Infrastructure Summer: The Senate Budget Deal Kicks Off a Flurry of Negotiation

This is only the beginning of a long, long process.

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It’s the newsletter writer’s worst nightmare: You have a story all set up, prepped to post in the morning, and news breaks right after press time. You can rip the whole thing up or follow up later. I chose the latter.

The development in question was the announcement of a $3.5 trillion budget resolution agreement by Senate Democrats late Tuesday night. The Senate was always going to go first, and Speaker Pelosi’s immediate support confirms that this is the blueprint for the Build Back Better agenda. It’s really a State of the Union address in one bill, encompassing a set of policies that Democrats have sought to pass for decades.

If this or a close cousin of it passed, I think you’d have to agree with Bernie Sanders that it’s the most progressive advance in America since the New Deal. He obviously compromised to a place he was quite comfortable with. This sentence in the initial WaPo write-up that Sanders had to bow to “political realities inside a party whose centrist wing has sought to temper federal spending” because his $6 trillion high bid came down to $3.5 trillion, easily the biggest bill in American history by almost double, reflects how big a sea change there has been on fiscal policy among Democrats. Progressives who sought more spending aren’t going to be a problem here.

Combined with Portman-Sinema (they’re the two leads on the bipartisan infrastructure bill, and I’m tired of saying “bipartisan infrastructure bill”) and the American Rescue Plan in March, that’s $6 trillion in spending right there. These are almost precisely the toplines Biden called for in all of these bills, and it would be a monumental achievement to get them. It would change America for the better.

Of course, we are months from that point even under the best-case scenario. In baseball terms, this isn’t even the first inning, it’s the exchange of lineup cards before the game.

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Senate Democratic aides put out a sketch of what made the package yesterday, and the emphasis is on the word “sketch.” The expanded tax credits for families (Child Tax Credit) and the poor (Earned Income Tax Credit) will extend for an indeterminate period; it looks like a shorter extension than the initial Biden bill, which went to 2025. There are a number of climate provisions, led by the clean electricity standard (yes, the Civilian Climate Corps also made it), with fees on polluters for imports and the release of methane. Universal pre-K, along with “high-quality and affordable child care,” paid family and medical leave, and an expansion of home and community-based services, places the entire family care agenda in the bill. There’s funding for community colleges, though it’s unclear whether that would make them free, and expanded Pell grants. An affordable-housing plank could be the same as the initial Biden plan, which was $200 billion. Dental, vision, and hearing are added to Medicare. The expanded health insurance subsidies from the American Rescue Plan, which were to expire after 2022, are extended here, and the Medicaid “coverage gap” in nonexpansion states is closed (does that mean with a public option?).

Then there are the less fleshed-out planks, like “small business support” and “American manufacturing.” Two surprising bits: Sanders says the PRO Act, which would make it easier to organize workers, is in the bill, and there’s definitely an immigration component as well (the fact sheet just says “LRPs for immigrants,” which stands for legal permanent residents, as well as “border management”). Even the revenue offsets include a surprise: Though Biden never added it, some $600 billion in savings from allowing Medicare negotiation for prescription drugs is in the bill. This creates a virtuous circle, because if moderates are concerned about taxes, then the prescription drug component, which will also lower costs for patients, would need to be expanded. (Dynamic scoring is built in as well, “paying for” this investment by saying it will promote long-term economic growth.)

So that’s a lot. Nearly all of it is popular, and Democrats have a lot of self-created urgency to show tangible results to the public. Usually I don’t much care for these giant bills, because they are excellent ways to cover up some really sleazy legislation and pack it in with things that must pass. Here the opposite dynamic may hold: With a lot of good stuff in there, opponents can only target a couple, letting everything else go through.

If this or a close cousin of it passed, I think you’d have to agree with Bernie Sanders that it’s the most progressive advance in America since the New Deal.

The problem would be if that one thing that gets targeted is taxes. Democrats have already signaled they’re going wobbly there, and because of this deficit hawk preoccupation that the entire $3.5 trillion must be offset by revenue, every dollar reduction in tax increases must be paired with a dollar reduction in spending. We got a preview of this a couple of weeks ago with that story about how Biden’s team thinks they can get the same impact with less spending. That would be a mistake.

Biden’s vow not to tax anyone making under $400,000 a year gives policymakers less flexibility to come up with something. (Not to mention the whole state and local tax deduction kerfuffle, which costs a lot and is sure to come back.) Negotiators seem to work to get a lot done through more IRS enforcement to shrink the tax gap, but there’s the question of whether the Congressional Budget Office will score that as revenue.

So far, other areas seem to be getting the attention. Emperor Joe Manchin is more concerned about the climate provisions than the topline numbers. While there are many vulnerable Democrats who support the prescription drug price reforms, just a month or so ago ten House Democrats said they would oppose moving forward on that. There are three Senate Democrats who haven’t endorsed the PRO Act.

Then there’s the looming presence of the Senate parliamentarian. As this bill will work through the budget reconciliation process, everything must have a budgetary impact: The immigration and PRO Act pieces in particular will be a struggle (apparently only parts of each of those initiatives can make the bill). You’ll see a lot of kludges here, like a clean electricity standard that accomplishes its goals (80 percent of power generation from renewables by 2035) through fines, looking suspiciously like a carbon tax though it’s not the same. Democrats can overrule the parliamentarian at any time, but they shrank from that fight on the minimum wage in the American Rescue Plan.

There’s also the fact that Republicans could use this agreement as an excuse to pull out of Portman-Sinema; there’s already been talk of that. At that point, you’d have to fold that bill into the reconciliation package, and that could reopen that whole agreement, which was changed to court Republican support. Would Democrats put privatization in a Democrat-only bill?

Finally, this is a Senate Democratic agreement—and it needs work on that front—but the biggest problems are likely to come from the House, where Pelosi has just three votes to spare. Several members have spoken loudly about the deficit in recent weeks. This quote in Punchbowl News from a House moderate this morning was not too cheery: “Given red-hot inflationary pressures, and our strong desire to keep the House blue, a gargantuan $3.5 trillion package, with massive new taxes, is a non-starter for many of us, and I predict it would go down in a blaze of glory.”

Some progress has been made, but there are a lot of question marks, and the blaze-of-glory scenario is definitely possible. Put it this way: I might need a new logo for Infrastructure Fall and Winter.

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