Congressional Update: Infrastructure, Federal Budget Bills Still Center Of Attention
Congress continues to wrestle with ways to pass three major legislative items: (1) the bipartisan Senate-passed $1.2 trillion infrastructure bill (Infrastructure Investment and Jobs Act); (2) a partisan reconciliation measure totaling roughly $3.5 trillion; and (3) increasing the debt ceiling before October 18.
Last week, the Senate reached a tentative solution to the debt ceiling crisis, with Senate Minority Leader Mitch McConnell (R-KY) agreeing to allow Democrats to pass a debt ceiling increase through mid-December.
This gives Democrats more time to negotiate over the reconciliation package and infrastructure package, but all but guarantees that the debt ceiling debate will pick up again in mid-December.
On September 30, Congress passed a short-term continuing resolution to extend fiscal year 2021 funding levels until December 3. Extension of the Highway Trust Fund remained in the balance on October 1 as the House originally planned to pass the bipartisan infrastructure bill (which extends the Highway Trust Fund and other surface transportation measures) but could not secure the needed votes.
Therefore, Congress passed a short-term extension for surface transportation until October 30, 2021. Congress now faces a “soft” end of October deadline to pass the bipartisan infrastructure package, which would also provide a multiyear surface transportation authorization.
The legislative challenges facing Congress today do impact the likelihood that a $3.5 trillion reconciliation will fail.
Questions remain as to how a reduced topline spending amount for reconciliation will impact the proposed tax increases, and if so, what tax proposals will change and by how much.
The reality of a reduced reconciliation package is it provides an opportunity to place pressure on certain tax increases to also be compressed (or eliminated).
It is very likely that any passable reconciliation bill will cost far less than $3.5 trillion due to pressure from moderate Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ).
Sen. Manchin is broadly in line with most House Democrats on tax policy, however, favoring raising the corporate rate to 25 percent (compared to House Democrats’ goal of 26.5 percent); agreeing on raising capital gains to 25 percent; and agreeing on restoring the top marginal income tax rate to 39.5 percent.