Washington Weekly: Voting Reforms Bill

The Senate was unable to pass a voting law reform bill (see below). The House passed legislation to automatically enroll veterans in the Veterans Affairs Department‘s health care system.

Both the Senate and House will be out of session and return to Washington the week of January 31.

Voting Reforms Bill.

The Senate’s contentious debate on voting reforms came to a close this week with the failure of a House-passed reform bill. After the bill fell well short of the 60 votes needed to overcome the procedural hurdle to stop a filibuster, Senate Democrats tried to change Senate rules to allow the bill to pass on a simple majority basis but were unable to convince all 50 of their members to support this one-time rules change. All week, Democratic and Republican lawmakers respectively exchanged familiar charges of voter suppression and voter fraud that will no doubt reverberate throughout the mid-term elections. While action on voting reforms has stalled, there may be bipartisan agreement on clarifying the rules over how electoral votes from presidential elections are considered and approved by Congress. Such changes could have been helpful in the aftermath of the 2020 presidential election. While some Democrats may view it as too small of a consolation prize after not enacting a broader voting reform bill, legislation in this area likely would pass if it came up for a vote.

Democrats’ Build Back Better Act.

It is certain that the $2.2 trillion Build Back Better (BBB) bill that passed the House late last year is dead in the Senate. What is less certain is whether a smaller and more targeted bill can be crafted and passed in the Senate in the coming months. Senator Joe Manchin (D-WV) will be the key player in determining whether a bill can come together, although such a bill also would need to be acceptable to the other 49 Democratic Senators. Negotiations among Democratic Senators to develop a smaller bill have only recently begun and are expected to take at least several weeks (and possibly longer). While a smaller BBB bill is still an option for Democrats, the shortened legislative calendar in an election year will present challenges. We think Democrats need to come to agreement on a bill within the next two months to have a realistic shot at getting a smaller BBB over the finish line.

Potential Tax Increases in the BBB.

We are frequently asked about the future of the tax increases that have been proposed to pay for the spending in BBB. If the Senate is able to pass a smaller BBB, it will include many of the tax increases in the House-passed bill. While some provisions may be scaled back, even a smaller BBB would need to raise revenue through tax increases given the demand of Senator Manchin (and others) that the bill be fully paid for (with possibly extra revenue for deficit reduction). We expect a scaled-back BBB would include a surtax of 5% for individuals with income of over $10 million and an additional 3% surtax on income over $25 million. It also likely would have the surtax apply to capital gains for individuals at those higher thresholds but would apply to trusts at a much lower threshold (beginning at $200,000). No other changes to estate taxes, grantor trusts or capital gains are likely. While there would be no increase to the corporate tax rate, there would be several changes impacting large companies, especially those with an international footprint. While the tax provisions would be different and less extensive than those passed last year in the House bill, they still would be significant and would depend in part on the size of the spending in any Senate BBB bill.

New Pandemic Aid to Small Businesses?

A bipartisan group in the Senate has been discussing the need to extend financial assistance (in the range of $40 billion) to certain business sectors (like restaurants, bars, other food-service businesses, gyms and live entertainment venues) hit hard by the prolonged pandemic. According to the Independent Restaurant Coalition, 90,000 restaurants have closed since the pandemic began two years ago. These new funds may also be included in an upcoming request from the Biden administration for more Covid relief funds. Any new Covid relief funds may very well be justified, but they will be subject to greater scrutiny from Congress since much of the $6 trillion already allocated by Congress in relief is still unspent. Moreover, while the current effort being discussed is targeted, the size and cost of relief would mushroom if a broader set of businesses and groups of individuals try to be covered. Unless Covid worsens dramatically in the months ahead, any additional relief is likely to be much smaller and more targeted than some of the past relief bills.

Sanctions on Russia.

While the Biden administration and Congress have engaged in a lot of tough talk on the threat of further Russian military action in Ukraine, there currently is not agreement on what sanctions or other actions should be taken against Russia if it does invade. President Biden already has adequate legal authority to impose the strong sanctions he has threatened. Nevertheless, a strong show of bipartisan support from lawmakers for the sanctions would help strengthen the administration’s hand. Lawmakers from both parties are working on a bipartisan set of sanctions but have some disagreements that still need to be resolved. One particularly tricky issue is whether US sanctions should apply to the newly constructed Nord Stream 2 Pipeline that will transport Russian gas into Europe. Republicans feel strongly that such sanctions would deal a huge financial blow to Russia, while President Biden fears that the sanctions would cause a rift in the NATO alliance (since they would be resisted by Germany and other European users of Russian gas). If Russia takes further military action, we believe both chambers would come together and support a sanctions package, but many Republicans will grumble that they are not strong enough to affect Russia’s actions.

Big Tech Legislation.

At a lengthy mark-up this week, a Senate committee approved legislation aimed at curbing anti-competitive practices by big tech companies on their platforms. Not surprisingly, the bill was roundly opposed by its target, big tech companies. Though the bill has bipartisan support, Senators on both sides of the aisle expressed concerns about the bill’s potential impact on global competitiveness, privacy/cybersecurity and consumer choice as well as its heavy reliance on regulators and courts. As such, the bill will be subject to significant negotiation before it’s ready for a vote on the Senate floor. In an election year with a shortened legislative calendar, it’s possible time will run out on that process. While anti-trust and competition policy will continue to be a major focus for Congress, the more meaningful and serious action is likely to continue to come on the regulatory front.

Congressional Stock Trading.

There is growing interest among lawmakers on both sides of the aisle in placing restrictions on the personal trading of members of Congress to address concerns about insider trading and conflicts of interest. The focus in Congress follows public scrutiny of lawmakers’ trades at the beginning of the pandemic and more recent scandals at the Federal Reserve regarding the personal trades of board members and reserve bank presidents. In response, the Fed has established a policy that would ban trading in individual stock and place limitations on the trading in investment funds. There are a number of proposals in Congress, including ones requiring members to place certain investments in a blind trust and banning individual stock trades. These ideas generally have bipartisan support, though there isn’t momentum behind one single proposal at this point. While some members of Congressional leadership have expressed opposition to a ban on trading individual stocks, many lawmakers will want Congress to take some action in this area in an election year.

Presidential Approval.

Yesterday marked President Biden’s one-year anniversary in the White House. Based on recent polling, it is fair to say that the public has a significantly less favorable opinion of how he’s handling the job today than they did as recently as this past summer. While President Biden’s job approval ratings remained consistently around 55% for the first six months of the job, the last six months have seen a steady decline. His current average job approval rating is at 42%, the second lowest approval rating of any president in the modern era. President Trump held a 39% approval rating after one year in office, while President Obama was slightly underwater at 48%. Other modern presidents have fared better after year one, including Presidents George W. Bush (80% right after 9-11), Clinton (58%), H.W. Bush (80%), Reagan (50%), Carter (58%) and Nixon (60%). President Biden still has time to turn public perception around, but, if his favorable ratings stay below 45%, the mid-term elections will very likely be a one-sided contest.