March 29, 2021
The Biden Agenda and Reconciliation 2.0
After gaining enactment of the $1.9 trillion American Rescue Plan Act (ARPA), which the White House press secretary characterized as the “most progressive bill in history,” the Biden Administration and the Democratic leadership will face a challenge of how to push his “Build Back Better” program through Congress.
While Congress had previously passed five bipartisan bills to address COVID, President Biden, Speaker Pelosi (D-CA), and Senate Majority Leader Schumer (D-NY) chose to go the partisan route for ARPA. They used the Budget Act to trigger a reconciliation bill, avoid a Senate filibuster, and expedite the bill’s enactment without a single Republican vote. The result was a $1.9 trillion legislative victory for President Biden and Democrats in Congress, a particularly noteworthy achievement given their narrow margins in the House and Senate.
Both Pelosi and Schumer have signaled that they will seek bipartisan support for the next package, likely an infrastructure bill, but implementing the next part of the Biden agenda and developing a bipartisan package are probably at odds with one another. Democratic members are simultaneously calling for bipartisan cooperation and an end to the Senate’s legislative filibuster.
Because Democrats currently lack the Senate votes needed to end the filibuster, a breakdown in bipartisan negotiations could bring the reconciliation process back into play. Unlike the $1.9 trillion COVID bill, infrastructure investments lack the urgency of the response to the national emergency the pandemic posed.
While infrastructure seems the most likely agenda item to produce a bipartisan compromise, the scope, size, and financing of that package are potential political sticking points. On March 14, Pelosi outlined the scope of an infrastructure bill to include roads, bridges, water supply systems, “good paying jobs,” broadband, mass transit, schools, housing, and “the rest.”
Past Uses of Reconciliation
This year Democrats have a adopted a budget strategy similar to Republicans’ 2017 strategy. In 2017, Republicans adopted a budget resolution in early January to generate a reconciliation bill designed to “repeal and replace Obamacare.” That proposal ran into problems and ultimately failed in the Senate seven months later. For the next reconciliation bill, Republicans and the Trump Administration worked to gain a consensus on a tax reform bill, which evolved into the “Tax Cuts and Jobs Act.” Two months after adopting the budget resolution in October, that bill was signed into law at the end of 2017.
The other example is the Affordable Care Act (“Obamacare”). Biden does not enjoy the large majorities in the House and Senate that Obama did in 2009. For portions of that year, Obama could count on 60 Democratic Senate votes to overcome a filibuster, so reconciliation was less vital. Still, Democrats adopted a budget resolution that included reconciliation instructions as a backup plan. When Democrats lost a special election in Massachusetts to fill the vacancy created by Senator Kennedy’s death, they used reconciliation to help enact the Affordable Care Act, almost a year after the budget resolution’s adoption.
The Reconciliation Route
To trigger another reconciliation bill, Congress will need to adopt a budget resolution for FY22. Congress is likely to wait for the Biden budget submission before taking that step. While the White House has not announced a release date for the President’s budget, an OMB spokesman indicated a preview will be released the week of March 29 primarily focused on appropriations, with the full budget submission released in May. Press reports also indicate the White House will pursue a $3 trillion Build Back Better package, possibly split into two bills.
House Budget Chairman Yarmuth (D-KY) indicated that the budget resolution will be adopted in July with instructions to generate a reconciliation bill that will be completed in September. He also signaled that reconciliation will be “plan B” if bipartisan legislation cannot be enacted and thought it would include elements of their climate, health care, and immigration agendas. Chart I lists several topics that could potentially be part of a reconciliation bill.
Possible Candidates for Budget Reconciliation
Unlike the FY21 budget resolution, the sole purpose of which was to generate a reconciliation bill to implement the President’s $1.9 trillion COVID rescue plan, the FY22 budget resolution must confront a host of issues: the deficit and the debt, defense and non-defense spending levels, taxes, and more.
Assuming Congress adopts a budget resolution, passing a reconciliation bill will pose a second challenge and will depend on the bill’s substance and the votes. As we saw on the minimum wage ruling, Senate rules limit the scope of a reconciliation bill. The Senate’s “Byrd rule” can be used to extract non-budgetary provisions.
While a reconciliation bill cannot be filibustered, Democrats face a practical challenge. They cannot afford to lose a single Senate vote, making support from Senator Manchin (D-WV) and other Democratic moderates critical for passage.
Manchin ultimately voted for ARPA but only after insisting on changes to scale back unemployment benefit expansions and stimulus checks. He also went on nearly every Sunday show the weekend after the bill was enacted to send a clear signal about his concerns about the debt, the need to offset the cost of future legislation, his opposition to eliminating the filibuster, and that bipartisan legislation should be pursued instead of reconciliation.
If bipartisan discussions bog down, reconciliation theoretically becomes the path of least resistance. Based on past experience, Manchin seems likely to want to find a way to support a reconciliation bill. We believe the changes he is likely to seek will fall short of Biden’s ambitious campaign agenda and create vote math challenges for Senate Majority Leader Schumer as he works to unite a diverse 50-vote Senate Democratic Caucus.