Delta Blues

“President Biden met virtually with governors, mayors, and other state, local, and tribal officials to discuss ... investments made by the Bipartisan Infrastructure Deal.” @whitehouse Instagram, Aug 12, 2021

U.S. and global implications of the Delta variant, razor thin House and Senate margins, disputes between moderate and progressive Democrats in Congress, reapportionment triggered by the 2020 Census, and 2022 election politics impact the outlook for Biden’s Build Back Better Agenda. Decisions over the next 120 days will have a major impact on the agenda for the remainder of the 117th Congress.

The Delta Variant. In the U.S., 168.9 million Americans (50.9% of the U.S. population) are fully vaccinated against COVID-19. More importantly, 80.8% of seniors ( 65) are vaccinated. That combination dramatically reduces hospitalization and death risks for the most vulnerable Americans. 

As President Biden stated, “With the Delta variant, we’re seeing a pandemic of the unvaccinated.” Over the past seven weeks, the seven-day moving average of U.S. COVID cases jumped 850% from 12,000 to 114,000. Despite that increase, vaccines remain highly effective against hospitalization, severe disease, and death. According to CDC Director Walensky, 99.5% of recent COVID deaths were among the unvaccinated. In addition, CDC reports that 97% of hospitalized COVID patients from January through June were unvaccinated.

According to the CDC, “Low vaccination coverage in many communities is driving the current rapid and large surge in cases associated with the Delta variant, which also increases the chances that even more concerning variants could emerge.” Currently, there are five states—AL, ID, MS, WV, and WY—where the number of administered vaccine doses remains below 85,000 per 100,000 people. With multiple two-dose vaccines, that puts fully-immunized rates in those states below 40%. In Mississippi, 36% of state residents are fully vaccinated. For current CDC vaccination data by state, see Chart I.

Chart I. Source: CDC, Covid Data Tracker as of 8/19/21.

The pandemic among the unvaccinated surged as schools, businesses, and state and local governments prepare to reopen creating health and economic uncertainty. The response has been a string of mandates for vaccination and testing from federal, state, and local government leaders and employers.

Thankfully, for the first time in months, the nationwide seven-day average of positive COVID tests dropped 3.2% in the past week.

The Delta challenge is global and will be particularly devastating for developing countries with low vaccination rates. Vaccination delays allow new variants to develop and spread. For 15 months, vaccine availability was a major challenge in the U.S. Now, there are more than enough doses available to vaccinate every American. The new challenge is last mile delivery. As FBIQ reported last month, that problem will be far greater in developing countries. Taking a leadership role in solving that challenge with vaccine donations, technical, and technological support for the vaccine supply chain represents a great opportunity to restore America’s damaged international image.

What practical and political challenges affect Biden’s Build Back Better Agenda?

The legislative window is closing fast. The 50-49 Senate vote adopting a FY22 budget resolution that procedurally clears the way for a $3.5 trillion reconciliation-based package implementing key elements of Biden’s $2.25 trillion American Jobs Plan and his $1.8 trillion American Families Plan was a victory for President Biden, Senate Majority Leader Schumer (D-NY), and Senate Budget Committee Chairman Sanders (I-VT). Despite that win, there is a less than 20% chance that a $3.5 trillion bill implementing that plan can pass the Senate and a less than 50% chance it can pass the House. 

Intra-party disputes among Democrats also complicate the path forward for the bipartisan Infrastructure Investment and Jobs Act (IIJA) that passed the Senate 69-30. The “two-track” legislative strategy endorsed by Schumer, Speaker Pelosi (D-CA), and President Biden effectively holds both efforts hostage until a grand deal on infrastructure emerges. With unified opposition from congressional Republicans, disputes among congressional Democrats are likely to shrink the price tag on that plan dramatically before it can garner the votes needed to pass Congress. The shape of that deal will be impacted by House test votes in the weeks ahead. 

It’s possible that elements of IIJA along with provisions from the United States Innovation and Competition Act that passed the Senate in June on a 68-32 vote are added as legislative “sweeteners” to one or more future continuing resolutions (CRs) that provide billions in emergency disaster relief for expected fire, flood, drought, and hurricane damage, and international vaccine distribution funding. Those provisions make a future CR a likely legislative vehicle for implementing a two-year budget deal and a federal debt limit extension beyond the 2022 mid-term congressional elections.

The decennial reapportionment of congressional seats outlined in Article I, Section 2 of the U.S. Constitution looms over all these decisions. Based on 2020 Census results, seven states—CA, IL, MI, OH, NY, PA, and WV—will lose a Congressional seat and an Electoral College vote in 2022. Five states—CO, FL, MT, OR and NC—gain one seat. Texas gains two.

Chart II. Source: Census Bureau.

House Republican Leader McCarthy (R-CA) is convinced that process ultimately makes him Speaker of the House with a Republican majority in 2023. Both the Census map and mid-term election history suggest McCarthy may be right. 

What’s the path forward?

FY22 Appropriations. Don’t expect the Senate to pass a regular FY22 appropriations bill before a two-year budget cap deal emerges. A budget deal is unlikely before late October. Negotiations could drag into December. That leaves federal agencies in funding limbo through most of FY22 Q1 (Oct-Dec). Civilian agencies are likely to end up with less than the levels outlined in Biden’s FY22 budget. DoD is likely to get more than the $715 billion in Biden’s FY22 budget. 

Continuing Resolutions. In the short-term, agencies will operate under a series of CRs that prevent new starts for all but mission-critical activities with explicit congressional approval. Prospects for an October government shutdown remain below 10%. Those prospects could increase as budget negotiations intensify. 

Federal Debt Limit. The debt limit is an action-forcing event likely requiring Democrats to pass a bill with little GOP support (and a possible Senate filibuster) before the end of October. Because Democrats failed to authorize a debt limit extension in the Senate-passed Budget Resolution, the Byrd Rule prevents them from adding one to their reconciliation bill. While Senate Republican Leader McConnell (R-KY) has made clear Senate Republicans are not going to help the Democratic majority pass the debt limit, he too wants to avoid a potential default. Senate Republicans are likely to vote no and force every Senate Democrats and Vice President Harris to pass the debt limit increase. U.S. default prospects remain below 5%. 

The Bottom Line. Over the next 120 days, decisions by President Biden, Senate Majority Leader Schumer, Speaker Pelosi, and congressional Democratic progressive and moderate voting blocs will largely determine not only how much of the Build Back Better agenda is adopted but also the legislative outlook for the remainder of the 117th Congress.