Democrats have long hoped to coalesce around a plan to roll back some of Donald Trump’s tax cuts for wealthy individuals and corporations to pay for new spending on healthcare and the fight against climate change, and it appears that plan is finally taking shape.
Senate Majority Leader Chuck Schumer, a New York Democrat, sent portions of a so-called reconciliation bill to the Senate parliamentarian for her review, according to reports in Punchbowl News and Politico.
The parliamentarian must review legislation that is being advanced under a process called budget reconciliation, which enables the Senate to pass a budget-related bill with a simple majority rather than the 60 votes required normally.
The Senate parliamentarian gets the final say on whether any particular provision a direct impact on the federal budget and can therefore be included in a reconciliation bill.
“The public nature of this announcement from Schumer is material,” according to Henrietta Treyz, director of economic policy at Veda partners.
She argued in a Wednesday note to clients that in leaking this move to the media, Schumer was responding publicly to a pronouncement by Republican Senate Minority Leader Mitch McConnell of Kentucky, who said that he would withdraw support for a bill aimed at boosting domestic semiconductor manufacturing if Democrats move ahead on reconciliation.
The United States Innovation and Competition Act, or USICA, is a piece of legislation that has passed both the House and Senate in different forms, and staff are working on crafting a bill that could pass both chambers and be sent to President Biden to be signed into law.
It includes about $52 billion in appropriations that would incentivize and subsidize domestic semiconductor
SOXX,
manufacturing.
“Signaling publicly that Democrats are pressing ahead with reconciliation is a direct response from Leader Schumer that Democrats have made their decision, and they’re choosing to sacrifice the USICA bill for a reconciliation package,” Treyz wrote.
She added that the move is a “big deal for [Schumer], as he has long been an advocate of China-facing legislation,” and therefore his “decision to press ahead publicly with reconciliation…is a rock-solid indicator that Democrats are going for it on reconciliation now.”
Passing the bill will still be a tall order, however, given Democrats’ razor-thin majorities in both the House and the Senate, and because the reconciliation process requires them to pass the bill before Sept. 30.
For Democrats to succeed, the progressive wing of the party will have to agree to support a bill that is barely recognizable to the ambitious Build Back Better bill that passed the House, which called for roughly $2 trillion in new taxes and spending over the next decade.
Treyz predicts that the legislation will ultimately direct between $500 billion and $700 billion in new spending, which will include subsidies for green energy investment and for purchasing health insurance through Affordable Care Act exchanges.
The bill will likely end up raising more money than it spends, a structure aimed at placating moderate Democrats like West Virginia Sen. Joe Manchin, who sees deficit reduction as a tool for fighting inflation.
The bill would be paid for by changes to the law which would enable Medicare to negotiate the prices it pays pharmaceutical companies
PPH,
for some drugs, increases to the IRS budget that will likely raise upwards of $120 billion in net new revenue over 10 years and an excise tax on corporations that buy back their own stock.
The deal could also include new taxes on multinational corporations that conform to a deal that Treasury Secretary Janet Yellen helped to broker with 140 other nations, aimed at cracking down on corporate tax avoidance.
“Cutting the House-passed BBB by more than half is a political task that requires acquiescence from the progressive wing of the House Democratic caucus,” Treyz wrote. “Our conversations with House Democratic leadership indicate that that political hurdle has been cleared.”
