Update 572 — December’s Disposition:
What Will Get Done, What Might Wait?
The dread month of December is now upon us. Congress faces a fuller slate of priorities prior to adjournment than the usual madcap year-end. But delay invites difficulty. Now Congress is poised to dispose of three critical policy issues bearing on the economy and, therefore, next year’s midterm elections: funding the government, a resolution on the debt limit, and passing the Build Back Better Act.
Successfully closing out these priorities by the end of the year will not only protect and strengthen the economic recovery but could do likewise for the narrow House and Senate Democratic majorities. Any big-ticket items that slip will immediately define the 2022 legislative agenda. Today, we preview the main items on Congress’ December agenda and what to expect and hope for in the weeks ahead.
Government Funding: Resolution Continues
With government funding running out on Friday at midnight, Congress needs to take action to avert a shutdown. The deadline forces Congress to use precious calendar time on what should be a routine procedure. The most likely path is to pass another continuing resolution (CR) using the current funding levels. But with some Republican Senators vowing to delay a deal, which will require a 60-vote supermajority in the Senate, a short weekend shutdown might occur.
Some key Senate negotiators prefer a CR through January or February to give the chamber more time to finalize the omnibus appropriations bill. Generally, Republicans would prefer a longer CR, potentially through March or even the entire next year. The longer a CR lasts, the more negative the consequences, as funding levels would not be increased above the current formal appropriations. The Office of Management and Budget expressed concerns about staffing executive agencies if a long-term CR were enacted as it would force a hiring freeze and funding gaps. In addition, programs that are seen as outdated or duplicative would not end, nor would new programs start.
While Republicans would rejoice at many non-defense agencies being short-staffed, the Defense Department could be forced to delay over 114 new military construction projects on top of cutting $2 billion in the rest of their budget to make room for the 2.7 percent pay increase for service members. Impending headaches at the Pentagon could encourage enough Republicans to settle on a short-term CR and a full appropriations bill.
Debt Limit: A Limit to Negotiations?
On October 14, President Biden signed a $480 billion increase to the federal debt limit, temporarily ending a bitter standoff in Congress. But Treasury Secretary Janet Yellen has recently warned Congress that the “X date” at which this temporary measure would run out and bring about a default could come as soon as December 15. Many analysts believe that the actual date may not come until January or even February, but the Congressional Budget Office estimated yesterday that the Treasury is more likely to run out of cash by the end of December.
The path forward is currently unclear. Democrats insist that raising the debt limit should involve a bipartisan vote, while Republicans want Democrats to have to provide all the votes for a specified, numerical increase to the limit. In passing the stopgap measure in October, Minority Leader McConnell essentially folded and provided 11 Republican votes to break a filibuster in the Senate. But McConnell has warned that he will not do so again, meaning Democrats may be forced to use the reconciliation process to raise the debt limit by majority vote.
Both sides have notably toned down the bitter rhetoric that precipitated the October deal, and Majority Leader Schumer and McConnell have reportedly been negotiating on the issue. Sen. Toomey has floated a proposal in which Senate Republicans would agree to an expedited process for reconciliation to obviate procedural hurdles. This might be the most straightforward method to avoid a default, but some Democrats remained concerned that raising the debt limit this way will endanger incumbents to political attacks over the debt in 2022. Democrats’ objective should be to resolve this issue quickly so as to minimize political exposure and prevent negative consequences to the economy even before a default would occur.
The Build Back Better Act Builds Momentum
With House passage of the Build Back Better Act on November 19, the Senate is likely to make changes to the bill in order to get to 50 yes votes through the reconciliation procedure. Key unresolved areas include:
- Paid Leave: The House-passed bill offers four weeks of paid leave, allowing some workers to get as much as 90 percent of their wages compensated. While this is a long overdue and much-needed policy, Sen. Manchin’s opposition means the provision will likely end up on the cutting room floor. If so, Democrats may try to pass a standalone paid leave bill next year.
- SALT: One of the thorniest issues is BBB’s inclusion of reforms to the State and Local Tax deduction. The bill that passed the House significantly raises the $10,000 cap set by the 2017 tax cut law to $80,000 and extends it to 2030 — changes that will disproportionately result in tax cuts for the wealthy. This provision will likely be altered in the Senate. Sens. Sanders and Menendez have floated a compromise proposal that would limit the $80,000 cap to those with incomes below $400,000. The final bill will likely include some form of SALT change to secure the necessary votes for passage in the House.
- Immigration: Senate Democrats have tried repeatedly to get a favorable opinion from the parliamentarian to make immigration reforms eligible for the Byrd Rule. While the parliamentarian has unfortunately already disapproved a pathway to citizenship, Democrats included different changes in the House bill that would give temporary protections to undocumented immigrants in an attempt to make the provision more than “merely incidental” to the budget. Senate aides are meeting with the parliamentarian this week to argue for the provision merits under the Byrd Rule, but the odds are against a favorable decision.
Resolving these and other issues will take some time, and the timing of a final vote may be affected by how expeditiously Congress deals with the aforementioned issues. Schumer has said his goal is to pass the bill before Christmas. He may even put the bill on the floor two weeks from now, but the timeline will ultimately be determined by the parliamentarian — who also might make a ruling on the bill’s prescription drug provisions — and getting Sens. Manchin and Sinema to yes. What also remains to be seen is whether any changes to the bill in the Senate affect its chances for final passage in the House. The expeditious passage of this bill will clear a major element of Congress’ agenda and allow Congress to focus on other critical priorities in January.
Top of the Agenda for 2022
Resolving these issues by the end of the year is essential in order for Congress to turn next year to the many other important economic and other policy priorities next year. These go hand in hand with democracy reform, without which economic policy will continue its chaotic course. The Freedom to Vote Act is still stalled in the Senate filibuster, with no path to 60 votes for cloture.
Schumer still seeks to get all members of his caucus behind some form of procedural reform that would allow these critical bills to pass via a simple majority. With the 2022 midterms quickly approaching, too much further delay on these bills means running material midterm risks. Today’s Supreme Court oral arguments in the Mississippi abortion case purs choice on that agenda as well.
Maybe next year we can get the full complement of economic policy nominations. The nomination of Saule Omarova to be Comptroller of the Currency looks unfortunately imperiled, meaning her nomination might not even get a vote in the Banking Committee. The Senate will likely hold hearings soon on Jerome Powell’s and Lael Brainard’s nominations to be Chair and Vice Chair of the Federal Reserve — as well as two other critical open seats on the Fed Board of Governors. The Senate should move quickly to confirm these nominations as the Fed will be making significant decisions for the economy in the months ahead almost as important as the choices facing Congress.