the next item shows.
Quick recap of intraparty squabbles among Democrats: All of them support a separate, $1 trillion traditional infrastructure bill that passed the Senate with bipartisan support. But progressives (liberals) say they will vote it down on Monday unless moderates back their vision of a $3.5 trillion reconciliation package that includes human infrastructure spending, a price tag that must be lowered to attract Senate Democratic moderates. House moderates want the infrastructure bill to pass whether or not there is agreement on reconciliation; the country needs it now, they say, and Democrats could show they can deliver. Progressives worry they would then lose leverage in future reconciliation negotiations. House and Senate Republicans are sitting on the sidelines watching the Democrats trying to reach successful conclusions.
House progressives have threatened to block the $1 trillion traditional infrastructure bill in a bid to pressure moderates to support the $3.5 trillion human infrastructure/reconciliation legislation. “That bill, it cannot pass,” Rep. Pramila Jayapal (D-Wash.), the chairwoman of the Congressional Progressive Caucus, said of the infrastructure bill. “It can only come to the floor once everyone’s agreed and once the Senate has voted on” the $3.5 trillion effort. No vote has been scheduled in the Senate. Rep. Ilhan Omar (D-Minn.), an ally of Jayapal, said the situation in the caucus is “not as tense” as it was several weeks ago. “I trust the speaker will come up with the best strategy forward,” she said.
Friday morning meeting. National Economic Council Director Brian Deese and White House legislative affairs director Louisa Terrell met with the Blue Dog Coalition, a group of centrist House Democrats, on Friday morning to discuss the two bills. Lawmakers pushed for the infrastructure vote to take place Monday, a date top Democrats agreed to last month. Meanwhile, the White House said Biden spoke with Pelosi and Senate Majority Leader Chuck Schumer (D-N.Y.) again on Friday afternoon and would stay in touch with them over the weekend.
The House Budget Committee passed the $3.5 trillion Build Back Better Act on Saturday, but that’s not the reconciliation package that the House will vote on. The markup didn’t settle issues such as the price tag or key policy disputes. “We put all of them together and that’s the bill,” Budget Chair John Yarmuth (D-Ky.) said. “Link to text. Democrats held the markup without Congressional Budget Office (CBO) scores for all 13 pieces of legislation. CBO had only scored four portions of the package as of Friday. Rep. Jason Smith (R-Mo.), the Budget panel’s top Republican said the combined spending in the bill is $4.3 trillion, partly offset by $2.1 trillion in revenues, which leaves about $2.2 trillion to be deficit financed.
Here is Pelosi’s “Dear Colleague” letter, which went out late Saturday afternoon:

Dear Democratic Colleague,

September 30th is a date fraught with meaning. This week, we must pass a Continuing Resolution, Build Back Better Act and the BIF.

On Thursday, the Build Back Better Act was sent to the Budget Committee for mark-up. As I write to you, the Budget Committee is marking up the bill. As negotiations continue with the Senate, changes will be handled under the Rules Committee led by Chair Jim McGovern.

The next few days will be a time of intensity. We sent a CR to the Senate and are awaiting their action to avoid a shutdown. We must pass the BIF to avoid the expiration of the surface transportation funding on September 30. And we must stay on schedule to pass the reconciliation bill so that we can Build Back Better.

The Build Back Better Act is a jobs bill for the future: addressing the empowerment of women in the workplace and creating good-paying green jobs by tackling the climate crisis. The jobs initiatives relating to child care, home health care, paid family and medical leave, universal pre-K and more are transformative. The legislation also helps middle class families by making health care costs and prescription drug prices more affordable.

The initiatives of the Build Back Better Act are ones in which President Biden takes a great pride, which House and Senate Democrats share. Build Back Better will cut taxes for the middle class, create more jobs, lower costs for working families and make sure the wealthiest and corporations pay their fair share.

The Caucus will hold a meeting on Monday at 5:30 p.m. ET. I urge the fullest participation of Members and hope that as many of us can be there in person as possible.

Proudly, I have never seen as big a consensus as we have around the Build Back Better initiative. Again, I thank Chairs, Members, staff and all who have participated, doing so with the urgency that is required.

Thank you for your leadership For The People.

Next step: The House Democratic Caucus will meet Monday evening at 5:30 p.m. ET to discuss its strategy moving forward.
Final price tag. Biden revealed how he was trying to coax members of his party toward a compromise: asking what their priorities are and adding up the costs, rather than starting by haggling over the final price tag. “Forget a number. What do you think we should be doing?” Biden said, recounting his talks with Democratic lawmakers. “Is it appropriate, in your view, to cut taxes for working-class people by providing for day care, providing for early education, 3 and 4 years old?” He added: “Several of them, when they go through their priorities, it adds up to a number higher than they said they were for.”
Biden supports a plan by Senate Finance Committee Chairman Ron Wyden (D-Ore.) that would impose annual taxes on billionaires’ unrealized capital gains (the proposal was not included in the legislation that the House Ways and Means Committee approved earlier this month). Under current law, people pay capital gains taxes only if they sell an asset. At death, those unrealized gains aren’t subject to income taxes and heirs only must pay capital-gains taxes when they sell and only on gains since the prior owner’s death. That rule, known as the tax-free step-up in basis, gives wealthy people an incentive to hold on to their assets and borrow against them to finance their lifestyles. Estate taxes can still apply. Democrats view the current rules as an unjustified giveaway to wealthy people who can build fortunes without paying income taxes. Biden proposed treating death as a taxable event for income-tax purposes, with a $1 million per-person exemption and special rules for family-owned farms and businesses. But congressional Democrats from farm states have effectively killed that idea, dismissing even larger exemptions and carve-outs for farmers. Under Wyden’s plan, for billionaires only, annual gains in wealth would be treated as income. So, under current law, someone whose net worth rose to $22 billion from $20 billion and sold nothing would have no income. Under Wyden’s proposal, that person would have $2 billion of taxable income. One challenge for the proposal is that it would need to deal with losses. Reports note that lawmakers could allow deductions for annual losses while also imposing limits on those deductions or allowing them to carry forward to offset gains in future years. Such a tax could also be potentially vulnerable to legal challenges as going beyond Congress’s power to tax incomes. (Note: My Signal to Noise podcast Monday morning, with Chip Flory, will include tax specialist Paul Neiffer, so if you have any questions, ask them. The podcast starts at 8:15 a.m. CT.)
U.S. could default on debt as soon as Oct. 15: analysis. The U.S. is on track to default on the national debt sometime between Oct. 15 and Nov. 4 if Congress is unable to raise the federal debt ceiling, according to a forecast (link) released Friday by the Bipartisan Policy Center (BPC). BPC’s new projections narrowed their expected window in which the U.S. is likely to hit the “x-date,” the day when the Treasury Department runs out of cash to meet the country’s obligations. The U.S. has never defaulted on its debt. Outlook: Democrats will include a debt limit suspension in a scaled-back human infrastructure bill via reconciliation or they could do a separate reconciliation bill for the debt ceiling suspension.

— Here are some likely bottom-lines for the key issues discussed:

A stopgap spending bill without a debt limit suspension, but one including billions in aid for 2020 and 2021 ag disasters.
Dems will include a debt limit suspension in a reworked and much-scaled back human infrastructure bill via reconciliation. Or, Dems could just do a separate reconciliation bill just to raise the debt ceiling. That would be faster than adding to a bigger recon bill.
A House delay from a promised Monday vote on traditional infrastructure unless Pelosi works another deal with her moderates and progressives (liberals).

Wait… no EPA announcement on RFS details on Friday? No, despite Sen. Chuck Grassley (R-Iowa) saying the info would be out Friday afternoon. More accurate on the timing was Rep. Cindy Axne (D-Iowa) who said on AgriTalk Friday morning that the RFS info would not come out Friday.

Now the rumor-rife biofuel sector is wanting to know if a last-minute push to get the White House involved is successful in turning around rumored mandate levels first reported by Reuters (link). The only certain thing is another Friday afternoon was wasted waiting to see if the RFS rumor mill was correct… it wasn’t, again.

The House Ag Committee is scheduled to hold a hearing Wednesday on wildfires and there are reports that the Ag panel may be eyeing a hearing on competition in the livestock sector.

Several Senate nominations are on tap this week. The Senate move past roadblocks from Sen. Ted Cruz (R-Texas) to push forward several State Department nominations, with final votes coming as soon as the week ahead. Cruz had put holds on many of them in protest of the Biden administration’s leniency on the Nord Stream 2 pipeline.

Economic Reports for the Week

The Federal Reserve stays front and center, with Chairman Jerome Powell testifying before Congress and a host of other Fed officials speaking at events (see details below). Powell testifies twice before Congress on the pandemic and the policy response to it. Treasury Secretary Janet Yellen will join him for the hearings Tuesday and Thursday. Powell also appears on a European Central Bank panel with other central bank leaders Wednesday.

Monday, Sept. 27

Chicago Fed President Charles Evans
Census Bureau releases the durable goods report for August. New orders for manufactured durable goods are expected to rise 0.6% month over month to $258.7 billion, after a 0.1% decline in July. Excluding transportation, new orders are seen gaining 0.5%, less than the previous 0.8% rate.
Fed Governor Lael Brainard

Tuesday, Sept. 28

Advance economic indicators
Chicago Fed’s Evans
S&P CoreLogic releases the Case-Shiller National Home Price Index for July. Economists forecast a 20% year-over-year jump, which would be the fourth consecutive monthly record increase for the index.
FHFA home prices
Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen before Senate Banking, Housing and Urban Affairs Committee on pandemic response
Conference Board releases its Consumer Confidence Index for September. Consensus estimate is for a 114.5 reading, roughly even with the August figure.
Fed Governor Michelle Bowman
Atlanta Fed President Raphael Bostic
St. Louis Fed President James Bullard
Treasury Secretary Janet Yellen deliver the keynote address at the 63rd National Association for Business Economics annual meeting. The theme of this year’s confab, which runs from Sept. 26 to Sept. 28, is “Shocks, Shifts, and the Emerging Economic Landscape.”

Wednesday, Sept. 29

MBA Mortgage Applications
National Association of Realtors releases its Pending Home Sales Index for August. Expectations are for a 1% month-over-month rise, after a 1.8% dip in July.
Fed Chairman Powell on European Central Bank panel
Atlanta Fed’s Bostic

Thursday, Sept. 30

Jobless Claims
Real GDP Q2
Institute for Supply Management releases its Chicago Purchasing Manager’s Index for September. Economists forecast a 64.7 reading, about two points less than the August data.
Fed Chairman Powell and Treasury Secretary Yellen before House Financial Services Committee
Atlanta Fed’s Bostic
Philadelphia Fed President Patrick Harker
St. Louis Fed’s Bullard
Chicago Fed’s Evans
Fed Balance Sheet
Money Supply

Friday, Oct. 1

Bureau of Economic Analysis reports personal income and spending for August. Income is expected to rise 0.3% month over month, while spending is seen increasing 0.7%. This compares with gains of 1.1% and 0.3%, respectively, in July.
Personal consumption expenditure data, which the Federal Reserve monitors for its inflation index.
Monthly vehicle sales
Manufacturing PMI
ISM manufacturing
Consumer sentiment
Census Bureau reports construction spending data for August. Consensus estimate is for construction spending to rise 0.4% month over month to a seasonally adjusted annual rate of $1.58 trillion.
Philadelphia Fed’s Harker

Key USDA & international Ag & Energy Reports and Events

Thursday brings some key USDA reports via its Grain Stocks and Small Grains Summary. Pro Farmer reports that analysts have consistently missed the mark on pegging quarterly stocks, especially for corn, so the Sept. 30 Grain Stocks Report could have some surprises. Any surprises for wheat, Pro Farmer adds, would likely come from the Small Grains Summary. Pro Farmer anticipates USDA will cut spring wheat harvested acreage to reflect more abandonment than previously estimated.

Monday, Sept. 27

Ag reports and events:

Export Inspections
Crop Progress
Peanut Stocks and Processing