Inside The Washington Beltway Update

Last week, Senator Joe Manchin (D-WV) and Majority Leader Chuck Schumer (D-NY) indicated a renewed focus and progress with negotiations on a slimmed down reconciliation package.

In recent weeks, Senator Manchin outlined a deal that would raise corporate and capital gains taxes, include some drug-pricing reforms, and would boost both clean energy and fossil fuels.

Senator Manchin’s main focus is on fighting inflation, meaning any package would be far smaller, and less expansive, than the previous Build Back Better plan which he effectively killed.

Senate Democrats appear more optimistic and have indicated that the beginning of the August recess is a more realistic deadline.

The rest of the Senate Democratic caucus would likely agree on any package negotiated between Senators Manchin, Schumer, and Kyrsten Sinema (D-AZ) going into the midterms.

As a reminder, a reconciliation package only requires 50 votes.

However, Democrats only have until September 30 to pass a reconciliation package, when the current budget resolution expires.

The Congressional calendar, however, remains daunting. Congress spent much of this week focused on gun control discussions and hearings on the January 6th attack on the Capitol.

Negotiations continue over the China competition legislation, and Congress is also beginning to consider annual must-pass legislation, including the annual defense policy bill.

Any reconciliation agreement would need to come together quickly in order to pass both chambers.

Senate Democrats are also planning to introduce legislation that would place a fee on certain imports produced by high-carbon industries.

The measure – which is largely designed to target China — would impose a border carbon adjustment starting in 2024 on imported products from energy intensive industries.

This would include fossil fuels, refined petroleum, petrochemicals, fertilizer, hydrogen, adipic acid, cement, iron and steel, aluminum, glass, pulp and paper and ethanol.

The levy would begin at $55 per ton and increase at 5 percent above inflation per year, and also apply to domestic products.

The goal is to support domestic producers that face higher costs by following higher environmental standards.

A potential carbon import tax still faces an uphill battle to be part of a reconciliation deal.

Some in Congress have indicated a greater desire to enact a national vehicle mileage fee to support the Highway Trust Fund.

A pilot program to study such a fee was included in the Bipartisan Infrastructure Law. House Transportation and Infrastructure Committee Chairman Peter DeFazio (D-OR) said that “we need to look beyond the gas and diesel tax… to move forward in a sustainable way to fund [the Highway Trust Fund] and in my mind, it will be vehicle miles traveled.”

Chairman DeFazio said that he agreed with Congressional Republicans who criticize EV drivers for not paying the gas tax. Any change in policy will be determined by politics as well as results from the Department of Transportation pilot program.

Also, last week, President Joe Biden announced efforts to expand the deployment of solar technologies in the U.S. through use of the Defense Production Act (DPA), a Cold War-era law that facilitates greater federal involvement in promoting domestic industry.

In addition to being used for certain solar products, the DPA will be used to expand manufacturing capabilities for heat pumps.

President Biden also announced a relaxation of tariffs on certain solar products, which was praised by business groups but criticized from some labor unions.

In addition, the Biden Administration also announced new steps to meet its goal to build out the first-ever national network of 500,000 electric vehicle chargers along America’s highways and in communities, a key piece of the Bipartisan Infrastructure Law.

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