Biden and Democrats Push Job, Infrastructure and Family Bills
President Biden gave his initial speech to a Joint Session of Congress; but with Covid protocols in place the speech had a unique atmosphere. As I watched I wrote on Twitter that having tried, and failed, many times in my youth to get a ticket for a Joint Session; this past week’s nearly empty House Chamber was an eerie picture.
As has become the practice at Joint Sessions the simple act of applauding the President’s comments became political statements. Speaker Pelosi would signal Democrats when they should stand, and Leader McConnell would set the tone for Republicans.
President Biden is an experienced and poised speaker and both practiced his speech and participated in the writing of the remarks; even most Republicans conceded it was well delivered. The content had been well leaked so there were no surprises. The President gave a strong pitch for bipartisanship; and there does seem to be a ray of hope that the two sides may be able to find some common ground on the more traditional infrastructure ideas. A group of Republicans have given the White House a proposal totaling $568B; and while much less than the $2T proposed by the President it is a significant proposal. Republicans left projects on Broadband buildout and electric grid upgrades out of their proposal; but as bipartisan negotiations continue these areas could be added and drive the bipartisan package closer to $1T.
Financing the compromise could be a contentious issue; but while an increase in the corporate tax is unlikely to make the cut, there are proposals that range from increasing the gas tax to building the ability of the IRS to find cheats that could fund part of the legislation.
If Republicans and Democrats can reach agreement on a large traditional infrastructure bill Democrats could look to Budget Reconciliation to pass some of Biden’s ideas on housing, schools and senior care living. Under Reconciliation Democrats could fund some of these programs with an increase in the Corporate Tax rate, though probably less than the 28% in the Biden proposal.
The Democrats will have a tougher job getting many of the ideas in the American Families Plan through even if they attempt to use Reconciliation. While Democrats can get budget ideas passed with only Democratic votes using Reconciliation it requires the unanimous agreement of Senate Democrats, and near unanimity among House Democrats where currently Speaker Pelosi only has a four seat cushion.
I believe some of the more expensive ideas pushed by progressive Democrats may have to wait until they can gain a larger majority; and paying for the changes with an increase in the capital gains tax seems like a tough goal with Democrats representing high tax areas where at 39.6% when combined with state and local taxes the rate would rise to over 50%. This would be a tough sell in competitive House districts. Bottom line: It is my view that there is less than a 20% chance that capital gains tax rise anywhere near the proposed rate of 39.6%, though an increase from 21% to 25% might be more doable.
