US Finally Hits a Major Covid Milestone

US Finally Hits a Major Covid Milestone

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Plus, putting $550 billion in new spending in context
Monday, August 2, 2021
 

Happy Monday! How was your weekend? The Senate had an unusually busy one, as lawmakers spent it finalizing the text of the bipartisan infrastructure bill, which was filed Sunday evening. Here’s what you need to know while still mourning the U.S. women’s 1-0 loss to Canada in Olympic soccer.

What’s Next for the Bipartisan Infrastructure Bill

Now that the text of the bipartisan infrastructure bill is out — all 2,702 pages of it — the Senate will race to finish consideration of the package this week ahead of a planned August recess that could still be delayed.

Senate Majority Leader Chuck Schumer (D-NY) said Sunday night that he expects the Senate to pass both the infrastructure bill and a budget resolution for fiscal year 2022 before lawmakers leave town. The budget resolution would set the stage for the next portion of President Joe Biden’s economic agenda, a $3.5 trillion package focused on caregiving, health care, education and climate change.

"Let’s start voting on amendments," Schumer urged his colleagues on Monday. "The longer it takes to finish the bill, the longer we’ll be here.

The Senate started considering amendments on Monday afternoon, but Senate Minority Leader Mitch McConnell (R-KY) said Monday that Democrats shouldn’t set up an "artificial timeline" for the amendment process. He called the infrastructure bill "a good and important jumping-off point for what needs to be a robust and bipartisan process" on the Senate floor. "Senators on both sides expect and deserve opportunities to have a say and put their own state’s imprints on this major bill," he said.

GOP senators are still waiting on the Congressional Budget Office to score the legislation, which will provide an official estimate of how much of the bill is paid for. Senate Minority Whip John Thune (R-SD) reportedly estimated that the score would find just over half of the bill’s costs as being offset.

A number of senators are also expected to go to a funeral service on Friday for former Sen. Mike Enzi (R-WY), who died last week.

Putting $550 Billion in New Spending in Context

You’ll undoubtedly be hearing about the nearly $1 trillion infrastructure package all week as the Senate pushes to pass the bill — and for months to come as the House eventually takes up the legislation and a related $3.5 trillion budget reconciliation package.

While the bipartisan infrastructure legislation is historic and undoubtedly large — like we said, more than 2,700 pages — it’s worth putting the $550 billion in new spending in some context.

The new spending in the package is spread out over five years, meaning it averages $110 billion a year. Even without those additional outlays, the federal government is already projected to spend $28.1 trillion over the next five years, according to estimates released last month by the Congressional Budget Office. (Mandatory spending — most notably on programs including Social Security, Medicare and Medicaid — accounts for more than $18 trillion of that total.) In other words, the $550 billion in new spending represents an increase of less than 2%.

Meanwhile, revenues over the next five years are projected to total about $23.4 trillion, leaving cumulative deficits over that time of more than $4.7 trillion. The Congressional Budget Office hasn’t yet scored the new infrastructure bill, but we should find out before long whether it sees the package as being fully paid for, as negotiators say it is, or whether it will add to those deficits.

Now let’s look at the reconciliation package, which Democrats are currently targeting at $3.5 trillion in spending and tax credits over 10 years, for an average of $350 billion a year. Democrats have said that their budget package will be fully paid for with tax increases and other revenue, but moderate Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have expressed concerns about the size of the package and whether its cost will be fully offset. They may still press for cuts or changes.

But just how massive would a $3.5 trillion package be? As of last month, CBO projected total federal spending over the next decade at $63.4 trillion, with annual outlays rising from $5.5 trillion to $7.8 trillion. The Democratic budget package thus represents a 5.5% increase in spending, or a 6% increase if you exclude the cost of interest. (Net interest payments on the debt are projected to rise from $306 billion next year to $396 billion in 2025 and $910 billion by 2031, meaning that they will eventually dwarf the proposed new spending.)

Revenues over the next decade are projected to total $51.3 trillion, and deficits are expected to add up to a combined $12.1 trillion.

Amtrak Gets $66 Billion in Infrastructure Bill, and a New Mission

The bipartisan infrastructure bill includes $66 billion in new funding for Amtrak — and, as Madeleine Ngo of The New York Times reports, it also proposes some changes to the legal mission of the railroad service, which has lost money since it was created in 1971:

"The bill includes new language that would change Amtrak’s goal to ‘meet the intercity passenger rail needs of the United States" rather than achieving ‘a performance level sufficient to justify expending public money.’ It would also add language that prioritizes service in rural areas in addition to urban ones."

Jim Mathews, CEO of the Rail Passengers Association, tells the Times that the change is "really significant" because it signals "that we’re not trying to make Amtrak into a profit-making venture" and instead are focused on delivering services needed by taxpayers.

Treasury Expected to Scale Back New Debt Sales

The federal response to the Covid-19 pandemic involved trillions of dollars in unplanned spending, forcing a substantial increase in debt issuance by the U.S. Treasury. Now that those programs are winding down, analysts expect the Treasury to cut back on its sales of notes and bonds, though the timing is still uncertain.

"Their financing needs will fall very sharply from 2021 into 2022," Bank of America’s Meghan Swiber told Bloomberg News. "We think Treasury needs to implement cuts sooner rather than later -- or it risks being over-funded."

Analysts at JPMorgan Chase expect the Treasury to issue about $1 trillion less in notes and bonds in 2022 compared to this year.

That doesn’t mean, however, that debt will be smaller or that deficits will disappear. "Our equilibrium end state -- say, after August 2022 -- will still have the debt higher than before the pandemic, with the recognition that deficits are going to be here for a long time," John Briggs of Natwest Markets told Bloomberg.

Numbers of the Day: US Finally Hits a Major Covid Milestone

70%: The White House said Monday that the U.S. has now reached President Biden’s goal of having 70% of the adult population get at least one Covid-19 vaccination shot, though the announcement comes about a month after the original target date of July 4.

When Biden announced the goal in early May, the country appeared to be on its way toward hitting the target, but a major slowdown in vaccinations, driven in part by resistance among supporters of former President Donald Trump, threw the effort off track. With alarm bells now ringing over the more infectious Delta variant of the virus, vaccination rates have picked up again in recent days. The U.S. is now averaging about 660,000 vaccinations per day — a big drop from the peak of over 3 million per day seen in April, but above the 500,000 per day recorded on July 20.

$100 million: A coalition of Democratic groups announced plans to spend nearly $100 million over the next six weeks to build support for Biden’s domestic agenda and pressure Congress to pass the infrastructure bill currently under debate in the Senate, as well as the $3.5 trillion proposal focused on what the White House refers to as human infrastructure.

The Biden administration will also be busy selling its agenda during the usually quiet August recess, with presidential surrogates traveling around the country in an effort to build support. Vice President Kamala Harris and 14 cabinet secretaries will hold dozens of events in at least 26 cities in the coming weeks, the White House said. Biden himself plans to hit the road at the end of the month, following a vacation in Delaware.

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