Bipartisan Deal on the Table

Update 540 — Bipartisan Deal on the Table:
What’s in It; What’s Left for Reconciliation?

After weeks of intermittent talks and progress, the administration and a bipartisan group of 21 senators struck a deal yesterday on a large long-term investment in traditional domestic infrastructure. The $1.2 trillion package comprises just $579 billion in new spending, with unclear pay-fors, and omits key elements of Biden’s original proposals though it still promises to make our economy more resilient, sustainable, and just.

Today, we cover the state of play of the bipartisan package and outline the case for the Democratic strategy of getting what they can in the package and committing to address the unfinished business left to pursue in reconciliation, once the package passes — changed or not — or fails. 

Good weekends all, 



The Bipartisan Deal and the Path Forward 

President Biden has been vocal in promoting the American Jobs Plan (AJP) and American Families Plan (AFP), which would invest over $4 trillion in the economy. Biden has also indicated he was willing to negotiate the size and pay-fors of the plan, which culminated in the deal announced yesterday.

The deal’s $579 billion in new spending primarily targets physical infrastructure projects and is only around one-fifth of what the Biden administration originally proposed in the AJP. The bipartisan agreement pays especially short shrift to critical investments such as green infrastructure and affordable housing. 

The financing of the package is vague and partially relies on repurposing unused funds from the American Rescue Plan. While not raising taxes on multinational corporations or the ultra-wealthy, the plan’s pay-fors include economically regressive policies that would cut unemployment insurance, privatize public infrastructure and the 5G spectrum, and extend automatic sequestration. 

Still unknown whether the deal will have enough support to pass through both chambers or how the deal might shape the budget reconciliation process. Democratic leadership has already begun laying the groundwork for a reconciliation bill. Budget Committee Chair Bernie Sanders has offered a reconciliation proposal totaling $6 trillion. Sanders’ plan incorporated most of Biden’s AJP and AFP as well as other policies, leaving the door open for Democrats to act alone if necessary.

Many Democrats say they will only vote for the bipartisan agreement if there is a reconciliation bill that incorporates the rest of the Biden agenda. Such a bill would have to include climate spending as well as the AFP’s investments in child care, education, and paid leave. 

Yesterday, Speaker Pelosi said that the House will not take up any bill unless the Senate has passed a reconciliation bill to supplement a bipartisan bill. Biden likewise said he would not sign the bipartisan bill unless a reconciliation bill was also passed. 

The Risks of a Limited Deal

Biden and moderate Democratic Senators may be well-intentioned in accepting a bipartisan deal, but the deal could prove problematic for the following reasons: 

  • Timing: Legislative time is a valuable and limited good, and negotiations with Senate Republicans have already dragged on longer than Biden’s original timetable. Even as a tentative agreement has been struck, there is no guaranteeing the package will pass either the Senate or the House. The legislative details still need to be worked out, as well as a strategy on how to pass two bills — one bipartisan and one via reconciliation — along separate tracks. The longer this process takes, the fewer time Democrats will have to go back to the table with additional policy reforms if necessary, and the more difficult it may become for any bill to pass. In striking a deal with Senate Republicans, Biden is relying on their goodwill not to back out at the last second and sabotage his agenda. 
  • Accepting Less in the Package: Reflecting what may be necessary to get at least 10 Republican votes in the Senate, the bipartisan deal leaves a lot to be desired. The deal is significantly smaller than Biden’s AJP, and its pay-fors are ill-defined, regressive, and do not include any corporate tax increases. If Congress passes this deal, that could take the wind out of the sails for passing progressive tax priorities like a capital gains rate increase — a lost opportunity to make the tax code more equitable

    Some Senate Republicans have hinted in recent weeks that they would be willing to accept a deal on traditional infrastructure because it could blunt the appetite of moderate Democrats to support a larger second bill. Progressives don’t want to be forced to accept a smaller compromise bill in anticipation of a second bill unless the terms of any follow-up are clearly defined. A majority party can avoid asking members to commit to an undefined future course in return for support for the first measure when a concrete agreement on the second is possible. 

What Remains for Reconciliation

The Democrats’ best option, in the end, is to pack as much as possible into one set of reconciliation instructions. But if the current bipartisan deal moves forward, progressives will seek to ensure that a second reconciliation bill includes what they regard as missing from the bipartisan deal. Considerations:

  • A Limited Opportunity: Full control of Congress and the White House by one party has been rare in recent decades and typically only lasts two years. The present may be the best (or only) opportunity Democrats have to pass a major economic package for years to come. Many elements of Biden’s proposals, particularly the AFP and most of the tax changes, will receive no Republican support and would go nowhere in a divided Congress. Investments in green energy, education, child care, and paid leave are long-standing Democratic priorities that may only have the chance to pass now. Reconciliation is the only vehicle to achieve this goal as long as the filibuster remains in place.
  • No Reason for Compromise: Even though Democrats’ majorities in Congress are limited, there is no compelling reason to compromise with Republicans. Biden’s proposals have polled well with voters, particularly the tax reforms. A solid majority even supports passing the AJP and AFP together as one package via reconciliation. As the majority party, Democrats hold the stronger hand. If Republicans want to be involved in the process, they should be the ones making concessions, not Democrats.
  • Economic Potential: If Congress only passes the bipartisan infrastructure bill, the full economic benefits that Biden’s original plans offer would not be realized. Per Moody’s Analytics, Biden’s AJP and AFP combined would create over 3.5 million jobs in the next decade. If the AFP policies are left out, the economy would lose a $100 billion increase in real GDP and significant boosts to labor force participation and labor productivity. With interest rates — and thus the cost of deficit spending — still at historically low levels, there is no better time than the present for such investments. 

President Biden is singing the praises of bipartisanship today. But he is content to realize such gains as he can by that means and seek what he cannot via reconciliation. If a bipartisan deal is to move forward, Biden and Pelosi have indicated, it would be approved and signed with the reconciliation chaser. A two-track process could succeed in the end but would be less likely to include the full range of Biden’s policies than one reconciliation bill would. Biden’s AJP and AFP would make the economy stronger and more equitable, and Democrats currently have the power to implement them. What remains to be seen is whether Democrats will legislate as boldly — and uncompromisingly— as promised in their policy proposals.

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