Fiscal Policy Landscape

Update 608 — Fiscal Policy Landscape:
Supps, Reconciliation, Payfors on Horizon

Congress’s fiscal debate is currently being dominated by responses to a series of crises at home and abroad. Over the next few weeks, Congress will actively consider a range of supplemental spending bills from a Ukraine aid package, to bills addressing the baby formula shortage, restaurant aid, and COVID surge supplemental.

Most of these items are an easy pass in the House; the 60 vote threshold in the Senate is the rub. Some bills, like the Ukraine support package, do have bipartisan support making them viable in some form. The only way around the filibuster’s 60-vote Senate hurdle to enact further spending is a reconciliation measure. There’s also the million (or billion) dollar pay-for question.

What will pass, how will it be funded? Read on to see what lies ahead for Democrats’ fiscal agenda in Congress.




The coming weeks will be critical if Democrats want to address a number of kitchen table issues affecting families and households struggling with higher costs this year. Addressing voters’ financial worries might save some Democratic seats come November, but it’s also just good policy. 

Over the next few weeks:

  • The Senate will vote on the Ukraine Supplemental
  • Senators will keep negotiating a possible deal on the COVID supplemental
  • Lawmakers are voting on bills to address the baby formula shortage
  • The Senate is looking for ways to provide additional relief aid for restaurants and small business industries impacted by the pandemic
  • Democrats will continue to work on a deal for reconciliation

The clock is ticking on what may very well be Democrats’ last shot at passing a meaningful reconciliation package for at least the next few years. 

Supplemental Season Continues

Late last week, the Senate was unable to reach a “unanimous consent” agreement for expedited passage of the Bipartisan Additional Ukraine Supplemental Appropriations Act. Senator Rand Paul blocked the $40 billion supplemental funding bill in order to push for a vote on a provision that would create a special Inspector General to oversee Ukraine-related spending. 

The Senate advanced the Ukraine bill by an 81-11 vote on Monday, putting it on track to clear the chamber later this week. The “no” votes came from fiscal conservatives who criticized the package as bloated and said its priorities were misplaced. The $40 billion spending bill is likely to pass on Thursday unless a deal is reached earlier.

Negotiations on a new COVID-19 package are expected to continue this week as House Democratic leadership pushes for a vote as soon as possible. House Democrats are poised to introduce a new COVID-19 funding package for health care needs as the Senate’s Bipartisan COVID Supplemental Appropriations Act remains on ice. The structure of the new bill is uncertain, but both parties will need to navigate wide divisions over funding offsets before additional funding for testing, therapeutics, vaccines, and more can be passed in both chambers.

Despite underlying agreement that the infant formula shortage needs addressing, the $28 million bill faces an uncertain path forward to President Joe Biden’s desk due to GOP opposition. The bill was dropped on Tuesday by House Appropriations Chair Rosa DeLauro. The bill provides extra funds to the Food and Drug Administration. Lawmakers are also poised to consider a bill out of the Education and Labor Committee that would provide flexibility on the types of formula that can be purchased through the Women, Infant, and Children (WIC) program. While members from both parties have expressed support for addressing the shortage federally, the timing of these votes, as well as the overall level of support within the 50-50 Senate, is still murky.

Senate Majority Leader Schumer has teed up floor action on the $48 billion Small Business COVID Relief Act. The bill provides another $40 billion to the Restaurant Relief Fund for applicants who did not receive funding through the first iteration, as well as another $8 billion divided among select industries. The bill’s authors, Senators Ben Cardin and Roger Wicker, are reportedly still in the process of garnering votes for the legislation. 

Reconciliation Wishlist

Senator Joe Manchin’s requirement that a reconciliation bill be split between energy, prescription drug pricing, and deficit reduction still constitutes a significant roadblock to any other reconciliation priorities. But Democrats shouldn’t give up the fight just yet. Deficit reduction is not a sufficient response to inflation concerns when Americans are struggling with the high costs of housing, food, healthcare, and childcare. Congress has the opportunity to close the Medicaid coverage gap for two million Americans, increase access to prohibitively expensive child care, and make the Child Tax Credit permanently fully refundable.

Leadership hasn’t negotiated a concrete framework for reconciliation with Manchin just yet, but Senate Majority Leader Schumer is meeting with Manchin Wednesday afternoon to discuss a path forward on reconciliation. Some Democrats have been circulating their own proposals as well. Senators Patty Murray and Tim Kaine have been shopping around their new modified compromise childcare proposal that would funnel $150-200 billion towards expanding access to and reducing the cost of childcare. 

Over the course of six years, it would

  • Increase funding for the Child Care Development Block Grant program by $72 billion, tripling funding for the program
  • Allot $18 billion for the creation of a new grant program expanding access to Pre-K
  • Invest $12 billion in the Head Start program to increase wages for teachers. 
  • Put $50-100 billion towards piloting a new program to cap child care expenses for families making up to 250 percent of their state’s median income. Eligible families would spend no more than seven percent of their income on child care costs for children under the age of five. 

Child care disruptions have hit women particularly hard, contributing to the uneven pandemic recovery. Comprehensive investments in childcare would benefit both workers and employees by allowing more parents to enter the workforce. When parents are unable to work due to childcare conflicts, workers lose income and employers are under-staffed. 

Another valuable item on the Democratic wish list would be permanently expanding the wildly popular Child Tax Credit. 3.7 million more children were in poverty in January 2022 than in December 2021, after the expanded tax credit expired. This 4.9 percentage point increase in child poverty disproportionately affected Black and Latino children. Bringing back monthly advance payments for a fully refundable CTC would help families address rising costs and take a step towards reducing inequality. Senator Manchin has expressed his opposition to the policy in the past which jeopardizes the prospects of the program’s revival. Many advocates and Democrats on the Hill hope to see a CTC expansion in a reconciliation bill. 

Pay-for Problems?

The most important thing to remember about paying for the supplementals is each one is necessary to combat a significant and immediate challenge facing the American people.The Ukraine supplemental has not faced the same calls for full offsets that the COVID supplemental did. The $10 billion bipartisan COVID supplemental was fully paid for, at least on its face. The largest offset in the package, $2.3 billion from the Aviation Manufacturing Jobs Protection Program, would never actually be spent, COVID supplemental or not. However, there were a number of genuine pay-fors through rescission of unspent ARP funds that would have offset the majority of the new spending. 

It’s important to consider the costs of not spending additional money. The COVID supplemental agreement in the Senate was less than half of what the Biden Administration had said was necessary to continue combatting COVID. Demanding that COVID funding be fully paid for crowds out priorities like global vaccine funding. The compromise bill also does not include money for testing and treatment for the uninsured.  

Democrats have talked about reviving some iteration of the reconciliation bill for months after Manchin killed it in December. And they’re running out of time with the midterms fast approaching. The big question up in the air here is pay-fors and what Manchin would be willing to support, citing concerns around the deficit and inflation.

Concerns about the deficit should be taken seriously, especially weighed against the value of fighting a pandemic or addressing a nutritional crisis for children, when the interest expense is at a historic low. Each of the three supplementals that lawmakers hope to take up would ease taxpayers’ burdens during a time when many of them are grappling with financial uncertainty. Hawks concerned about the costs of these policies should focus on increasing taxes on the wealthy and closing loopholes rather than blocking funding as rates — inflation, interest and mortgage — are on the rise.