Biden’s Economic Plan Hinges on Party Unity After Procedural Win

President Joe Biden now likely has several chances to pass parts of his economic agenda without needing any Republican votes, but that doesn’t solve his biggest problem: keeping his own party unified.

Democrats could have at least three more chances in 2021 to pass legislation with a simple majority, instead of the 60 votes needed to overcome a Republican filibuster, thanks to a Monday ruling from Senate Parliamentarian Elizabeth MacDonough.

The details of that ruling and what it would mean in practice are still being litigated behind the scenes, but won’t change the basic math governing Washington: Biden needs support of all 50 senators who caucus with Democrats, including West Virginia’s Joe Manchin, who has already expressed some reservations.

And bills that go through the budget reconciliation process must be fiscal in nature, limiting what can pass without any Republicans. All of these factors will determine how Biden’s $2.25 trillion of measures is packaged to have the best chance of getting through both chambers of Congress with narrow Democratic majorities.

Democrats already used reconciliation once this year to pass the $1.9 trillion coronavirus-relief bill without any GOP votes. Republicans used the same process to pass their tax overhaul in 2017, and Democrats used it in 2010 to pass portions of the Affordable Care Act.

White House Press Secretary Jen Psaki said Tuesday the administration wants to see progress on its stimulus package by May and passed by the summer, but she didn’t address how reconciliation could be used. She said the White House continues to believe “there’s a bipartisan path forward.”

Tax Tensions

Already, the taxes Biden said will help pay for investments in infrastructure and social initiatives are emerging as a point of tension among Democrats. Manchin on Monday proposed a 25% corporate tax rate -- higher than the current 21%, but lower than the 28% in Biden’s plan. Manchin also doesn’t want the next package to add to the budget deficit, even as Democrats are likely to use one of their budget reconciliation bills to raise the debt limit.

”There are already folks who are opposed to raising the corporate tax rate,” House Appropriations Chair Rosa DeLauro said Tuesday. “There certainly will be a vigorous discussion about all this.”

Meanwhile, many House Democrats want to lift the $10,000 cap on the state and local tax deduction implemented by the 2017 GOP tax law -- something that would either expand the deficit or take up fiscal space Biden plans to spend on other things.

Biden has no margin for error because there’s little chance of getting Republicans on board for anything close to the multitrillion-dollar scale of his ambitions. In addition to the massive price tag, Republicans are already criticizing Biden’s plans to raise tax rates on corporations and high-income Americans to help pay for the package.

A Goldman Sachs Group Inc. report Tuesday predicted that Democrats will take advantage of the budget reconciliation process to pass party-line legislation, but in just one big package moving in the third quarter.

The parliamentarian ruling in theory “could allow them to pass a variety of fiscal initiatives separately, rather than one large bill,” analyst Alec Phillips wrote. “But the constraint on multiple reconciliation bills was not procedural, it was political, and the political disadvantages haven’t changed.”

Since Democrats need unanimous or near-unanimous support in both chambers, they’ll find it easier to pass one bill with tax increases rather than two or three, the report said.

All-Nighters

Going through the reconciliation process is also painful, particularly in the Senate, because Republicans can force multiple all-night “vote-a-ramas” on theoretically unlimited amendments for each reconciliation bill.

A Senate GOP aide, who wasn’t authorized to speak publicly, also described the parliamentarian’s ruling as very narrow, not addressing whether reconciliation can be used for specific infrastructure provisions, for example.

One option for Democrats is to seek Republican support for policy changes and member-directed projects, known as earmarks, that aren’t eligible for the reconciliation process. Any bipartisan part of the package would likely have to be shorn of any tax increases or social policy spending, leaving those for a party-line reconciliation bill.

Some progressives are pushing for trillions in additional spending on climate and health care, like lowering the Medicare eligibility age, for example. Even if those provisions are left out of the first budget bill Democratic leaders plan to push this summer, having the option for additional reconciliation packages could help them corral votes.

But many Democratic priorities wouldn’t be eligible for the reconciliation process under current Senate rules because they aren’t related to the budget process. That reality has many Democrats pushing their leaders to get rid of the filibuster that allows Republicans to block legislation unless overruled by 60 votes.

Adam Jentleson, a former senior Senate Democratic aide who wrote the recent book “Kill Switch” advocating for the end of the filibuster, said other legislation like a voting-system overhaul know as H.R. 1 still has no path through the current Congress without changing the rules.

“The parliamentarian’s ruling on reconciliation is great but doesn’t change the fact that Democrats must either end or reform the filibuster, or H.R. 1 and other voting rights bills will die,” Jentleson said.

©2021 Bloomberg L.P.

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