Biden’s Two-Track Economic Agenda Hits Turbulence in Senate

Senate negotiators struggled Tuesday to shore up enough support for both a bipartisan infrastructure bill and a large tax and spending measure backed only by Democrats, marking a significant political hurdle for quick congressional approval of President Joe Biden’s $4 trillion economic agenda.

A group of 22 Democratic and Republican senators plans to huddle Tuesday night to sort out lingering problems with their proposed $579 billion physical infrastructure package, while a separate group of Senate Democrats will meet in the evening to discuss the top-line spending level for the second package.

The biggest issue for the infrastructure bill is how Congress intends to pay for it -- through increased tax enforcement and user fees -- as well as re-purposed pandemic relief money and incentivizing private investment.

The nonpartisan Congressional Budget Office has not agreed with the senators that a $40 billion investment in the IRS will net $100 billion in newly collected tax revenue. Some Republican senators who previously supported the deal said that poses a problem.

Republican Senators Jerry Moran of Kansas and Mike Rounds of South Dakota said they want to see the bill fully paid for in a CBO score. Rounds, however, added that he felt the bill was “getting there.”

Keeping Flexible

Other Republican senators, such as lead negotiator Rob Portman of Ohio and Mitt Romney of Utah, are more willing to forgo official CBO blessing if they are convinced the bill pays for itself. The White House has previously said there is $1 trillion in unpaid taxes to be reaped from increased audits.

Romney said the CBO isn’t likely to give senators full credit for beefed up Internal Revenue Service enforcement, dynamic scoring -- which counts on revenue gains from anticipated faster growth -- and other items the group believes will pay for the package.

“My test is, is it paid for in my own mind,” Romney said.

Republicans also remain concerned that Democrats will link passage of the infrastructure bill to the budget measure, which so far has no GOP support.

GOP Concern

Senator Thom Tillis of North Carolina, one of the 11 Republicans to back the tentative infrastructure deal, said his biggest concern is that House Speaker Nancy Pelosi wants to tie approval of the infrastructure package in her chamber to Senate clearance of the budget resolution.

“I’m actually more concerned about what I’m hearing from Speaker Pelosi on the linkage of this bill to reconciliation. We’ve got to get that sorted out,” Tillis said. Reconciliation is the term for the fast-track bill that Democrats plan to use to bypass any GOP filibuster for the larger spending package.

Democrats, who met privately with White House officials Monday night, remain divided over the size of the budget resolution, which would essentially serve as a blueprint for much of Biden’s domestic agenda.

Senate Budget Chairman Bernie Sanders is still fighting for a $6 trillion package, with only $3 trillion of that paid for through tax increases and allowing Medicare to directly negotiate drug prices with pharmaceutical companies. Sanders wants to add an expansion of Medicare, immigration reform, expanded child tax credits and other social spending to Biden’s proposal.

Manchin’s Bar

But that is a problem for the most conservative Democrat in the caucus, Joe Manchin of West Virginia, whose vote will be pivotal. Unity is key for the party in the evenly divided Senate, where Vice President Kamala Harris casts tie-breaking votes to pass legislation without Republican support.

Manchin told reporters Tuesday that both the infrastructure bill and the second measure “should be fully paid for.”

“We have put enough free money out,” he said.

Senate Majority Leader Chuck Schumer said Tuesday, when asked whether a reconciliation bill can be paid for without adding debt, “That is doable, absolutely.” He added that the topic came up at a lunch meeting with Democratic senators.

Wealth Tax

One option some Democrats have pitched that could expand revenue-raising measures in the social-spending bill is a wealth tax or millionaire surtax -- which the White House didn’t propose in its own tax reform blueprint. “Progressive taxation is certainly under discussion,” Sanders said.

Still, it’s not clear yet more tax hikes would win backing from moderates. Manchin has already said he wouldn’t back the full corporate tax increase that Biden has proposed, preferring a 25% rate to the administration’s 28%.

Schumer told reporters that he’s been urging Democrats not to draw lines in the sand on what they will or won’t support and that they must come together for a big, bold package.

Budget Committee Democrats have said they hope their Tuesday night meeting can clear away some of the differences and allow for a Senate floor vote as soon as next Tuesday.

A Democrat attending both sets of Tuesday meetings said to take the turbulence with regard to both tracks in stride.“A lot of these deals die a thousand deaths before they actually get through,” said Senator Mark Warner of Virginia.

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