Update 626 — Democratic Reconciliation:
IRA Secures 50 Votes, en Route to Passage
Facing an August recess deadline, Democrats in Congress are on the verge of fulfilling their economic policy promise, bringing a hitherto elusive unity to a reconciliation bill and a Senate floor vote as soon as procedurally possible. The leap forward shows lessons learned: the Inflation Reduction Act focuses on a few but key elements of their agenda like prescription drug costs, climate change, and tax fairness. This time, reporting has centered around the provisions of the bill rather than the topline figure. Passage is expected.
After 18 months, President Biden and his narrow majority in Congress now have the IRA and its tax, health, and climate provisions but also historic investments in manufacturing and infrastructure, giving voters a much clearer choice for this fall. This morning’s job report for July is more good news with 528,000 jobs added and unemployment down to 3.5 percent, the lowest level in over 50 years.
Today, we look at the imminent accomplishment of the IRA and the status of other major economic policy bills as Democrats seek to build on this record ahead of the midterms.
Good weekends all,
The plan in Congress had been to break today for the August recess, but the Senate will continue to work on reconciliation throughout the weekend. With recent passage of the Chips and Science Act and the PACT Act, Congress has hit its stride and checked two major items off its summer to-do list. If reconciliation’s climate and health care investments follow, that will provide plenty of material for frontline Democrats to run on in the fall.
When they return from recess, both the House and Senate will need to resume making progress towards a FY2023 omnibus. With the competition bill and reconciliation hopefully out of the way, Democrats will have a chance to dedicate their focus to more aspirational bills like a ban on Congressional stock trading. Democrats should use the coming months to build on their successes and clear as many remaining legislative priorities as possible before November elections.
Next Up for Reconciliation
After last week’s surprise deal struck between Senator Joe Manchin and Senate Majority Leader Chuck Schumer, the end is finally in sight for reconciliation. Last night, Senator Kyrsten Sinema released a statement announcing that she had reached her own deal with Senate Democrats to modify the text of the Inflation Reduction Act and secure her support. While exact details remain unclear, the deal involves removing the provision that would have narrowed the carried interest loophole, a sacrifice Democrats were expecting to make. In its place there will be a 1 percent excise tax on stock buybacks. Sinema also secured an additional $5 billion in funding for drought resiliency and changes to the structure of the corporate minimum tax to exempt accelerated depreciation of certain investments for manufacturers. The addition of the excise tax will raise more than enough revenue to make up for both the loss of the carried interest provision and the additional cost of Sinema’s other additions, which should keep Manchin and the deficit hawks happy.
The bill in its current form contains the following investment provisions:
- investments in climate change and energy security
- an extension of Affordable Care Act subsidies
- over $300 billion in deficit reduction over ten years
And the following major revenue raising provisions:
- a 15 percent corporate minimum tax
- investments in the IRS to bolster tax enforcement
- prescription drug pricing reform
- a 1 percent excise tax on stock buybacks
Now that Sinema’s vote has been secured, all that remains are the Senate parliamentarian’s ruling and the voting itself. Senators and aides have spent the past week in oral arguments with the parliamentarian as part of the “Byrd bath” to determine which provisions can stay in the final bill. The parliamentarian’s ruling on prescription drug reforms is expected as early as today, with rulings on the tax provisions to follow thereafter.
The Senate will move forward with the bill as they await word from the parliamentarian. On Thursday, Schumer announced that the Senate would return on Saturday afternoon to vote on a motion to proceed to the bill.
Following the procedural vote, there will be 20 hours of debate, equally divided between the two parties, although Democrats may yield back some time to keep things moving. Vote-a-rama will follow, most likely beginning on Sunday, clearing the way for the Senate to actually pass the bill early next week. The House will then need to return to begin its own work on passing reconciliation.
If all goes well, Democrats will have achieved a number of long-time legislative priorities, including allowing Medicare to negotiate drug prices, making significant climate investments, and creating a fairer tax system in which the wealthiest corporations have to pay their share.
Ride the Omnibus
Other than reconciliation, Democrats’ remaining legislative priorities will have to wait until September, when both chambers return from recess. Among these priorities is securing the Fiscal Year 2023 budget. This is likely the Democrats’ last chance to pass a budget with a Democratic trifecta. If Republicans take the House, as they are expected to do, or even both chambers, it will become even more difficult to secure funding for progressive priorities like child care, healthcare, education, and addressing food and housing insecurity through the regular appropriations process than it was in FY22.
While the House has passed six of its twelve appropriations bills, and the Senate has finally introduced its own bills for the 2023 fiscal year, there is virtually no chance of seeing an omnibus by the October 1st deadline. Instead, we will likely see a continuing resolution to keep funding the government at FY22 levels through at least Thanksgiving. Time – and the results of the midterm elections – will tell whether Republicans stall the FY23 omnibus into the new year, when they would potentially have more control over the final package, including the levels of defense and non-defense discretionary spending.
In contrast to other priority items, congressional stock trading is a must pass good government reform that does not yet have legislative text. While the 2012 STOCK Act significantly reduced members’ stock trading, it has fallen short of its objectives. Members of Congress still trade stocks and often flout the rules, facing little penalty when they fail to disclose their trades. Reform that bans members from trading stocks altogether is necessary and popular, with 70 percent of voters supporting banning members of Congress from trading stocks, which might be particularly persuasive in an election year.
After a flurry of activity earlier this Congress, progress has been creeping steadily behind the scenes. There are plenty of bills in both the House and the Senate, Democratic, Republican, and bipartisan, but no one bill has decisive support. The authors of these bills came together to form working groups, one in each chamber, to find a consensus bill. In the Senate, they’ve reached a framework for a bill, and the House is close as well. However, neither bill has been introduced as the members work to drum up support from their colleagues on an issue that will directly affect their personal finances. The two branches must work to introduce legislation quickly, so it can be passed before the end of this Congress. Senator Jon Ossoff put it best, calling to bring legislation to vote by saying, “Consensus is a worthy goal. The desire for universal consensus should not paralyze action.” Congress must act, a busy calendar is no excuse to delay common-sense ethics reform.
Other economic priorities to keep an eye on this year include:
- Child Tax Credit: Despite its popularity and impact in cutting child poverty dramatically, the child tax credit (CTC) is one of numerous Democratic priorities that was left out of reconciliation. When the CTC expansion expired at the end of 2021, 3.7 million children were allowed to slide back into poverty, a major reason that restoring a monthly, fully refundable CTC remains a priority for progressive lawmakers and activists. The CTC will likely be picked back up after recess for inclusion in an end-of-year tax package.
- Overdraft: The Overdraft Protection Act advanced through the House Financial Services Committee’s July markup. While further legislative action is unlikely, the movement provides additional leverage for the CFPB to implement rules around the predatory fees and lower the cost of banking for millions of Americans.
- Antitrust: Senator Klobuchar’s American Innovation and Choice Online Act will have to wait until the fall. The bipartisan bill would bar tech companies like Google, Amazon and Apple from giving preference to their own products on their online platforms. Republican control of Congress could doom the bill, which has already seen significant opposition from big tech, so Democrats will have to move quickly after the recess in order to get a vote by the midterms.
Democrats are now on the verge of achieving a more productive Congress than most would have anticipated a few weeks ago. Between now and November, Democrats will have to continue to pass as many good bills as they can before facing down voters in the midterms. Passing the long-awaited reconciliation bill in the coming weeks should clear the way for Democrats to refocus their attention on important bills that have previously struggled to rise to the top of the agenda.
Any further progress Democrats can make on these issues in September and October would not only help bolster their chances in November, but also serve as important steps toward achieving progressive goals. What a difference a few weeks makes. By dint of rapidly falling gas prices, a booming jobs report, and their recent progressive legislative gains the last few weeks, Democrats will not go into recess and the hustings on the defensive.