The central pieces of President Joe Biden’s $4.1 trillion economic agenda are now moving through Congress on a precarious two-track path that’s further complicated by a September showdown over the debt ceiling.
Funding for the government will expire and the Treasury will approach the limit of its borrowing authority just as congressional Democrats try to make the administration’s massive infrastructure and social spending plans a reality.
The convergence will test the limits of how well House Speaker Nancy Pelosi and Sen. Majority Leader Chuck Schumer can manage their narrow — and often fractious — majorities and Biden’s ability to bargain with dissenters.
The first part of Biden’s plan, infrastructure legislation with $550 billion in new spending, passed the Senate on a bipartisan basis. But the framework for a much larger plan — a $3.5 trillion budget resolution opening the way to expansive spending on social programs paid for in part by taxes on the wealthy and corporations — squeaked through on a straight party-line vote.
Here’s what’s ahead for a process that could last through year-end:
Pelosi is briefly interrupting the chamber’s summer recess by calling lawmakers back to Washington on Aug. 23 to vote on the Senate’s budget resolution.
She needs near-unanimous Democratic support to adopt it against anticipated unified GOP opposition. The resolution is just an outline setting the parameters for an eventual budget bill and instructions for committees to draw up legislative text. It doesn’t require the president’s signature.
For now, the infrastructure bill is on hold. In a bow to demands by House progressives, Pelosi has vowed to wait until the Senate finishes the budget package to assure it addresses priorities on social programs and climate change. House Democrats may also want changes to the carefully negotiated infrastructure legislation.
Both chambers will then move to write precise policies and other language for the massive budget package, with the House likely to go first, predicts Zach Moller, a former Democratic Senate staffer who now works for Third Way, a centrist policy-research organization.
House Democrats, ranging from top Pelosi lieutenants and powerful committee chairs to upstart progressives, are already signaling various changes they want to see in a final version of the Senate’s reconciliation package.
The Senate-passed resolution sets a nonbinding Sept. 15 deadline for committees in both chambers to submit proposals to their respective budget panels.
The Senate Finance Committee has jurisdiction over the heart of the package, including the tax hikes on the wealthy and corporations. Other committees can increase the deficit by about $1.75 trillion combined over a decade — meaning up to half of Biden’s plan could be debt-financed.
There is no firm deadline on passage of the economic agenda, but Democrats keen on keeping their congressional majorities in the November 2022 midterm elections want the packages enacted this fall. That would allow voters time to feel the legislation’s effects and provide for the extension of popular pandemic-era benefits like the expanded child tax credit, which would otherwise end in December.
By Sept. 30, lawmakers must reach bipartisan deals on unfinished regular government spending bills or on a stopgap bill to keep agencies running that would maintain current spending levels through at least October or early November.
Such a measure could carry language temporarily suspending the debt limit. But doing so could trigger a government shutdown. Republicans say Democrats must go it alone on the debt ceiling and want them to revise the budget resolution to allow them to pass a hike with a simple majority.
Senate Democrats, however, insist for now on using the regular legislative process, which would require at least 10 Republicans to join them. Prospects for a bitter battle this fall have already started to impact short-term debt markets.
Obstacles abound in the coming months. For one, House Democrats can afford just three defectors in a party-line vote. In the evenly divided Senate, unity is the only option.
Even the House’s vote this month on the budget framework is no slam dunk. Party moderates, who want an immediate vote on the infrastructure package, could withhold their backing, stalling the measure.
In the Senate, not all Democrats are on board with the $3.5 trillion package, even though they all voted for the framework. Some, like Kyrsten Sinema of Arizona and Joe Manchin of West Virginia, say they’re uncomfortable with the price tag or the size of the tax hikes Biden has proposed to help pay for it.
Manchin has also said he disagrees with Democrats who want to target fossil fuels — setting up tension for a key piece of the legislation.
Schumer asserted Wednesday Democrats would ultimately unite, but he acknowledged it wouldn’t be easy.
Republicans will have ample opportunity to split Democrats and make their case that more taxes and spending will increase inflation and hurt the economy. Under special Senate rules they can force nearly unlimited amendments trying to strike individual provisions, potentially peeling off some Democrats in politically fraught votes.
The package will still have to clear a major procedural hurdle scrubbing it of anything deemed incidental to the federal budget.
Biden’s $1.9 trillion COVID-19 relief package was shorn of a proposal for a $15-an-hour minimum wage via that process. Potential challenges in the $3.5 trillion plan include providing a path to citizenship for millions of immigrants.
All of this comes with long-term implications. In the short term, any misstep — particularly on government spending and the debt ceiling — could have large-scale reverberations in the market and the broader economy.
“I am one who believes that neither party wins with government shut down or certainly government default so I lean toward being a little more optimistic that the latter will be avoided,” said former Senate Budget Committee Republican staff director Bill Hoagland, who’s now at the Bipartisan Policy Center. “But this is really an uncertain time.”