Budget Battles Heat Up

Currently in Washington, Congress and the White House are working on multiple fronts, from varying perspectives, to negotiate several pieces of budget legislation. While there are lots of competing priorities for new programs and new spending government-wide, the only two pieces of legislation that are “must pass” from an economic standpoint are avoiding both a government shutdown and default. How Congress and the White House come to a bipartisan agreement to achieve this will require a lot of negotiating over the next couple of weeks, which will have significant implications for funding and reconciliation legislation later this fall.

With ten days to spare, the Democratic House passed legislation on a party-line vote to avoid a government shutdown when the fiscal year ends September 30. The House version of the bill includes a continuing resolution (CR) to keep the government running until December 3, 2021, emergency funding for recent natural disaster aid and Afghan refugee assistance, and a suspension of the debt ceiling until December 16, 2022.

For this same bill to reach the president’s desk, 60 votes are needed in the Senate, which means Democrats and Republicans will need to come together to pass the bill. With Democrats holding only 50 seats, ten Republicans will need to vote for the CR to avoid a government shutdown.  Votes on a CR or a debt ceiling increase are often fodder for partisan budget battles, but this year is especially heightened because of the confluence of additional budget items being considered at the same time. 

Over the span of a month, the following deadlines have created pressure for the Democratic congressional leadership:

• September 15: The self-imposed, non-binding deadline for reconciliation legislation came and went, leaving what was once thought to be a quick implementation of the president’s social program priorities open to a long slog of negotiations and possible scaling back of funding to meet the concerns of moderate Democrats. 
• September 27: The date by which Speaker Nancy Pelosi (D-CA) promised moderate House Democrats a vote on the Senate-passed bipartisan physical infrastructure package. Many in the party are using this as leverage for votes on reconciliation. 
• September 30: The federal fiscal year 2021 ends at midnight on the 30th. Without FY 2022 appropriations bills or a continuing resolution, the government will shut down. 
• October 20: The current date the Treasury Department estimates it will exhaust the use of “extraordinary measures” to avoid defaulting on the national debt.  The debt limit will need to be extended by this date.

While Democrats hold the majority in the House, party unity is being tested with the upcoming budget votes. The vote on the bipartisan physical infrastructure package in the House has tenuous support, as different factions of the Democratic Party vie for their own priorities.  For example, moderate Democrats said they would support the budget resolution, which provides up $3.5 trillion in social program spending, in return for Speaker Pelosi’s promise of a vote on the Senate’s version of the physical infrastructure bill.  

Since the physical infrastructure package was quickly negotiated with the Senate and White House, it was expected that the social infrastructure package would also move quickly via the reconciliation process. That has not been the case, despite the non-binding September 15 deadline for committees to report. Now that the infrastructure deadline is a few days away, moderate Democrats are worried the vote will slip because the reconciliation bill is behind schedule.  At the same time, progressive Democrats are threatening to withhold their votes on the physical infrastructure bill until the social infrastructure bill is ready. 

In the Senate, party unity has been difficult, because Senators Joe Manchin (D-WV) and Kirsten Sinema (D-AZ), who both voted for the budget resolution framework, are now saying they will not vote for a final bill that spends $3.5 trillion. None of the Senate committees have finalized the reconciliation bills that were due by September 15. 

Meanwhile, because Senate Republican support is needed to pass all of these “must-do” bills other than reconciliation, they have important cards to play. While they may support a CR to avoid a government shutdown, Republican Leadership is balking at suspending the debt ceiling limit past the 2022 elections, so they will not support the House CR bill as written. 

For more information, please contact:
Stephanie Giesecke