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Democrats unveil blueprint for $3.5T budget reconciliation bill

Upon the resolution’s adoption, House and Senate panels would have until Sept. 15 to draft their pieces of filibuster-proof fiscal package

Senate Budget Chairman Bernie Sanders, left, and Majority Leader Charles E. Schumer are seen in the Capitol on Monday, August 9, 2021.
Senate Budget Chairman Bernie Sanders, left, and Majority Leader Charles E. Schumer are seen in the Capitol on Monday, August 9, 2021. (Tom Williams/CQ Roll Call)

Senate leaders released a fiscal 2022 budget resolution Monday that directs a dozen committees in the Senate and 13 in the House to write what will amount to a $3.5 trillion package that would implement major changes in health care, social and climate policy.

Within that figure the Democrats’ budget blueprint is assuming only about $1.75 trillion is offset, including tax increases on upper-income households and corporations and other savings, such as reining in prescription drug costs.

The draft budget includes room to grow deficits by the same amount over the next decade, which Democrats say ultimately could be a smaller amount given economic growth that they expect will result as well as savings from closing the “tax gap” between what’s owed and actually paid to the IRS.

[Budget reconciliation instructions likely to assume deficits]

It’s still going to be a heavy lift with some moderate Democrats, however. Perhaps cognizant of that struggle, Democratic leaders left out instructions to raise the statutory debt ceiling through the reconciliation process. 

Doing so would have required their own party to bear the entire burden of voting for the big tax-and-spend bill, as well as the blame for lifting the national borrowing cap, even though Republicans have historically supported debt limit increases as well. Because they’ll be taking up the measure without GOP support, Democratic leaders need to keep their entire caucuses on board. They can lose only three votes in the House, and zero in the Senate.

Treasury Secretary Janet L. Yellen issued a statement prior to the budget’s release Monday calling on Democrats to seek bipartisan support for lifting the debt limit — or simply suspending it, as has been done frequently in recent years but may not be possible in a reconciliation bill.

[Democrats mull keeping debt limit out of budget reconciliation]

That means the debt ceiling will need to be dealt with this fall through “regular order,” which could lead to partisan brinkmanship since 60 Senate votes would be required — and possibly in the context of the stopgap funding bill needed to avoid a partial government shutdown after Sept. 30.

A New ‘New Deal’?

But top Democrats say it’s a small price to pay for sorely needed “investments” that are decades in the making, and they cited past GOP efforts to ram through pricey reconciliation measures on party-line votes, most recently the $1.5 trillion tax overhaul in 2017.

In a statement introducing the resolution, Senate Budget Chairman Bernie Sanders, I-Vt., said once adopted it will “allow the Senate to move forward on a reconciliation bill that will be the most consequential piece of legislation for working people, the elderly, the children, the sick and the poor since [Franklin Delano Roosevelt] and the New Deal of the 1930s.”

The Senate is expected to take up the budget plan, which can be adopted with a simple majority, as soon as Tuesday after wrapping up work on the bipartisan infrastructure bill.

A vote on final adoption would come no later than 50 hours after adopting the motion to proceed, which also requires a simple majority. Either or both sides can yield back some of their alotted time, after which a “vote-a-rama” on amendments would ensue. 

Sept. 15 deadline

The follow-on budget reconciliation bill also requires only a simple majority to pass in the Senate and is subject to limited debate, rather than the typical 60-vote threshold. The committees of jurisdiction would have until Sept. 15 to produce their pieces of the package, which would then be bundled together by the Budget panels for floor debate as a single, mammoth bill.

The reconciliation instructions direct multiple House and Senate panels to write legislation to increase the deficit by up to nearly $1.75 trillion while instructing the Senate Finance and House Ways and Means committees to reduce the deficit by at least $1 billion. 

The instructions to the Finance and Ways and Means committees provide them with considerable flexibility to achieve the target by both raising taxes and creating or extending tax breaks, and both initiating new spending programs and cutting spending through other programs.

According to a fact sheet from Senate Democrats, the Finance instruction assumes that panel, which has jurisdiction over the tax code as well as around 60 percent of all federal spending, will include some $1.8 trillion in new spending as well as tax breaks for clean energy, families with children and the working poor.

According to documents circulated by Democrats, the Finance panel will draft provisions including on paid family and medical leave; renewing expanded health insurance exchange subsidies; Medicare expansion to dental, vision and hearing benefits; closing the Medicaid “coverage gap” in states that haven’t expanded their programs; and subsidies for home health care services.

And the panel would also be charged with coming up with unspecified relief from the $10,000 cap on state and local tax deductions that Republicans imposed in the 2017 law.

Combined with tax increases on corporations and households earning more than $400,000 a year — the budget includes a specific mandate not to raise taxes on anyone below that line — as well as cuts in prescription drug subsidies and other programs, Finance and Ways and Means have to achieve a net savings of at least $1 billion. 

That’s similar to when Republicans used reconciliation to try to repeal the 2010 health care law in 2015. Ultimately, the legislation would have cut spending by $1.4 trillion and also cut taxes by $1.1 trillion, producing hundreds of billions in extra deficit reduction beyond the Finance and Ways and Means targets.

So it’s possible the tax panels could overshoot their targets and raise taxes by an even larger amount, though that might upset moderate Democrats whose votes are needed.

The total instructions to a dozen House committees assume a higher deficit target of closer to $2 trillion over a decade, but that figure assumes some overlap among panels sharing jurisdiction over certain provisions. 

Senate Democrats gave their biggest budget target to Health, Education, Labor and Pensions: $726.4 billion. That figure assumes the panel will provide funding for universal prekindergarten subsidies, free community college tuition, workforce development programs, community health centers and more.

Banking, Housing and Urban Affairs would receive the second-largest allocation, $332 billion. Within that figure, the panel is expected to draft legislation to grow the supply of affordable housing and provide rental and down payment subsidies, among other provisions.

Energy and Natural Resources would get $198 billion, including funds to establish a “Clean Electricity Payment Program” to try to incentivize businesses to reduce emissions and hit the Biden administration’s carbon reduction targets.

Other Senate panels’ deficit-increase targets are below:

  • Agriculture — $135 billion.
  • Judiciary — $107.5 billion.
  • Commerce — $83.076 billion.
  • Environment and Public Works — $67.264 billion.
  • Homeland Security — $37 billion.
  • Small Business — $25 billion.
  • Indian Affairs — $20.5 billion.
  • Veterans’ Affairs — $18 billion.

House timing up in the air

One unanswered question is when the House would take up the budget if the Senate is able to adopt it this week.

Initial plans called for the House to return during the August recess to consider the blueprint. But some House moderates have called for taking up the bipartisan infrastructure bill during the August recess, contrary to Democratic leadership plans and raising doubts about whether there would be the votes in the House for the budget resolution during recess.

Speaker Nancy Pelosi has said she wants to hold the infrastructure bill until the Senate passes the reconciliation bill, which would not be until September at the earliest.

On Monday, a group of House Democrats wrote to Pelosi making their concerns with her stated timetable clear. The letter lays out their support for the Senate’s bipartisan infrastructure bill and why it should be decoupled from the budget reconciliation process.

And it throws up another potentially significant roadblock to quick House adoption of the budget blueprint: the moderates want to first know what the budget reconciliation bill is going to look like before voting on the resolution that will start the process.

“Before the House adopts a budget resolution, Members of Congress should be able to review a detailed scope of spending levels and revenue raisers,” wrote the six House Democrats in Monday’s letter. Signatories included New Jersey’s Josh Gottheimer; Hawaii’s Ed Case; Oregon’s Kurt Schrader; Maine’s Jared Golden; and Filemon Vela and Vicente Gonzalez, both of Texas.

On the other hand, the delicate balancing act facing Pelosi was evident in initial comments from House Natural Resources Chairman Raúl M. Grijalva. The Arizona Democrat and former leader of the Congressional Progressive Caucus said the $25.6 billion budget instruction to his panel wasn’t enough to meet the needs, and that he’d be working to increase that target.

“Regardless of how much good work this resolution does in other areas, you can’t spin away the fact that it doesn’t offer the Interior Department enough money to meet some of our critical climate goals, including pressing needs like drought mitigation throughout the West,” Grijalva said in a statement.

Lindsey McPherson contributed to this report.

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