Washington Weekly: Infrastructure Bill Finalized

U.S. Office of Public Policy, 12 November 2021

This Week:

Both the Senate and House were out of session and will return to Washington next week.

Next Week:

The Senate will vote on various Biden administration nominees.  The House plans to vote on President Biden’s Build Back Better legislation through the budget reconciliation process (see below).

The Leads

Infrastructure Bill Finalized.

Following passage by the House last weekend, the bipartisan infrastructure bill just awaits the signature of President Biden to become law.  We expect President Biden to have a signing ceremony on Monday (November 15).  The bill has had a long and meandering journey.  After months of work, a bipartisan group in the Senate developed a bill that the Senate passed on a strong bipartisan basis in August.  However, the bill was held up for months in the House as progressive Democrats (and party leaders) used it as leverage in the party’s negotiations over the broader social spending bill (see below).  The package has a little over $1 trillion of total spending on infrastructure that will be spread out over the next decade.  Infrastructure projects take time to develop and typically face complex requirements on environmental reviews, permits and contractor selection, among other areas.  The bill, which is a big boon to state and local governments as well as many businesses, should help the US catch up on addressing its well-documented infrastructure needs.  Politicians in Washington have talked about the need to pass a meaningful infrastructure bill for over a decade and have finally acted in a bipartisan way to do so.

Biden Signature. 

We have received many questions on why President Biden has not yet signed this significant accomplishment into law.  Given the broader political climate, it’s easy to conjure up shenanigans, but the answer is pretty benign.  The President wants to have a public signing ceremony for the bill, but members of Congress are not in Washington this week given the recess.  The President will have the signing ceremony with the bill’s supporters when Congress returns next week.  House Speaker Nancy Pelosi (D-CA) also has not yet officially transmitted the bill to the White House for the President’s signature, likely because of this scheduling issue.  When the House or Senate takes the final step in passing a bill, it can send the bill to the White House or hold it (if necessary).  The infrastructure bill will be signed into law in a few days, and Washington will move on to the next issue.          

Democrats’ Budget Reconciliation Bill. 

The House expects to vote on this bill late next week.  This will be a significant vote, but the bill’s future still rests with the Senate.  After hammering out a compromise last week, we believe House Democratic leaders have lined up enough votes to pass the bill next week.  However, the measure will be revised in the Senate.  Senator Joe Manchin (D-WV) continues to express concerns about the bill, but we think he is jockeying to make changes rather than trying to sink the bill.  Continued signs of persistent and longer-term inflation (including Labor Department data released this week) has only stoked these flames.  Some Washington observers are growing increasingly bearish about the passage of a bill in the Senate due to potential opposition from Senator Manchin.  That outcome is more of a possibility today than it was just weeks ago, but we think that recent concerns about inflation will not be a death knell for the bill.

Budget Reconciliation and Medicare Expansion. 

Medicare expansion is a major issue to watch in the upcoming debate in the Senate on the reconciliation bill.  In the past year, Democrats generally have moved from trying to pass comprehensive “Medicare for All” legislation to expanding Medicare in certain areas.  The original proposal to expand benefits to cover vision, dental and hearing has been pared back.  The reconciliation bill that the House will vote on next week only expands Medicare coverage to hearing benefits.  At a time when the Medicare program faces financial insolvency by 2026, an expansion of benefits to all three areas would cost roughly $350 billion.  Senator Bernie Sanders (I-VT) and his progressive allies have led the charge to expand the system, while Senator Manchin has worked on narrowing the expansion given Medicare’s financial challenges.  This will be a battle royale among Democrats in the Senate and is one of many reasons why additional time will be needed to craft a final bill.

Other Issues

Fed Decision. 

President Biden is expected to decide in the coming weeks (potentially any day) whether to renominate Federal Reserve Chairman Jay Powell for another term. In Chairman Powell’s favor, he is widely respected on both sides of the political aisle and has the support of Treasury Secretary (and former Fed Chair) Janet Yellen. However, progressives like Senator Elizabeth Warren (D-MA) have argued that he was too lax on bank regulatory requirements and that he hasn’t done enough on climate issues.  The Federal Reserve recently has suffered reputational damage due to the stock trades of some regional reserve bank presidents. The persistence and breadth of higher inflation also is not helpful, although the Biden administration and Democrats generally have no problems with Chairman Powell’s dovish monetary policy.  Overall, Chairman Powell seems less of the shoo-in that he was not long ago.  The main contender to replace him is Fed Governor Lael Brainard, a veteran policymaker of the Obama and Clinton administrations.  With a total of three current or upcoming vacancies on the Fed Board (not including the position of chair), the Biden administration will be able to roll out a slate of new Fed candidates.   Governor Lael Brainard would face Republican opposition as nominee to be Fed Chair and would have a less smooth confirmation process than Powell would.  She also could be slotted into the vice chair for supervision role (and could be an eventual pick for Treasury Secretary).  The decision will come down to President Biden’s appetite for rocking the boat at a time of economic uncertainty and when the administration already has its hands full with a fight for its controversial pick to head the agency that regulates national banks (there will be fireworks on this nomination in a Senate hearing next week).  We will have the consequential answer to this looming question very soon.    

Ransomware. 

As cyber-attacks on private businesses escalated in the summer, pressure has increased on Washington to act.  Lawmakers from both parties have in the past rallied behind a program to encourage private companies to report attacks on their computer networks on a voluntary basis to help federal authorities better understand the threats and identify the culprits. That process has proven insufficient for a variety of reasons. Congress is currently considering legislative solutions that would make the reporting of cyber-attacks mandatory, strengthen privacy protections (so proprietary information is not publicly disclosed) and provide companies with liability protection when reporting to the government. Some Republicans and businesses have apprehension about a mandatory reporting requirement, while Democrats have concerns about the liability protections.  Nonetheless, a bipartisan bill to accomplish these goals is now moving forward in a Senate committee, and a vote could occur by the end of the year. 

The Last Word

The 2022 Senate Map.

After a week of enthusiasm following their win in Virginia and narrow loss in New Jersey, Republicans were handed a setback on Tuesday when Governor Chris Sununu (R-NH) announced he would not run for the Senate in 2022. Governor Sununu won reelection last year by 32% in a state that President Biden won by seven points. His entry into the Senate race would have given Republicans a strong opportunity to pick up a seat in the Senate where Democrats currently hold a 50-50 majority. Even with this setback, Republicans have a more favorable election environment than they had earlier this year. The elections are still a year away, but toss-up races in Arizona, Georgia, North Carolina, Pennsylvania and Wisconsin seem to be trending more Republican. Meanwhile, seats in New Hampshire and Nevada, which have been reliably blue for the past few elections, could become more purple. Finally, traditionally contested seats in Florida and Ohio may become safer Republican seats. Each seat will be critical for determining control of the Senate.