Washington Weekly: Senate Bipartisanship

U.S. Office of Public Policy, 11 February 2022

8 min read

This Week:

The Senate confirmed various Biden Administration judicial appointees. The House passed a three-week extension of government funding through March 11 (see below), a bill to reform the US Postal Service (see below) and legislation to impose sanctions on foreign individuals who violate human rights against LGBTQ individuals. Both the Senate and House passed a bill that will eliminate mandatory arbitration in sexual assault and harassment disputes.

Next Week:

The Senate will pass the extension of government funding and consider the House-passed postal reform bill. The House has not scheduled any votes for next week.

The Leads

Government Funding Deadline.

With government funding set to expire on February 18, the House this week passed legislation to continue current levels of spending through March 11. The Senate is expected to approve this extension next week. Lawmakers will have another three weeks to reconcile their differences and pass a bill to fund government agencies through the remainder of the fiscal year (September 30). While there are hundreds of spending provisions in this bill, the primary issue of contention concerns the size of spending increases for both defense and domestic programs. There will be spending increases for both that will add to the budget deficit, though the size of those increases is still being worked out. Lawmakers go through this exercise every year and ultimately settle on a compromise. The current activity should yield the same result by March 11, if not earlier.

Other Issues

Senate Bipartisanship.

With Senator Ben Ray Luján (D-NM) recuperating from a stroke and likely to be away from the Senate for at least another six weeks, Senate Democrats find themselves in the position of being one vote short in an evenly split Senate. This development further sidetracks President Biden’s Build Back Better plan of social spending and tax increases, which Democrats have tried to advance through a budget reconciliation process that only requires a majority vote. It also presents another headwind to Democrats’ ongoing inability to change Senate filibuster rules as a means of passing comprehensive voting reforms. Finally, it poses challenges in approving more controversial executive branch nominees. However, this development doesn’t stop the Senate from passing legislation with sufficient bipartisan support. The following bills have bipartisan support and could advance in the next two months as Senate Democratic leaders deal with the reality of being one vote short of a majority.

  • Postal Reforms. The House this week passed bipartisan legislation to reform the US Postal Service in an effort to make the agency more competitive and financially viable. The Postal Service has posted operating deficits over the last 15 years, including a $4.9 billion deficit in the last fiscal year. Absent any changes, the agency is on pace to run out of funds by 2024. The House bill would drop a longstanding requirement that the agency pre-fund retiree health benefits, which would save about $27 billion. Unlike earlier versions, the current bill does not eliminate weekend mail delivery at residences or close any post offices in an effort to trim costs. Interestingly, the bill also would allow post offices to sell certain non-postal items like fishing and hunting licenses. Postal reform has been debated in Congress for a long time, and this could be the year it finally is enacted.
  • Boost in US Technology Competition. We discussed this bill last week following passage in the House. The bill invests federal money in a wide range of critical science and technology areas, with a specific emphasis on US production of semiconductors. Practically every lawmaker supports the bill’s core purpose of enhancing US competitiveness in science and technology. A Senate version passed on a bipartisan basis last year, but Republicans opposed the House bill because it addressed many issues that went far beyond the Senate’s focus on technology. The legislation is a major priority for Democratic leaders and President Biden, who are eager to show bipartisan victories in an election year. A final bill, which will be a product of bicameral negotiations, has a good shot at passing if it stays focused on technology competitiveness.
  • Port Congestion Relief. Disparities in freight rates have resulted in significant delays in US exports (primarily agricultural products) leaving US ports. A bipartisan bill to address this problem was included in the aforementioned US technology competition legislation approved by the House last week. The freight pricing bill would have little impact on the current supply chain dilemma, but it would provide some helpful longer-term relief. Though it was not included in the Senate competition legislation, we believe this provision will be part of any final agreement.
  • Mental Health Assistance. Bipartisan groups in both the House and Senate have pledged to craft legislation soon providing a boost to mental health awareness, access and treatment. Given the pandemic’s impact on schools and caregivers, assistance to younger kids will be a major focus. Lawmakers in both the House and Senate are working on bills that could get votes in the late spring or summer. The bills will likely focus on strengthening the mental health care work force, the adequacy of insurance coverage for mental health services, disparities between physical health care and mental health care, and the role of telehealth for mental health. If this remains a bipartisan effort, a final bill has a good chance of being enacted later this year.

Retroactive Taxes?

Even with the pause in Build Back Better (BBB) negotiations, there are ongoing conversations on Capitol Hill about BBB’s possible tax components. One question we continue to get relates to whether any potential tax increases would have a 2021 effective date. The House bill had different effective dates depending on the tax changes, with a range from September 13, 2021 (a proposal to limit the exclusion for the gain to qualified small business stock) to December 31, 2031 (limitation to backdoor Roth conversions). If BBB does make a comeback in the Senate, it could have retroactive tax changes though retroactivity (whether to 2021 or January 1 of this year) becomes less likely and tenable the further we get into the year (particularly as we get into the summer). Of course, the more time passes without significant progress in negotiations, the more improbable it is that the Senate passes any BBB bill.

Stablecoins and Digital Assets.

The House Financial Services Committee this week held a lengthy hearing on the regulation of stablecoins, which are digital assets issued by private entities but backed by other assets, including fiat currencies like the dollar. At the hearing, a senior Treasury official discussed recommendations made in a stablecoin report issued by the Treasury and other regulators. To fill in regulatory gaps and address financial stability concerns, the regulators would like Congress to develop legislation that regulates stablecoin issuers as banks, a point that received pushback from some lawmakers. Stablecoins are not the only area where regulators want Congress to act. The Federal Reserve recently issued a much-anticipated report on central bank digital currency (CBDC) where it made it clear that it would like direction from Congress before it would proceed with a CBDC. While interest in these burgeoning issues is growing in Congress and among the broader public (the Biden administration also will weigh in with an executive order in the near future), it will take time for lawmakers to digest the complexities of these issues and reconcile potentially divergent approaches on how digital assets should be regulated. Regulators could be waiting a long time for Congressional action and in the meantime will need to grapple with these issues using the limited and imperfect authorities they already have.

The Last Word

Redistricting Scorecard.

By now, all but 10 states (FL, LA, MN, MO, NH, NC, OH, PA, RI and WI) have completed their new congressional district maps. While the early consensus was that the redistricting process would slightly favor Republicans, the process so far has not worked out that way. Democrats are now expected to have a slight advantage when redistricting is complete, with potentially four to eight additional Biden-won congressional districts being created in various states. This is partly due to the decision of Republican-controlled state legislatures (in GA, KY and TX) to focus on strengthening incumbent Republican districts instead of dismantling Democratic-held districts. Furthermore, Democrats have had some success in limiting Republican gains by challenging various GOP-drawn redistricting maps in court (in NC and OH). Nonetheless, Republicans are still better positioned at this time to win the majority back in the House in the mid-terms even though the redistricting process may allow Democrats to limit their losses.