Dems Set Up a Debt Limit Showdown

Let’s start with the big picture: Right now, Democratic efforts to pass their $3.5 trillion budget reconciliation package and enact the bulk of President Biden’s economic agenda look like a chaotic mess. But as we head into the final days of September — and the last 10 days of the fiscal year — lawmakers may have more urgent issues to worry about, like funding the government to prevent a shutdown and suspending the federal debt limit to prevent a global economic convulsion.

Democrats Play Hardball on Debt Limit

Democratic leaders said Monday that they would include a suspension of the debt limit through December 2022 — as well as emergency disaster relief and funding to help resettle Afghan evacuees — as part of legislation to provide stopgap funding for the federal government through the end of this year.

By tying the debt limit to the funding bill, which will require bipartisan support to pass the Senate, Democrats are hoping to force Republicans to swerve in a game of chicken over the government’s borrowing authority.

House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer (D-NY) said in a joint statement Monday that they believe suspending the debt limit through next year would account for the debt added by a bipartisan $908 billion Covid relief bill signed into law by President Trump last December.

“The American people expect our Republican colleagues to live up to their responsibilities and make good on the debts they proudly helped incur in the December 2020 ‘908’ COVID package that helped American families and small businesses reeling from the COVID crisis,” Pelosi and Schumer said. “Addressing the debt limit is about meeting obligations the government has already made, like the bipartisan emergency COVID relief legislation from December as well as vital payments to Social Security recipients and our veterans. Furthermore, as the Administration warned last week, a reckless Republican-forced default could plunge the country into a recession.”

Republicans have insisted for months that they will not help raise the debt limit, and certainly not while Democrats pursue a partisan package of spending and tax increases. “Senate Republicans would support a clean continuing resolution that includes appropriate disaster relief and targeted Afghan assistance,” Senate Minority Leader Mitch McConnell said Monday. “We will not support legislation that raises the debt limit.”

McConnell last week signaled he won’t budge on the issue. “Do you guys think I’m bluffing?” he asked Punchbowl News.

Democrats may not actually expect McConnell to fold. Even as they try to squeeze Republicans with this latest maneuver, they are reportedly also privately discussing options for extending the debt limit without GOP support. “Well, ultimately they’re going to have to vote for it or we’re going to have to have a vote and do it by ourselves,” House Budget Committee Chair John Yarmuth (D-KY) told MSNBC on Sunday. “We can do it through reconciliation. Leadership has said they don’t want to do that. The reason is, if we do that through reconciliation, we have to specify a number. That only leads to further chaos in a certain period of time.”

Reconciliation bill won’t be ready by next week: On the budget bill, House committees last week met the September 15 deadline set by Pelosi for sending their portions of the package to the Budget Committee. But Punchbowl News reports that the Budget Committee will not mark up the package this week, making it official that the legislation won’t be ready for consideration by the full House next week.

Instead, Democrats will continue to debate the details of their bill as they try to find a path to passage in both the House and Senate. “The process now shifts to backrooms as the sausage is made,” analyst Chris Krueger of the Cowen Washington Research Group told clients Monday morning, adding that all Beltway players will be watching, and parsing, comments from Sens. Joe Manchin (D-WV), Kyrsten Sinema (D-AZ) and Bernie Sanders (I-VT). “Adverbs, adjectives & anecdotes will be the coins of the realm for the coming weeks as everyone will be looking for clues on what is in the bill and what is out. Super.”

A pair of senior House Democrats, Yarmuth and Rep. Jim Clyburn of South Carolina, acknowledged on Sunday that the $3.5 trillion package will likely be scaled back.

Bipartisan infrastructure bill in question: Democrats were likely never going to be able to speed their budget reconciliation package through by the end of the month, but the timing of that legislation calls into question whether Pelosi will allow a September 27 floor vote on the bipartisan infrastructure bill passed by the Senate. Pelosi had agreed to a vote by that date as part of a deal she struck last month with Democratic moderates threatening to derail the larger budget package. Democratic leaders had sought to link the two pieces of legislation so that progressives would back the infrastructure bill favored by moderates and moderates would back the social welfare package sought by progressives. Pelosi will now have to decide whether to allow the infrastructure vote to take place before the reconciliation package is ready. Yarmuth said Sunday that, while the vote would likely slip into October, Pelosi could preserve some leverage by not sending it to Biden right away.

Sinema delivers an ultimatum: Sinema reportedly told President Joe Biden last week that if the House delays its vote on the bipartisan infrastructure bill, or if the vote fails, she won’t back a reconciliation package.

Other moderate Democrats are taking the same position. “If they delay the vote — or it goes down — then I think you can kiss reconciliation goodbye,” Rep. Kurt Schrader (D-OR) told Politico’s Playbook. “Reconciliation would be dead.”

Democrats still clashing over health care: Sinema also told the White House that she opposes the prescription drug pricing proposals in bills being developed in both the House and Senate, according to Politico (which also notes that the Arizona senator has been a leading recipient of pharmaceutical industry campaign donations, according to a Kaiser Health News analysis from earlier this year).

But Sinema is not the only Democrat taking issue with the party’s health care reform proposals. A number of other lawmakers also oppose a proposal to allow Medicare to negotiate drug prices with pharmaceutical companies and indexing prices to those paid by other developed countries — changes that would save hundreds of billions of dollars, which party leaders had envisioned helping pay for the expansion of other benefits.

As moderates and progressives continue to argue over the size and scope of their reconciliation package, health care remains a key sticking point, as Jonathan Weisman and Sheryl Gay Stolberg report at The New York Times:

Manchin wants a pause: The centrist senator from West Virginia is telling people that Congress should take a “strategic pause” — until next year — before taking up the $3.5 trillion budget reconciliation package, Axios’s Hans Nichols reports. Manchin, who has said he’d only support a package of up to $1.5 trillion and has expressed concerns about specific parts of the Democratic plan, had floated the idea of a “strategic pause” in an op-ed for The Wall Street Journal earlier this month but did not specify the length of the delay at the time.

Other Democrats worry that any pause would threaten the prospects for passing the reconciliation bill — and the bipartisan infrastructure bill.

Senate parliamentarian nixes Dems’ immigration plan: In another blow to Democrats’ reconciliation plans, Senate Parliamentarian Elizabeth MacDonough said in a ruling released Sunday night, that the package can’t include the party’s plan to provide a path to citizenship for millions of undocumented immigrants. The parliamentarian’s office said that the proposed immigration changes represented “a policy change that substantially outweighs the budgetary impact of that change” and thus did not qualify under the Senate’s reconciliation rules.

Revolving Door Helps Accounting Firms Game the Tax System: Report

There is something of a revolving door between federal tax agencies and the top accounting firms, according to a report published Monday by The New York Times, and the cozy relationship between government officials and accounting executives can mean that rules are written or interpreted in ways that can save corporate clients millions or even billions of dollars in taxes while reducing the flow of revenues to the Treasury.

The Times’ Jesse Drucker and Danny Hakim sum up the arrangement:

During the last four presidential administrations, the Times found at least 35 instances in which accounting executives took jobs in the Treasury’s tax policy office, the IRS or the Congressional Joint Committee on Taxation, and then returned to their old firms. In at least 16 of those cases, the returning tax specialists became partners at their firms.

Some tax experts say the system simply rewards work experience and seniority, but the Times analysis suggests that it contributes to the maintenance of a tax system that rewards the wealthy and well-connected.

Read the full New York Times report.

How Much It Takes to Be in the Top 1%

Democrats are in the middle of a major effort to raise taxes on the wealthiest Americans to help offset the cost of their proposed expansion of the social safety net. In light of Democrats’ effort, CNN’s Tami Luhby took a look at some key characteristics of today’s top 1%, including these three numbers:

* $540,000: That’s how much income it took to claim a spot among the top 1% in 2018, according to the IRS.

* 21%: The top 1% of earners claimed about 21% of all total adjusted gross income in 2018, with most of that income coming from capital gains and dividends, not labor. By comparison, the bottom 50% of taxpayers claimed about 11.6% of all total adjusted gross income.

* $615 billion: The top 1% paid about $615 billion in federal income taxes in 2018, which accounted for about 40% of all federal income taxes paid. The bottom half of the income distribution paid about 3% of federal income taxes that year.

Coronavirus Death Toll Surpasses 1918 Influenza Pandemic

The U.S. has now reported 675,446 deaths due to Covid-19, according to data from Johns Hopkins University, surpassing the estimated U.S. death toll from the 1918 influenza pandemic.

While there are many important differences between the two pandemics — in 1918, more young people were struck by the virus, in a population that was about a third the size — hitting the century-old milestone is a bit of a shock to some experts, given the availability of modern health treatments and the enormous federal response to the crisis.

“People were desperate for treatment measures in 1918. People were desperate for a vaccine,” historian Christopher McKnight Nichols of Oregon State University told ABC News.

• White House Rules Out Concessions Over Debt Ceiling While GOP Refuses to Help Avert Crisis – Washington Post
• Pelosi Tries to Hold Line as Democrats Start to Crack on Debt Ceiling Standoff – Washington Examiner
• Debt Limit Options Narrowing, 14th Amendment Chatter Returns – Roll Call
• Biden Pushes Back at Democrats on Taxes – The Hill
• Conservatives' 2022 Big Target: Tax Increases – Axios
• Audit: Pentagon Lags in Fight Against Fraud – Roll Call
• 7-Day Average of U.S. COVID Deaths Passes 2,000 for the First Time Since March 1 – New York
• Republicans Maneuver to Block Vaccine Mandates, Undercutting a Policy Widely Seen as an Effective Tool to End Pandemic – Washington Post
• Covid Vaccine Prompts Strong Immune Response in Younger Children, Pfizer Says – New York Times

• Washington’s Oldest Contact Sport: Lobbyists Scrum to Dilute or Kill Democrats’ Tax Bill – Albert Hunt, The Hill
• The Biggest Hurdle on the Road for Biden’s Economic Plan – John Hardwood, CNN
• The Economic Mistake the Left Is Finally Confronting – Ezra Klein, New York Times
• Does the U.S. Economy Still Need Booster Shots? – Peter Coy, New York Times
• Kyrsten Sinema Needs to Show Us What She Believes In – Paul Waldman, Washington Post
• The People Have Spoken: Infrastructure Means Roads and Bridges – Sadek Wahba, The Hill
• Our Drug Supply Is Sick. How Can We Fix It? – Farah Stockman, New York Times
• Americans Who Refuse Vaccinations Are Costing US Big Bucks as Well as Lives – Steve Kamin and John Kearns, The Hill
• House Democrats Should Be Careful They Don’t Get BTU’d – Bruce Thompson, Roll Call
• Congress Needs to Increase My Taxes – Rep. David Trone (D-MD), Roll Call