Washington Weekly: Biden Budget Proposal

U.S. Office of Public Policy, 01 April 2022

9 min read

This Week:

The Senate advanced a technology competition bill that will now head to a conference committee with the House to reconcile differences on a final bill (see below). It also confirmed various executive branch nominations. The House passed a bill to bolster retirement savings (see below), a bill to decriminalize marijuana (see below) and a bill to cap monthly insulin costs for insured patients.

Next Week:

The Senate plans to vote on the nomination of Judge Ketanji Brown Jackson to serve on the Supreme Court (see below). The House will vote on a bill that would require health insurance plans to cover treatment of birth defects.

The Leads

Supreme Court Nomination.

Following her confirmation hearings last week, Supreme Court nominee Judge Ketanji Brown Jackson remains on a path to be approved by the Senate. She will become the 117th justice to serve on the Supreme Court and, at age 51, will be among the youngest justices to serve on the court. Judge Jackson’s prospects were bolstered this week when Senator Susan Collins (R-ME) became the first Republican to support her nomination. It’s possible she will get one or two more Republican votes. The Senate hopes to vote on her nomination at the end of next week before Congress goes into a two-week recess.

Other Issues

Retirement Savings Bill.

In an overwhelming bipartisan vote, the House this week passed a bill to bolster retirement savings (the SECURE 2.0 Act). The legislation would increase the required minimum distribution age to 75 over the coming years, allow employers to match employees’ student loan payments with contributions to their retirement accounts and allow for increased catch-up contributions for individuals aged 62 to 64. With the ball now in the Senate’s court, we expect the Senate Finance Committee to examine these issues in a hearing in the coming weeks. While there is general support for the House bill, some Senators will want to make refinements. As a result, the bill will be subject to negotiations between the two chambers over the next few months. We are optimistic that those efforts will result in a final bill that can be approved toward the end of the year.

Biden Budget Proposal.

As required by law, President Biden sent his annual budget request to Congress this week. As reflected by the reality that Congress is unlikely to pass a budget this year, the President’s budget is more of a symbolic document that lays out his administration’s spending and tax priorities. The Biden budget seeks a 9.5% increase in domestic spending and a 4% increase in defense spending. However, the final government spending bill that Congress passes later this year likely will have similar spending increases for both domestic spending and for defense programs. While some of the administration’s specific tax and spending proposals received significant press attention, most are unlikely to be enacted into law. Some new spending proposals could make their way into the final government funding bill. The tax proposals generally are dead on arrival since they only have support from some Democrats. Although the budget contains many serious proposals, the overall exercise has become more about political messaging than policy formulation.

“Billionaires Tax.”

A proposed new tax on billionaires was one of the items that received the most headlines from the budget. This proposal is basically a new iteration of some of the wealth tax ideas that have emerged over the past few years. It would subject individuals with more than $100 million of assets to a new annual minimum tax of 20% on their total income, which would include unrealized gains on assets. The administration estimates that the proposal would raise $360 billion in revenue over ten years. Given the large impact, the proposal would allow individuals to pay off their initial liability over nine years. As with other wealth tax proposals that have been rejected in the past, this proposal faces universal opposition from Republicans and at least some Democrats (namely Senator Joe Manchin (D-WV)). Despite its poor prospects, we will continue to hear about this proposal from the Biden administration and supportive Democratic lawmakers who believe the general public likes such a tax.

Technology Competition Bill.

One area where there continues to be bipartisan agreement is in increasing US technology capabilities to address competitive threats from China. The Senate last year passed (on a strong bipartisan basis) a bill to increase US semiconductor production and bolster science and technology research, while the House earlier this year passed its own version of the bill. Despite the strong support from both parties on confronting China, the sprawling House bill was uniformly opposed by Republicans because it contained contentious provisions (particularly on labor and environmental issues) absent from the Senate bill. Congress this week took some procedural steps toward setting up a formal conference committee where members will engage in negotiations to iron out the differences between the two bills. Ultimately, the final product likely will need to hue pretty closely to the Senate bill given the necessity of having Republican support in the upper chamber. However, the negotiations could drag on if House Democrats dig in on some of the more contentious items in their bill. Even without that dynamic, the conference negotiations won’t be easy given that the bills cover a lot of complicated issues that span many Congressional committees. Particularly with a two-week Congressional recess later this month, the goal of wrapping things up before Memorial Day may be aspirational.

Marijuana Legalization.

With 39 states having legalized, or decriminalized, cannabis in some form, there continues to be interest among many Democrats in Congress in taking national action. Reflecting that, the House today will take up and pass (on a party line basis) a bill that would decriminalize and tax cannabis at the federal level (it passed a similar bill at the end of 2020). Senate Democrats also have been working on a Senate bill that would combine decriminalization with broader criminal justice reforms. Given opposition from Republicans and likely a few Democrats, such a bill would have no chance of clearing the 60 votes needed for passage in the Senate. One bill that has bipartisan support is the Secure and Fair Enforcement Banking Act (the “SAFE Banking Act”), which would allow banks and other financial institutions to serve covered cannabis businesses. The House has passed that measure on a broad bipartisan basis on multiple occasions and has included it in bigger pieces of legislation (including the China competition bill mentioned above). To this point, Senate Democrats have been reluctant to take up the SAFE Banking Act without also advancing criminal justice reforms. So, while the SAFE Banking Act likely could pass the Senate, there continues to be uncertainty whether that will happen.

Masks on Planes.

The Biden administration is facing additional pressure to repeal its mandate for airline passengers to wear masks. US airline CEOs have led the request to drop the mandate in the context of lower Covid cases, increased vaccinations and the lifting of many other restrictions across the US and in other countries. The request comes as airlines continue to deal with incidents where passengers refuse to abide by the rules. According to the Federal Aviation Administration, of the 6,000 reports of unruly behavior on planes last year, 4,300 involved masks (700 of 1,000 reports involved masks this year). The public transportation mask mandate was set to expire on March 18, but the Transportation Security Administration extended the policy through April 18 (the third, and shortest, extension since the mandate took place in January 2021). The Senate this month passed a resolution to repeal the transit mask mandate, but the House is not likely to act on the bill. Barring a significant uptick in Covid cases over the next couple of weeks, we expect the Biden administration to allow the mask mandate to expire.

Supreme Court II.

Supreme Court Justice Clarence Thomas is under pressure from some Democratic lawmakers to recuse himself from some court cases (particularly those relating to the January 6, 2021 protest and invasion of the US Capitol) because of his wife’s political activities around the controversial presidential election. A few lawmakers have even called for Justice Thomas’ impeachment. An impeachment (and subsequent replacement with a new justice nominated by President Biden and confirmed by the Democratic Senate) would be a monumental development, but it is unlikely to happen. Impeachment would be a lengthy process playing out over months. At this point, it’s unlikely all Democrats would be on board with pursuing this drastic step. Even if it was pursued, a conviction (and removal from office) would require a two-thirds vote in the Senate (67 votes), which seems very unlikely. For an impeachment strategy to gain any traction, there would have to be some evidence that Justice Thomas has done something wrong. While problematic, his wife’s political activities were not illegal and we are unaware of any wrongdoing by Justice Thomas himself. We expect more calls from Democratic lawmakers for the Justice to recuse himself in certain cases, but the calls for a resignation or impeachment will only get traction if there is much more to this story than we know today.

The Last Word

Presidential Polling.

With the mid-term elections about eight months away, President Biden’s low polling numbers (an average of 41% approval) are an increasing concern for Democrats. The President has not seen a bump in his low approval numbers from the State of the Union, the war in Ukraine or his nomination of a historic Supreme Court Justice, even though these are all the types of events that traditionally have helped Presidents. The situation could reflect a hardening of voters’ perceptions (President Trump’s favorability ratings followed the same trend), though it could also be because an issue like rising inflation might be superseding other factors. If voters’ perceptions have indeed hardened, this will be a sentiment that could be very hard to reverse before November. Regardless of the cause, the president’s low approval rating will be a major headwind for Democrats in a 2022 mid-term election where they also will be fighting historical trends that have worked against the party that occupies the White House.