Good Wednesday evening! As
this email hits your inbox, Congress has about 29 hours to avert a
government shutdown.
Lawmakers appear poised to get that done, with the Senate
working to finalize a deal on a short-term funding extension that
can be passed on Thursday and then, if all goes according to plan,
quickly approved by the House. That would clear only one of the
four issues lawmakers are wrestling with, though. The paths to
addressing the debt limit and resolve Democratic infighting over
infrastructure and a budget reconciliation bill remain far less
certain. Here’s what you need to know.
Biden, Pelosi Struggle to Break Dem Stalemate; Manchin Slams
Spending Plan as 'Fiscal Insanity'
President Joe Biden and congressional Democratic leaders
scrambled Wednesday to try to resolve an intraparty standoff that
threatens to delay or derail a $1 trillion bipartisan
infrastructure bill and a larger package focused on
expanding access to health care, bolstering the social safety net
and combating climate change.
Biden canceled a planned trip to Chicago Wednesday so he could
stay in the capital and continue efforts to broker a compromise
between progressives and centrists divided over the two tentpole
pieces of legislation.
Biden met with House Speaker Nancy Pelosi (D-CA) and
Senate Majority Leader Chuck Schumer (D-NY) at the White House
Wednesday afternoon following a series of meetings Tuesday with
Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), who oppose both
the size of the social spending package and key provisions in it.
Progressives, meanwhile, are still vowing they’ll withhold their
support for the infrastructure bill, fearing that if it passes,
centrists will scuttle any chance of passing the second
package.
Progressives apparently have good reason to be concerned
about that larger bill, which would require the backing of all 50
Senate Democrats in order to pass using the special budget
reconciliation process the party wants to use to bypass a
Republican filibuster.
Despite repeated pressure from Democratic lawmakers, Manchin and
Sinema reportedly have yet to specify what they would support in a
reconciliation bill. “During a private meeting with the president,
Sinema made clear she’s still not on board with the party’s $3.5
trillion social spending plan and is hesitant to engage on some
specifics until the bipartisan infrastructure package passes the
House,” Politico
reports, citing a person who spoke with her.
White House Press Secretary Jen Psaki would not tell reporters
Wednesday whether the two senators have provided a topline number
that they would accept for the price tag of the budget
reconciliation package. Manchin has previously indicated he could
back $1.5 trillion. Sinema remains more of an enigma, though she
continues to engage in talks with the White House. Psaki said
Wednesday that the White House believes the Arizona senator does
support passing a reconciliation package this year.
For the moment, that all leaves Democrats going in circles, as
Politico
summed up: “To pass the House, progressives are
demanding that the much larger reconciliation bill must be
finished. To finish the reconciliation bill, Biden needs to cut a
deal with Sen. Kyrsten Sinema … . To get a deal with Sinema, she
has previously said, the bipartisan infrastructure bill must pass
the House on Thursday.”
Pelosi said Wednesday that the legislative text of the
reconciliation package must be done before the House takes up the
infrastructure bill. “That won't happen,” Manchin quickly
responded.
Manchin says spending trillions more is ‘fiscal
insanity’: The West Virginia senator issued a statement
Wednesday evening reiterating many of his objections to the budget
reconciliation package. “I can’t support $3.5 trillion more in
spending when we have already spent $5.4 trillion since last
March,” he said, without including a number that he could support.
“What I have made clear to the President and Democratic leaders is
that spending trillions more on new and expanded government
programs, when we can’t even pay for the essential social programs,
like Social Security and Medicare, is the definition of fiscal
insanity.”
Manchin also said he was concerned that spending trillions more
would spur inflation that could weaken the recovery from the
pandemic.
“While I am hopeful that common ground can be found that would
result in another historic investment in our nation, I cannot – and
will not – support trillions in spending or an all or nothing
approach that ignores the brutal fiscal reality our nation faces,”
Machine added. “There is a better way and I believe we can find it
if we are willing to continue to negotiate in good faith.”
The bottom line: Biden and Pelosi appear to have a couple
of options, neither of which is good. They could press ahead with
Thursday’s planned infrastructure vote, daring progressives to
follow through on their threat and tank the bill, as is likely to
happen. Or they could delay the vote and anger moderates,
potentially complicating negotiations even further. “If the vote
were to fail tomorrow or be delayed, there would be a significant
breach in trust that would slow the momentum in moving forward in
delivering the Biden agenda,”
said centrist Rep. Stephanie Murphy (D-FL).
Pelosi has made clear she won’t bring a bill to a vote without
knowing it will pass, meaning delay — and more Democratic
infighting — is the likeliest outcome. But check back tomorrow!
House Votes to Suspend Debt Ceiling
With one eye on a rapidly shrinking calendar, Democrats in
the House on Wednesday approved a stand-alone bill that would
suspend the federal debt ceiling until December 16,
2022.
The bill passed 219-212, but it faces an unavoidable
problem: Republicans have vowed not to support any effort to deal
with the debt ceiling, making it virtually impossible to pass a
bill without resorting to the filibuster-proof reconciliation
process.
Earlier this week, Republicans in the Senate blocked two
efforts to vote on a separate bill that would suspend the debt
limit, amplifying concerns that Congress could push the economy
into a potentially catastrophic crisis as soon as
mid-October.
“We’re just asking Republicans to get out of the way,”
Schumer pleaded on the Senate floor.
Internal resistance: Before the vote,
Pelosi faced resistance from some within her caucus who threatened
to block the new bill due to concerns about the political damage
they could suffer if they supported it. To win their support,
Pelosi agreed to allow a vote on a bill that would create something
like a fiscal report card for the U.S.
In a letter to Democratic lawmakers ahead of the vote,
Pelosi said “the House plans to move forward to honor its
responsibility to protect the American economy and American
families from the catastrophe of a default by passing legislation
to suspend the debt limit.”
Pelosi also made it clear who she blames for the
last-minute legislative scramble: “We cannot and will not allow
Republicans’ extremism and utter lack of concern for families to
drive our economy into the ground,” she wrote.
Few Americans Pay the Estate Tax – and the Number Has Been
Shrinking
Democrats want wealthy households to pay more taxes to
help fund their effort to expand the social safety net, and one
proposal in Congress calls for lowering the threshold for the
estate tax to $5 million.
That prompted
CNBC’s Greg Iacurci to take a look at how many
Americans currently pay the estate tax. And the answer is: very
few.
According to IRS data reviewed by Iacurci, just 0.2% of
U.S. adults who died between 2011 to 2016 paid the estate tax.
That’s well below the historical norm of 1% to 2%.
The falling rate is due in large part to the increase in
the threshold for the estate tax. Twenty years ago, the threshold
was $1 million, rising to $3.5 million in 2009 and then to $5
million in 2010. In 2017, Republicans more than doubled the
threshold to the current levels of $11.7 million for single people
and $23.4 million for couples. Above those levels of wealth, the
estate tax of 40% applies.
In raw numbers, just 2,570 returns owed estate tax in
2019, Iacurci reports. The money owed was substantial, though,
totaling $13.2 billion.
According to the Joint Committee on Taxation, the
Democratic plan to lower the estate tax threshold to $5 million
won’t significantly increase the percentage of people who owe the
tax, bumping the share up to 0.3% or 0.4%, but it will raise a lot
of money, bringing in about $52 billion over the next five
years.
Mind the GRAT: A new report from
ProPublica highlights a method some ultrawealthy households use to
avoid paying estate taxes altogether.
“The estate tax can be easily avoided by exploiting a
loophole unwittingly created by Congress three decades ago,”
ProPublica’s researchers
write. “By using special trusts, a rarefied group
of Americans has taken advantage of this loophole, reducing
government revenues and fueling inequality.”
The special trusts are called grantor retained annuity
trusts, or GRATs, and they’ve been used by more than half of the
country’s 100 wealthiest individuals, ProPublica
reports.
Here’s how they work: “A typical GRAT entails putting
assets, like stocks, in a trust that ultimately benefits a person’s
heirs. The trust pays back an amount equal to what the trust’s
creator put in plus a modest amount of interest. But any gains on
the investments above that amount flow to the heirs free of gift or
estate taxes.”
The GRAT structure has helped the likes of Michael
Bloomberg, Oprah Winfrey and Charles Koch ensure that their
families and in some cases friends receive millions from their
estates, tax-free.
“I don’t blame the taxpayers who are doing it,” Daniel
Hemel, a professor at the University of Chicago Law School, told
ProPublica. “Congress has virtually invited them to do it. I blame
Congress for creating the monster and then failing to stop the
monster once it became clear how much of the tax base the GRAT
monster would eat up.”