Washington Weekly: Final Four

U.S. Office of Public Policy, 03 December 2021

This Week:

The House and Senate passed a short-term spending bill to fund the government until February 18 (see below).

Next Week:

The Senate will continue to work on the fiscal year 2022 defense authorization bill (see below) and vote on various Biden administration nominees. The House will vote on a bill that would limit certain executive powers.

The Leads

Final Four.

As Congress returned to Washington this week, it has four major priorities to advance between now and the end of the year. These include a short-term extension of government funding, a fiscal year 2022 defense authorization bill, Senate consideration of the Build Back Better Act (through the budget reconciliation process) and an extension of the debt ceiling. We cover below each of these issues, which will dominate activity in Washington over the next month.

  • Extension of Government Funding. Of the four, this is the only issue that needed to be acted on immediately. Failure to act would have resulted in a government shutdown, which both parties know from experience is a bad outcome for everyone. The House passed a bill on Thursday to continue to fund government at current levels until February 18. After a debate and unsuccessful vote on an amendment to defund President Biden’s vaccination mandate on businesses, the Senate passed the same bill yesterday evening. Since this is just a short-term punt, Congress will face the need to pass a longer-term spending bill (or another short-term extension) early next year. This will need to be a bipartisan exercise since the measure will need 60 votes in the Senate to pass. This will not be easy, but Congress generally solves this annual problem by increasing spending to accommodate both parties’ funding priorities – defense spending for Republicans and social spending for Democrats. We expect that script to be followed again by February 18. At this point there is general relief that Congress has temporarily averted a shutdown, but this issue will return in February.
  • Defense Authorization Bill. This bill is currently being debated in the Senate and should pass soon on a bipartisan basis, as it usually does. The House has already passed its version of the bill, and the two chambers may have to hammer out their differences in a conference committee. Or, in the interest of time, the House could just pass the Senate-passed bill. As we noted two weeks ago, this bill routinely draws hundreds of amendments, many of which are unrelated to defense. These usually represent the more contentious aspects of the bill, and most are excluded from the final bill. This bill determines US defense policies for the next year but is otherwise unrelated to the big tax and spending issues that are more prominently in the public spotlight today.
  • Democrats’ Build Back Better Act. Passage of this large package of social spending and tax provisions is the Democrats’ biggest priority this month. The Senate is now considering various changes (including a reduction to the current price tag of $1.75 trillion) to the bill passed by the House two weeks ago. The changes, which currently are being negotiated, will have to be approved by all 50 Democrats, including Senator Joe Manchin (D-WV) and other moderates. Senator Manchin has expressed concerns about certain contents of the bill and has even raised questions about the need for such a bill. Senate Democrats will need at least a couple of weeks to fine tune the bill, get all 50 Democrats on board with it and navigate the bill through intricate Senate procedures under the budget reconciliation process. We believe a final bill will emerge and be voted on toward the end of this month, but this is not a given. The negotiations over the next two or three weeks will be intense and exacerbate tensions among different Democratic factions.
  • Debt Ceiling Limbo. At hearings this week, Treasury Secretary Janet Yellen continued to underscore the need for Congress to raise the debt ceiling by December 15, emphasizing that the Treasury might not have the funds needed to make required payments. Senate Majority Leader Chuck Schumer (D-NY) and Senate Minority Leader Mitch McConnell (R-KY) have held a series of closed-door discussions over the last two weeks on possible ways to meet that deadline. There is no silver bullet solution on this issue that will accommodate the political interests of the two sides. The two leaders have discussed passing a debt ceiling increase through budget reconciliation (as Republicans have favored) but shortening the debate time and amendments around such a vote (a Republican concession). Another option is adding it to another must-pass bill (as Democrats have favored) but specifying a new debt limit amount that could exceed $30 trillion (instead of merely “suspending” the debt ceiling). We should have a sense of the direction the leaders will take in the next week, but we are encouraged by the urgency with which top congressional leaders are treating the issue.

Other Issues

Student Loans.

Progressive Democrats are again ratcheting up pressure on President Biden to forgive $50,000 in federal student loan debt per borrower. Federal student loans represent the lion’s share of the roughly $1.8 trillion in outstanding student loan debt. As we near the end of the year, it is notable that the Build Back Better Act does not contain student loan relief. Additionally, the current forbearance on student loans put in place at the beginning of the pandemic is scheduled to end on January 31, 2022. Under the current arrangement, payments have been suspended with no accrual of interest. Letting this forbearance period lapse at the outset of an election year may not be a politically viable option for President Biden and congressional Democrats. Keep in mind that back in April the White House asked the Department of Education to review the administration’s legal authority on student loan relief. We expect the administration to take action on this issue (by extending the forbearance or potentially doing something bigger) in January.

Electric Vehicles.

One fight that will come to a head in the coming weeks is the size and scope of the electric vehicle (EV) tax credit in the Build Back Better Act. The fight between Senator Manchin and other Democrats is not about the $7,500 EV credit but about an additional bonus $4,500 tax credit for EVs made by union labor. Senator Manchin opposes this provision because he is concerned that the bonus credit would disadvantage car production in his state (West Virginia has a Toyota plant that produces EVs with non-union labor). Democrat Senators from the car-producing state of Michigan are making appeals to Senator Manchin, but he shows no signs of backing down and likely will prevail on this issue. Another issue that may become a source of disagreement among Democrats is the bill’s requirement that EVs need to be built in the US to receive any of the credit after 2027.

Senate Parliamentarian.

The Senate Parliamentarian, Elizabeth MacDonough, will have a major impact on the content and prospects of the Build Back Better Act. She is now being presented with the House-passed bill and will soon rule on whether certain provisions can be included in the Senate bill under its budget reconciliation rules. Top of the list are immigration proposals, which are important Democratic priorities but likely will run afoul of the reconciliation rules. Back in 2017, the Senate Parliamentarian required some changes to be made to the Republican tax bill. Democrats will be disappointed if the immigration provisions are eliminated and progressives in the party will call for the Senate rules to be changed, but these calls are unlikely to alter the course of the legislation or the rules of the Senate.

The Last Word

Term Limits.

We received plenty of questions about the prospects of term limits in either the House or Senate after our piece two weeks ago on the average age of Senators. Congressional term limits are widely supported by the American public and are a frequent campaign talking point for candidates challenging incumbent members of Congress. However, the public perception of how long members of Congress serve is likely skewed by the advanced age of party leaders and committee chairs, all of whom have had to serve for a very long time in order to gain the support and seniority to earn those roles. At the start of this Congress, the average length of service for a House member was 4.5 terms (9 years) and 1.8 terms for a Senator (11 years), and we expect both of those averages to go down after the elections next year (especially after the 36 already announced retirements and others in the upcoming months). Congressional term limits will remain unlikely to be implemented as long as the turnover they hope to achieve continues to occur naturally in elections.