McConnell Lays Down a Marker on Infrastructure

By Yuval Rosenberg

Ahead of White House Meetings, McConnell Lays Down a Marker on
Infrastructure

Just how serious is President Joe Biden about trying to reach in
infrastructure deal with Republicans?


Politico this morning called that “the D.C.
guessing game du jour,” and anyone playing along should get plenty
more evidence to dissect and soundbites to interpret this week.
Biden was set to meet with Sens. Joe Manchin (D-WV) and Tom Carper
(D-DE) on Monday afternoon and evening and then host an Oval Office
discussion on infrastructure and spending with the four
congressional leaders on Wednesday.

Biden is also scheduled the meet with six Senate Republicans on
Thursday to discuss the infrastructure plan.

As the White House searches for some bipartisan consensus,
Biden’s meetings with GOP members will reportedly focus on physical
infrastructure such as roads and bridges, as Democrats don’t expect
any Republican cooperation on Biden’s proposed safety net
spending.

“Should negotiations move forward, the remaining priorities
within Biden’s roughly $4 trillion spending plans that are not
included in a bipartisan compromise — from funding for home health
care to expanded childhood education, family tax credits and
increased taxes on those earning more than $400,000 — would likely
be pushed through a separate budget reconciliation bill with only
Democratic support,” Politico
reports.

Democrats will need to have Manchin, in particular, on board
with any plan they want to pass through the 50—50 Senate using a
maneuver called budget reconciliation, which would allow them to
bypass the threat of a Republican filibuster. Manchin has expressed
concern about the amount of spending Biden has proposed and has
said he prefers a 25% corporate tax rate to the president’s
proposed 28% rate.

McConnell lays down a marker: Senate Minority Leader
Mitch McConnell on Sunday told Kentucky
PBS station KET that the “proper price tag” for an
infrastructure package would be about $600 billion to $800 billion,
far shy of the nearly $2.3 trillion Biden has proposed in his plan.
And McConnell again criticized the president’s proposal for
including items that Republicans say aren’t related to
infrastructure.

Republican Sen. Shelley Moore Capito of West Virginia has
proposed a $568 billion package, including existing spending plans,
but she told NBC News on Friday that the plan “is not our final
offer.”

The size and scope of the package aren’t the only obstacles,
though: Even if the two sides can settle on the contours of a
physical infrastructure package, they continue to have fundamental
differences on how to pay for it. The White House has proposed
corporate tax increases, while Republicans insist they won’t roll
back their 2017 tax reform and want user fees to pay for new
spending.

The White House so far isn’t drawing many public red lines on
the package, though. “The president’s red lines are inaction and
are anything that would raise taxes on people making less than
$400,000 a year,” White House Press Secretary Jen Psaki
said.

Biden appeared to draw another red line last week, saying he was
“not willing to deficit spend” to pay for an infrastructure plan.
“I’m willing to compromise but I’m not willing to not pay for what
we’re talking about,” Biden said last week, adding that the
Republican tax cuts “already have us $2 trillion in the hole.”

But the White House’s flexibility reportedly may extend to the
idea of additional deficit spending anyway. “Lawmakers and other
stakeholders who have recently met either with the president or top
members of his team say the White House is more focused on getting
Biden’s priorities into a legislative package than drawing a hard
line on deficit spending,” Politico notes.

The bottom line: The meetings this
week may go a long way toward determining how much room the two
parties have to try to work out a deal as Democrats looks to make
bipartisan progress by Memorial Day — and prepare to go it alone if
they don’t see that progress being made.

Quote of the Day: Biden Says Workers Can’t Turn Down ‘Suitable
Job’ and Get Unemployment

“We’re going to make it clear that anyone who is collecting
unemployment who is offered a suitable job must take the job or
lose their unemployment benefits. There are a few Covid-19-related
exceptions so that people aren’t forced to choose between their
basic safety and a paycheck, but otherwise that’s the law.”

– President Biden, in a speech Monday afternoon,
emphasizing that “no one should be allowed to game the system.”

The president’s comments come after Friday’s monthly employment
report fell far short of expectations as the economy added only
266,000 jobs in April. Republicans and business groups have argued
that generous enhanced unemployment benefits have created too much
incentive for workers to stay home. Administration officials and
others have argued that lingering pandemic fears and caregiving
responsibilities are more of a factor.

For more on the unemployment benefits situation, see

this report by Jim Tankersley and Alan Rappeport
in The New York Times.

Number of the Day: Deficit Hits $1.9 Trillion Over First Seven
Months of Year

The federal government ran a $225 billion deficit in April,
bringing the total deficit for the first seven months of fiscal
year 2021 to $1.9 trillion, according to estimates from the

Congressional Budget Office.

The total for October through April is $449 billion, or 23%,
more than the deficit for the same period last year, and larger
than any full-year deficit prior to 2020, according to
The Hill.

Outlays over the first seven months of the year were 22% higher
than the same period a year ago, mostly as the result of
pandemic-related emergency programs such as refundable tax credits
(commonly known as “stimulus checks”), unemployment compensation
and the Paycheck Protection Program of loans to small businesses.
Revenues were 16% higher.

States Line Up for $350 Billion in Federal Aid

The U.S Treasury on Monday began to accept applications
from state and local governments for the use of $350 billion in
federal aid, money that was made available as part of the $1.9
trillion American Rescue Plan law signed by President Biden in
March.

According to the
guidelines for the program, the Treasury “will
distribute funds to eligible state, territorial, metropolitan city,
county, and Tribal governments.” States will receive about $195
billion of the funds, while counties will get $65 billion and
cities will get $45 billion. Tribal governments, territories and
non-entitlement units of local government (cities with fewer than
50,000 people and counties with fewer than 200,000) will divide the
remaining $45 billion.

Stating that the funds must be used “to meet pandemic
response needs and rebuild a strong, more equitable economy,” the
guidelines appear to give states considerable leeway in how they
use the money. Recipients can spend the money on public health; use
it to replace lost revenues; provide “premium pay” to essential
workers; invest in infrastructure; and, perhaps most broadly, use
it to “address negative economic impacts caused by the public
health emergency.”

There are some uses that are prohibited. States are
forbidden from cutting taxes to offset the inflow of cash;
depositing the money in pension funds; using it for debt service
payments; socking it away in rainy day funds; or paying legal
settlements.

Correcting a mistake: “Today is a
milestone in our country’s recovery from the pandemic and its
adjacent economic crisis,” Treasury Secretary Janet Yellen said in
a statement Monday that provides a critical assessment of the
federal response to the financial crisis in 2009.

“There are no benefits to enduring two historic economic
crises in a 13-year span, except for one: We can improve our
policymaking,” Yellen said. “During the Great Recession, when
cities and states were facing similar revenue shortfalls, the
federal government didn’t provide enough aid to close the gap. That
was an error. Insufficient relief meant that cities had to slash
spending, and that austerity undermined the broader recovery. With
today’s announcement, we are charting a very different – and much
faster – course back to prosperity.”

Tax revenues stronger than expected:
State tax revenues held up much better than experts
anticipated in the early days of the pandemic. California Gov.
Gavin Newsom announced Monday that his state expects to see a $75
billion surplus across two fiscal years, thanks in part to capital
gains tax revenues provided by a surging stock market. Last year,
the state projected a $54 billion deficit due to the pandemic. But
now, with a record surplus, the governor plans to spend $12 billion
on payments to families earning less than $75,000 per
year.

The cash payments have drawn fire from critics. Although
the guidelines prohibit using federal money to give tax breaks, the
payments in California are acceptable because the state can claim
they are driven by economic growth, Politico’s Kevin Yamamura

reports. But the payments don’t sit right with
many Republicans, who opposed using federal money to boost state
and local budgets, even before revenues came in stronger than
expected.

"This is one more reason why borrowing and sending tens of
billions to California was a crying shame — and why every
Republican in Congress opposed it," Sen. Mitt Romney (R-UH)

tweeted.

Pentagon Money Diverted to the Wall Cannot Be Recovered:
Report

The Trump administration diverted $9.9 billion from the
Department of Defense to wall construction projects along the
border with Mexico, but despite President Biden’s cancellation of
those projects, very little of that money can be recovered, Roll
Call
reports.

Rep. Betty McCollum (D-MN), chair of the House Defense
Appropriations Subcommittee, told fellow committee members on
Friday that no money would be returned from those projects that
received funding in 2019 and 2020.

According to Roll Call, most of the money has either been
spent or its authorization has expired. At most, there may be $1.8
billion left in an account originally intended to pay for
construction projects on military bases, though the status of those
funds is uncertain.

McCollum said she would soon provide a memo providing
details on the status of the accounts.

News

Views and Analysis