The Archive

THE TOP

Happy Monday morning.

Congress is back! The Senate is in session today, the House will return tomorrow. President Joe Biden will meet Tuesday with Mexican President Andrés Manuel López Obrador. Then it’s off to Israel (his first trip there as president) and Saudi Arabia for a controversial visit with a regime that he’s sharply criticized but is a pillar of U.S. policy in the region.

There are 120 days until Election Day.

The Jan. 6 select committee will hold what could be its last two public hearings this week, while the House takes up the defense authorization bill and pro-abortion rights legislation. The latest inflation data will be released early Wednesday morning, with the threat of a recession looming.

But let’s start here: Senate Majority Leader Chuck Schumer announced Sunday night he tested positive for Covid. Schumer’s office said he was only experiencing “very mild symptoms” and will quarantine for the week. Here’s Justin Goodman, a Schumer spokesperson:

Now this leads to an interesting situation. The Senate is supposed to be voting this week on the nomination of Steven Dettelbach to serve as director of the Bureau of Alcohol, Tobacco, Firearms and Explosives. There hasn’t been a Senate-confirmed ATF director since 2015, and the White House and Democratic leaders would like to get Dettelbach in place.

GOP Sens. Susan Collins (Maine) and Rob Portman (Ohio) voted with all 50 Democrats to discharge the nomination from the Senate Judiciary Committee, giving Dettelbach more than enough votes for confirmation. Schumer was going to schedule a cloture vote on Dettelbach’s nomination as early as Tuesday, with final passage to follow.

However, Schumer and Sen. Patrick Leahy (D-Vt.) are out. Leahy fell on June 29 and broke his hip. The 82-year-old Vermont Democrat underwent hip replacement surgery and is rehabbing.

In a statement, David Carle, Leahy’s spokesperson, said, “Senator Leahy’s recovery and physical therapy are proceeding well and he expects to be available for votes this week if necessary.”

Which is, of course, very good news, but as long as the Dettelbach vote is 48-48, then Vice President Kamala Harris can break the tie and Leahy’s presence isn’t required. Democrats will just have to see if all 50 Republicans show up. Also, Schumer can simply reschedule this vote for next week.

That leads us to reconciliation, which is THE issue for July.

Schumer and Sen. Joe Manchin (D-W.Va.) are negotiating a scaled-down, $1 trillion reconciliation package – Build Back Manchin – but serious hurdles remain. Schumer and the White House want to put a bill on the floor before the Senate leaves for the August recess – if there’s a deal. The fate of USICA, a massive China competitiveness bill, is tied to the reconciliation legislation as well.

Sources involved in the Schumer-Manchin talks say “good progress” has been made and they’re hopeful an agreement can come together. Schumer and Manchin were supposed to meet this week. That’s now postponed, but it’s certain they’ll talk.

Schumer has already submitted a Democrat-drafted Medicare prescription drug pricing proposal to the Senate parliamentarian for review. Democrats aren’t expecting any guidance from the parliamentarian’s office on the proposal this week. CBO estimates that the proposal would save the federal government nearly $288 billion over a decade.

Senate Democrats also have a deal to raise taxes on “pass through” income for small business owners who make more than $400,000 annually ($500,000 for couples), with the revenue generated by this tax going to boost Medicare’s solvency.

Yet there’s no agreement on a “global minimum tax,” a very important issue for corporate America. And party leaders will have to resolve the state and local tax deduction fight, with a block of blue state House Democrats saying they won’t vote for any reconciliation package that doesn’t address this matter. The price tag for this provision is high, and the politics are tough. How do Democrats vote to give millionaire homeowners a tax break right before an election?

Another big challenge – what to do about enhanced premium subsidies for Obamacare enrollees? This additional support runs out at the end of the year, and millions of enrollees could see massive increases in their premiums if nothing is done. Manchin has concerns about this provision, as we’ve reported. But it’s a big priority for Democratic leaders on the Hill, Democratic governors and the White House.

Democratic Sen. Kyrsten Sinema of Arizona, who was deeply involved in crafting the tax provisions for the Build Back Better Act, has yet to show her hand on this new effort. So far, she’s letting Manchin take the lead. But there’s no deal without Sinema’s assent, of course. And she’s been skeptical of tax increases.

Finally, there are environmental and climate change provisions. There’s been a lot of focus on electric vehicle tax credits, something Manchin has complained about for awhile. Manchin – worried about the impact of high energy costs – also wants to ramp up fossil fuel production in the short run while the United States eventually transitions to cleaner sources. There’s been some progress on this issue, as our friend Tony Romm of the Washington Post reported, yet no agreement.

Let’s step back and look at the politics of reconciliation for a moment.

This is the last bout of real legislating before the midterm elections, which as we noted at the top are less than four months away. It’s Democrats’ final opportunity at enacting a package that could help them with voters.

It’s true that passing a reconciliation package at this point may not make any substantive difference for Democrats in light of the political headwinds they face – an unpopular president; the traditional losses for the president’s party in the first midterms; high inflation, including soaring gas, food and housing costs; rising crime and gun violence; a lingering pandemic; a potential recession; and an overwhelming perception among the American public that things are getting worse.

Yet doing nothing, especially after the shocking blow of the Supreme Court’s decision to strike down Roe v. Wade, would be a double defeat for Biden and Schumer. Especially now that Schumer and Manchin have revived talks about a potential deal.

The focus on reconciliation by Democrats also spurred a threat from Senate Minority Leader Mitch McConnell to tank the USICA legislation, which has strong support from high-tech companies and both parties in the Capitol. While many Democrats believe McConnell overplayed his hand here, the Kentucky Republican doesn’t really have any other choice but to take this hardline stance. Democrats are looking to undo portions of the 2017 GOP tax cut. McConnell will do anything possible to oppose that, as will all the other Republican senators. The potential of tax hikes will become Republicans’ top concern, and McConnell must respond.

One question we have here is where does this effort go in the House? Speaker Nancy Pelosi has a paper-thin majority. What is rank-and-file Democrats’ risk tolerance four months before the election?

– John Bresnahan and Jake Sherman

REMINDER: Don’t forget about our event tomorrow (Tuesday, July 12 at 9 a.m. ET) with Rep. Brad Sherman (D-Calif.) about how Washington is looking to regulate capital markets and financial reporting in an effort to maintain trust in a changing economy. RSVP here!

---