The Four Fights in Washington This Week

There are four fights in Congress that are merging into one this week. Nancy Pelosi intends for this to be one of the biggest weeks in recent congressional history. It could wind up being a massive disaster for the Democrats if they cannot extract unity and, if they do unite, it will be the beginning of the end for House moderates.

Bipartisan Infrastructure Bill (“BIF”)

Senate Democrats and Republicans together crafted a $1.5 trillion bipartisan plan that pays for actual infrastructure. It would go towards roads, bridges, transportation, etc.

Early in the negotiations, President Biden and Speaker Pelosi said they would only support BIF if the Senate Democrats also passed a larger plan, the reconciliation plan. Biden eventually walked that back. Pelosi has waffled.

BIF is tied to reconciliation.

Reconciliation

Under Senate rules, a budget adjustment called reconciliation can pass the Senate without the filibuster blocking it. The reconciliation package, in essence, reconciles a spending plan to a previously passed budget framework.

To get reconciliation passed, it (1) must not negatively impact the deficit and (2) must not create new or significantly alter existing public policy. So, for example, amnesty cannot pass under reconciliation because it would be a new public policy. A $15 an hour minimum wage cannot pass under reconciliation because it would both significantly alter federal policy and also negatively impact the deficit.

Democrats are throwing everything they can into the reconciliation package. It went from being an infrastructure bill to a climate change bill to a human infrastructure bill. Their failure to be able to articulate what it is has allowed the GOP a talking points advantage.

The problem for the Democrats is that reconciliation must not impact the deficit. Each item must be paid for. The result is that the reconciliation bill will also be one of the largest tax increases Congress has passed.

House moderates want the BIF. They cannot get the BIF without the reconciliation package. Some of them have concluded it is better to have nothing than to have the whole. Reconciliation is expected to cost $3.5 trillion. Combined with the $1.5 trillion BIF and you’ve got $5 trillion in new spending on top of the COVID relief package’s trillions of dollars.

In the Senate, Joe Manchin is opposed to the $3.5 trillion price and insists it be no more than $1.5 trillion. Kristen Sinema is opposed to the tax increases that come with reconciliation. Chuck Schumer says he has a deal, but neither Manchin nor Sinema claim to know what Schumer is saying. Pelosi, for her part, can only lose three House members. She now claims she has all of them on board except one. She can expect no Republican cross-over votes.

Debt Ceiling

While BIF and reconciliation are happening, Congress must also raise the debt ceiling. A statute in place prevents the federal debt from exceeding a certain amount — now closing in on $28 trillion. Secretary of the Treasury Janet Yellin says the debt ceiling will be hit in the next two months and the US risks default.

Actually, the way the debt ceiling works is if we reach it, Yellin must stop paying any and all discretionary parts of the budget to pay interest on the debt. So, for example, appropriations for federal salaries, school budgets, etc. will cease and that money will be diverted to pay the debt until the ceiling is increased.

It could also impact our bond rating as a nation, which would force up interest rates and cause the whole situation to spiral.

Republicans refuse to raise the debt ceiling arguing the only reason it is to be raised is Democrats are about to engage in a $5 trillion spending binge. Democrats claim they will have bipartisan cooperation or else.

Republicans in the House and Senate are not budging. The Democrats could put the debt ceiling increase in reconciliation to avoid a filibuster, but the Democrats will not do it. The Democrats want to force the GOP to break a filibuster. They seem to think the GOP is playing a game here. But the GOP is not bluffing. The Senate GOP will filibuster a debt ceiling increase unless it is put into reconciliation thereby bypassing a filibuster. However, if the debt ceiling increase is put in reconciliation, it will scuttle parts of what the Democrats want in reconciliation. They will have to cut other portions to comply with reconciliation rules related to impacting the deficit.

Continuing Resolution

Looming over all of this is the continuing resolution to keep the government open. The government runs out of money at the end of this week. Both sides tend to pass continuing resolutions that do not add new money to the budget. It just appropriations additional portions of money equal to current spending.

Normally, this would just get passed. But the Democrats have decided to throw the debt ceiling increase into the continuing resolution. Republicans refuse to join. If the continuing resolution is not passed, the government will shut down.

One thing Democrats have not seemingly remembered is that when the government shut down in 2019 under Trump, Trump made it as painless as possible. Parks remained open. Many government services remained open. Democrats tend to shut everything down, trying to make it painful for Republicans. But Trump showed it did not have to be that way and Biden would just be highlighting a level of cruelty via public services in trying to hurt Republicans if he doesn't do the same.

All these fights come to a head this week. No one really knows how they will turn out except the GOP is not bluffing. We could get a government shut down by the end of the week. Democrats could jack up taxes by Friday and provoke a stock market correction. On the politics of it all, the Democrats have structured a reconciliation package that hurts them if it passes and hurts them if it does not pass. The GOP can blame them for tax increases and inflation if it passes and deprive them of any significant accomplishments if it fails.

Democrats have seemingly forgotten how to govern when they control everything and they have forgotten that Mitch McConnell does not play chicken. He doesn’t play period. He destroys Democrat dreams. Only a united Democrat front can stop McConnell, but that united Democrat front will then crush the hopes of moderate Democrats in the midterms who will have just voted for the largest tax increases in decades and provoked inflation.