| | The high-stakes games continue in Washington as moderate and progressive Democrats face off over President Biden’s spending proposals. Here’s what you need to know.
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| | Pelosi Turns Up the Pressure
Despite resistance from a group of moderate lawmakers, Democratic leaders in the House are turning up the pressure within their caucus to stick with the plan to advance President Joe Biden’s economic agenda.
The moderates are demanding that House Speaker Nancy Pelosi (D-CA) bring the $1 trillion bipartisan infrastructure bill passed by the Senate to an immediate vote, while threatening to withhold support for Democrats’ $3.5 trillion budget resolution if they don’t get their way. But Pelosi is moving ahead with a plan to vote on both the budget resolution and a voting rights measure early next week, while leaving the bipartisan infrastructure bill for a later date, perhaps in the fall.
Pelosi, who reportedly dismissed the moderates’ effort as "amateur hour" in a leadership call on Monday night, is relying on her team to apply the pressure.
"We have to hold firm. We have to stay together," Rep. Peter DeFazio (D-OR), chair of the House Transportation and Infrastructure Committee, said on a group call for Democratic House members Tuesday, according to Politico. "If you want to be in this game, and you want the House to be a meaningful participant, then stay together next week."
House Majority Leader Steny Hoyer (D-MD) also joined in the effort. "Remember the psychology of consensus," he said on the members’ call. "We're in this together, led by the President."
The White House expressed support for Pelosi’s plan Tuesday. "All three are critical elements of the President’s agenda," White House spokesperson Andrew Bates said, referring to the spending and voting measures, "and we hope that every Democratic member supports this effort to advance these important legislative actions."
The bottom line: Pelosi shows no signs of giving in to the moderates’ demands and appears to be betting that the holdouts will fold once they are faced with a potentially do-or-die vote next week. Expect to see her continuing to apply pressure on wayward caucus members over the next few days.
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| Yellen: Why Biden’s Plan Is ‘Fiscally Responsible’
As lawmakers in Congress battle over the fate of President Joe Biden’s ambitious domestic agenda, Treasury Secretary Janet Yellen on Tuesday offers a vigorous defense of his plan to spend roughly $4 trillion over a period of years on a wide variety of social and environmental programs.
In an op-ed published by Yahoo Finance, Yellen argues that for decades the U.S. has underinvested in basic social goods, ranging from child care to education to infrastructure, and this neglect has produced "worrying trends" such as declining labor force participation. Biden’s plan, she says would begin to reverse those trends.
"We are now engaged in the most important economic project in recent history: Repairing the broken foundations of our economy, and on top of them, building something stronger and fairer than what came before," Yellen wrote.
Too much spending? Critics of the Biden plan, including most Republicans and no small number of Democrats, charge that the two infrastructure packages under debate in Congress, if passed together, would push too much federal spending into the economy, risking increased inflation while running up deficits and debt. Yellen says there are three reasons she is not concerned:
* Low interest rates: "If we are going to make these investments, now is the right time," Yellen writes. "Real interest rates are currently negative, and payment on our public debt, as a share of the economy, is expected to remain below historic levels for at least a decade."
* Fiscally responsible: Biden’s plans "proposals are fiscally responsible," Yellen says. "The investments are spread out over time, and total around one percent of our gross domestic product over the course of the decade. They’re also paid for over the long-term through a reformation of the tax code that will make it fairer."
* High opportunity cost: "Most importantly, we have to consider the opportunity cost of not making these investments," Yellen argues. "We’ve grown used to America as the world’s greatest economic power, but we aren’t destined to stay that way." Emphasizing the point, she says "the crucial question isn’t ‘What if we make these big investments?’ It is: "What if we don’t?"
Still, some of the critics of Biden’s plans continue to push back against the proposed big increase in spending. "Hard to believe we’ve moved from billions in deficit spending to trillions without blinking," Steven Rattner, the journalist-turned-investment manager who served as the auto czar in the Obama administration, tweeted Tuesday. "Chart below doesn’t even include interest," he added referring to a new analysis (see below) from the Committee for a Responsible Federal Budget that compares the cost of recent tax and spending plans and proposals.
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| | Afghanistan Collapse Won’t Affect US Military Budget: Analysis
The sudden collapse of the government in Afghanistan won’t have much of an impact on U.S. defense spending, says Roll Call’s Andrew Clevenger.
House appropriators have already approved $705.9 for defense in fiscal year 2022, and the Senate appropriators are expected to release their version of the Pentagon budget in the coming weeks. The final defense bill could see a few tweaks due to the situation in Afghanistan, but most of the spending is already set.
"The most likely outcome is there’s a lot of handwringing, there’s a lot of sadness, there’s a lot of disappointment in the way things are going down in Afghanistan," Todd Harrison, the director of defense budget analysis at the Center for Strategic and International Studies, told Clevenger. "But it ultimately does not affect the defense authorization or appropriations process in any significant way."
Analysts expect a few billion dollars to shift from accounts associated with Afghanistan, including $3.3 billion intended to aid security forces in the country. But the great bulk of the defense budget is focused elsewhere. "It’s not going to have a significant funding effect for [the Department of Defense], nor will it change the focus for DOD planning or strategy, which is on near-peer competition with China and Russia," Harrison said. "I don’t see it changing investments in weapon systems, I don’t see it changing force structure, I don’t see it changing military personnel policy."
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| Map of the Day: Piles of Covid Cash
The American Rescue Plan provided $350 billion for state and local governments to address Covid-19 related problems, and states are now sitting on tens of billions of dollars of unspent aid, according to Bloomberg CityLab.
By design, states and localities have several years to spend the money, with outlays to be completed by 2026, and officials are taking their time figuring out the best use for the funds. "That’s what we want government to do — to be thoughtful about it," Michael Leachman of the Center on Budget and Policy Priorities told Bloomberg. "They have to balance that with addressing as well as they can the immediate hardships people are facing."
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