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PRESENTED BY

BY JOHN BRESNAHAN, ANNA PALMER AND JAKE SHERMAN
WITH MAX COHEN AND CHRISTIAN HALL

THE TOP

New: Sen. Alex Padilla will sit down with Anna and Jake Sept. 23 at 8:30 a.m. for a 20-minute virtual conversation focused on immigration reform. The California Democrat is a member of the Budget Committee and chair of the Judiciary’s immigration subcommittee. The event comes as the Senate parliamentarian is reviewing whether a pathway to citizenship should be allowed in the Democrats’ reconciliation package. Ahead of the conversation, Alida Garcia, VP of advocacy at Fwd.us, will present sponsor remarks. Sign up!

New: Yellen calls McConnell

News: Treasury Secretary Janet Yellen called Senate Minority Leader Mitch McConnell on Wednesday to discuss the debt-limit situation, according to multiple sources familiar with the conversation. But it doesn’t sound like much progress was made, the latest sign of how dug in both sides are on this issue with potentially just weeks before the federal government exhausts its borrowing capacity. 

Yellen — the first person to ever serve as Treasury secretary, Federal Reserve chair and head of the White House Council of Economic Advisors — told McConnell that Congress should move as quickly as possible to raise the debt limit. Yellen also warned that brinkmanship on the debt limit wasn’t productive as the U.S. economy continues to emerge from the Covid-19 pandemic.

But McConnnell, who backed Yellen for Treasury secretary, repeated what he told us in an interview on Tuesday — Democrats have control of the White House and Congress, so this is a problem for them, not Republicans.

“The leader repeated to Secretary Yellen what he has said publicly since July: This is a unified Democrat government, engaging in a partisan reckless tax and spending spree,” a McConnell spokesman said Wednesday night. “They will have to raise the debt ceiling on their own and they have the tools to do it.” 

Lily Adams, principal deputy assistant secretary at Treasury, said, “Secretary Yellen will continue to talk to Republicans and Democrats about the critical need to swiftly address the debt ceiling in a bipartisan manner, to avoid the catastrophic economic consequences of default.”

In a recent letter to congressional leaders, Yelled warned that the Treasury Department will hit the debt limit sometime in October, but noted there remains “considerable uncertainty” when the actual deadline will occur. In fact, Yellen used the word “uncertainty” four times in that letter, which shows just how difficult predictions are right now even for experienced government analysts.

The House returns to town Monday for the first time in a month, and the showdown over government funding and the debt ceiling is quickly emerging as the top issue for the White House and Congress. Democratic leaders are currently planning to attach a debt-limit increase to a continuing resolution needed to keep federal agencies open beyond Sept. 30. The House is expected to take up that measure early next week. McConnell and Senate Republicans have said they will block this proposal.

The federal government runs out of money on Sept. 30.

THE BIDEN AGENDA

Progressives lash out at moderates as Rx drug plan hits the skids

Wednesday’s fight inside the House Energy and Commerce Committee over Medicare prescription drug pricing has become the latest flashpoint in the growing split between Democratic progressives and moderates, a divide that’s only getting worse as the party struggles to craft a massive $3.5 trillion reconciliation package.

From the overall cost of the package to capital gains to prescription drugs to the failure to repeal caps on state and local tax deductions, at least a half-dozen House Democrats have balked at elements of the proposed legislation, which makes up a massive chunk of President Joe Biden’s domestic agenda. The House Budget Committee is scheduled to begin assembling the proposals marked up by a dozen panels into one bill next week. But with only a three-vote margin to work with, and facing overwhelming GOP opposition, Speaker Nancy Pelosi can’t afford many defections.

Progressives lawmakers and outside groups are lashing out as well, accusing their moderate colleagues of being more motivated by campaign donations or their own political futures than backing the party’s policy priorities. Some progressives are threatening to vote against the $1 trillion bipartisan infrastructure bill slated to be taken up by the House on Sept. 27 in retaliation for the moderate opposition to portions of the reconciliation package.

“I’m very disappointed in the vote today on prescription drugs by the House Energy and Commerce Committee,” said Senate Budget Committee Bernie Sanders (I-Vt.) said on Twitter. “I get that the pharmaceutical industry owns the Republican Party and that no Republican voted for this bill, but there is no excuse for every Democrat not supporting it.”

Sanders added: “Now is the time for Congress to show courage and stand up to the greed of the pharmaceutical industry. The American people will not accept surrender.”

Three Democrats on the Energy and Commerce Committee voted against the proposal to save up to $700 billion by allowing HHS to negotiate on prescription drug prices for Medicare recipients. Democratic Reps. Kurt Schrader (Ore.), Kathleen Rice (N.Y.) and Scott Peters (Calif.) voted with all 26 Republicans on the panel, which led to a 29-29 tie, and the proposal failed.

In the end, the Ways and Means Committee approved the prescription drug language and sent it to the Budget Committee for inclusion in the reconciliation package. But these three Democrats have now gone on record opposing the measure, which leaves a $700 billion hole to fill and serious floor vote issues for Pelosi.

Rep. Stephanie Murphy (D-Fla.) voted against the Ways and Means portion of the reconciliation package. Murphy and Rep. Lou Correa of California signaled that they back an alternative proposal by Peters on prescription drugs. Peters has thousands of drug industry workers in his district.

The hundreds of billions of dollars saved from implementing the Medicare prescription drug program is supposed to help offset the cost of expanding Medicare to cover vision, dental and hearing programs, a move strongly backed by Sanders and other progressives. Now that expansion effort is at risk.

So to review, here are the Democratic leadership’s problems. They need to be very careful on the following issues in assembling the package or risk losing votes.

→ SALT: Northeastern lawmakers are keeping a very close eye on whether this package repeals a cap on deductions for state and local taxes (SALT) imposed by Republicans in 2017. The SALT fix, which is expensive and goes mainly toward wealthy homeowners, was left out of the Ways and Means Committee’s markup on reconciliation. Rep. Tom Suozzi (D-N.Y.) has made clear that without SALT, he’s a “no” on the overall reconciliation package. Moderates seem to be relying on the Democratic leadership fixing this as part of a manager’s amendment in the Rules Committee. That seems a bit risky, given that the left is against this policy. 

→ Price tag: Go too high on the overall cost of reconciliation, you lose the moderates and risk alienating Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.). Go too low and you risk losing progressives. Remember: some progressives like Sanders and Rep. Pramila Jayapal (D-Wash.), chair of the Congressional Progressive Caucus, wanted a $6 trillion to $10 trillion reconciliation package, so they view $3.5 trillion cost as a huge compromise. 

→ Policy: The inclusion of the prescription drug policy loses you at least three House Democrats — and possibly as many as five — as we just discussed at length.

Here’s Murphy in her statement about reconciliation: “I strongly support numerous provisions in the House Ways and Means portion of the Build Back Better Act, especially the historic provisions to combat the existential threat of climate change. But there are also spending and tax provisions that give me pause, and so I cannot vote for the bill at this early stage.”

But here’s the most important point — Murphy doesn’t want to vote on provisions that have no chance of becoming law. So she’s not going to back a House bill that will only get slashed down by half or more as Pelosi seeks to cut a deal with the Senate. “Every moment we spend debating provisions that will never become law is a moment wasted and will delay much-needed assistance to the American people,” Murphy added.

The Coverage: WaPo’s Tony Romm: “Democrats prepare for next phase of budget fight as House readies package and Biden meets with Senate skeptics” … Politico’s Alice Miranda Ollstein and Sarah Ferris: "Centrist Democrats scramble House drug pricing effort"

SNEAK PEEK

What Biden will say in his speech today

President Joe Biden is set to speak this afternoon ​​on “leveling the playing field in our economy to bring down costs and ensure that the backbone of the country, the middle class, can finally get a break.” 

Here is a bit more on what he will say, via a White House official: 

The President will lay out what’s a stake in the fight to ensure that our economy delivers for middle class families, and not only for those at the top. He’ll underscore that we’ve reached an inflection point where we have to choose whether or not we’re going to perpetuate an economy where the wealthiest taxpayers and biggest corporations get to play by a set of rules they’ve written for themselves while middle-class families aren’t given a fair shot. 

He’ll make the case that we simply can’t revert to how things were before the pandemic, that we have to Build Back Better and deal everyone in this time as we grow the economy. He’ll also argue that we don’t need to reduce the cost of being rich in America; we need to lower the cost of raising a child, of prescription drugs, of taking care of an aging parent, of health care, of high-speed internet, and of hearing aids.

The Canvass is back! Calling all congressional staffers who have signed up to participate in our anonymous poll to fill out your survey. The next couple of months are going to be intense when it comes to government funding, raising the debt limit and the future of President Joe Biden’s agenda. We want to hear your thoughts. Any senior staffers (comms directors, chiefs of staff, press secretaries, staff directors) who haven’t yet signed up, click here!

FRONTS 

MOMENTS

10 a.m.: President Joe Biden and Vice President Kamala Harris will get their daily intelligence briefing.

1:45 p.m.: Biden will speak — see above.

2:30 p.m.: Jen Psaki will brief.

CLIP FILE

NYT

→ “‘It’s Always Going to Haunt Me’: How the Capitol Riot Changed Lives,” by Emily Cochrane, Luke Broadwater and Ellen Barry

→ “Republicans, Wary of Political Fallout, Steer Clear of Rally for Riot Suspects,” by Luke Broadwater

→ “Struggle for Control of Afghanistan Comes to K Street,” by Ken Vogel

WaPo

→ "Joe Manchin gets all the attention. But Kyrsten Sinema could be an even bigger obstacle for Democrats’ spending plans," by Mike DeBonis

→ “With resounding California victory, Newsom takes control of his party in state,” by Scott Wilson in Los Angeles

WSJ

→ “In House Tax Bill, Companies Get Return of Higher Rates but Not the Breaks,” by Theo Francis and Rich Rubin

AP

→ “Friction among Taliban pragmatists, hard-liners intensifies,” by Kathy Gannon

→ “FDA strikes cautious tone ahead of vaccine booster meeting,” by Lauran Neergaard and Matthew Perrone

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Editorial photos provided by Getty Images