Budget Breakthrough

Blog Post
Friday, August 27, 2021

Budget Breakthrough

After moving at a breakneck pace and holding a special session, the House and Senate passed an FY 2022 budget resolution on Tuesday, setting the table for the annual appropriations process. It also jumpstarts reconciliation, the strategic lynchpin to enacting the “soft” infrastructure portion of President Biden’s Build Back Better agenda.

Even though a budget resolution can pass both chambers with a simple majority vote, the aforementioned outcome was not pre-ordained. The measure sailed through the Senate, but faced stiff odds in the House after an intra-party standoff between the moderate and progressive wings of the Democratic party threatened final passage. 

On one side, a group of moderate Democrats swore to withhold their support until after the House passed the bipartisan infrastructure bill (the “hard” infrastructure bill with funding for traditional infrastructure like roads, bridges, mass transit, airports, and waterways). On the other side, 90+ progressives similarly threatened to oppose passage of the “hard” infrastructure bill until Senate Democrats passed the not-yet-written “soft” infrastructure reconciliation bill. Why? To ensure moderate Democrats in both chambers wouldn’t withhold their support from the upcoming $3.5 trillion package.

Faced with seemingly mutually exclusive demands, Speaker Pelosi crafted a procedural solution that gave each side face-saving concessions while simultaneously punting the eventual clash to the end of September. The moderates were guaranteed a vote on the Senate-passed bipartisan infrastructure bill no later than September 27, and they secured a rule that prevents any House amendments. This means that if the “hard” infrastructure bill passes the House in September, it will be sent to President Biden for his signature. Progressives cannot stall the bill by amending it and sending it back to the Senate, though they can still kill it by opposing it.

Progressives, on the other hand, succeeded in keeping adoption of the budget resolution on track and teed up a September schedule that provides a very narrow window for the “soft” infrastructure reconciliation bill to pass the Senate before the House passes the bipartisan “hard” infrastructure bill. Assuming House and Senate committees report out their contributions to the reconciliation bill by the September 15th deadline (itself unenforceable), then the two chambers will have 12 calendar days to process the “soft” reconciliation bill—House first, followed by the Senate—before the House is required to vote on the bipartisan “hard” infrastructure bill. 

Will Senate Democrats pass their reconciliation bill before the House must vote on the bipartisan infrastructure bill? Like the odds of finding a four-leaf clover, the probability is greater than zero but very, very small. And if the reconciliation bill does not pass the Senate by September 27, the 90+ progressive House Democrats will face a difficult decision: should they follow through on their threat, oppose the measure, and sink one of President Biden’s hard-fought signature achievements?

Stay tuned….. 

Post-Budget, What’s Next?

Now that the FY 2022 budget resolution is in place, committee chairmen in the House and Senate will formally complete the process of putting the policy recommendations of the president’s Build Back Better agenda into legislative language. This is an arduous task, especially for what is expected to be a very expansive (and expensive) bill covering many policy areas. For many committees, this process unofficially began weeks ago with draft language circulating among staff, policy experts, stakeholders, committee colleagues, and scoring institutions like the Congressional Budget Office and the Joint Committee on Taxation. It is an iterative, time consuming process, and Democrats will have a real challenge sticking to their timeline.

Once House and Senate committee chairmen have finalized their proposed text, the committees will meet in public to mark up and adopt their titles and report them to the Budget Committee in their respective chambers. Technically, the just-passed budget resolution directs committees to complete this process by September 15th, but past precedent allows a committee to be late, subject to the patience of the Budget Committee chairman. There are consequences for recalcitrant committees however, so committees are expected to comply with their directives.

Up to this point, the process in the House and Senate is identical. In the Senate however, reconciliation bills are subject to the Byrd rule, a series of tests that prevent the inclusion of extraneous matter in a reconciliation bill. And before the Senate Budget Committee reports out a reconciliation bill to the floor for consideration by the full chamber, it will conduct an analysis called a “Byrd bath” to ensure a preponderance of the bill is compliant. The Budget Committee cannot make changes to the titles submitted by the other committees however— its role is largely administrative during reconciliation—so any Byrd rule violations will be “cured” by a substitute amendment offered from the floor. 

Traditionally, the House has gone first in marking up, reporting out, and adopting a reconciliation bill, then sending it to the Senate. This is because like most reconciliation bills, this one contains multiple tax provisions and the Constitution requires all revenue measures to originate in the House. 

Once the House measure is received in the Senate, the Senate’s version of reconciliation will be offered as a substitute amendment from the floor, and senators will then have the opportunity to offer amendments to the Senate’s substitute. Once the Senate has completed its process, it will send the amended reconciliation bill back to the House, where the House is expected to approve the Senate product and send it to the president for his signature. An unhappy House could also amend the Senate’s version and signal the Senate to try again, but this outcome is unlikely with a 50-50 Senate.

Government Funding and the Debt Limit—Background Noise or Crisis?

Keep in mind that while House and Senate Democrats work feverishly on their reconciliation bill, government funding runs out at midnight on September 30 and the Treasury needs Congress to act on the debt limit very soon. Logic (and public statements from leadership) suggest Democrats will offer up a temporary measure that extends both through mid-December, but the politics of jamming through a $3.5 trillion reconciliation bill on a party-line basis and simultaneously asking for Republican cooperation to avoid default on the federal debt will make it hard for Democrats in the Senate to attract the 10 Republicans they need to pass the short-term funding bill and extend Treasury’s debt capacity. 

By failing to include debt limit reconciliation instructions in the budget resolution, Democrats perhaps unwisely left themselves with only one path to prevent default on the nation’s debt: a regular order measure subject to the Senate’s 60-vote filibuster rule. Senate Republicans, however, have indicated they have no interest in providing the votes necessary to raise the debt limit after what they perceive as the Democrats’ unilateral tax-and-spending spree (conveniently ignoring their own contributions to the debt with their $1.7 trillion partisan tax cut in 2017 and their bipartisan support for trillions in emergency COVID relief). If September’s estimated payments from individuals and corporations are lackluster, the debt limit could evolve from a back-burner slow simmer to a roiling boil in September, eclipsing the reconciliation process and plunging Congress and the nation into another debt crisis akin to the summer of 2011.

It’s an anxious time to be a fiscal hawk….