Key Takeaways
- Congress returns with the potential of Democrats losing the House in midterms and, if so, this being the last year to get their agenda passed.
- What’s the future of Build Back Better (BBB) with Manchin opposition? Roadmap to BBB 2.0.
- 1Q22 agenda not only BBB but confirmation of Chairman Powell and funding government past end of current CR on February 18th.
As 2021 ended, Democrats in DC were stymied in their efforts to pass the Biden domestic agenda in the Build Back Better (BBB) legislation after West Virginia Democrat Joe Manchin announced that he was a NO vote – killing the bill. What happens next?
Progressives are furious as those in the House thought that they had a deal when the House approved the bipartisan infrastructure bill. The deal was that Biden and Senate leaders would get the support of Manchin and the BBB would pass. Progressives now feel cheated even though their vote allowed for the biggest infrastructure program since the Eisenhower Administration undertook construction of the interstate highway system. Democrats seem to have a hard time declaring victory.
Even though the current BBB is destined to fail in the 50/50 Senate without Senator Manchin’s support, in my view Senate Leader Schumer will likely bring the bill up for a vote just to make the point to House progressives that their version of the BBB is dead and that it’s time to start anew.
With Democrats facing daunting odds of keeping the House in the 2022 midterms this may well be their last opportunity to get significant pieces of their agenda passed. There are clearly pieces of the BBB that Manchin can support. Progressives and other Democrats hailed the bill as the most important climate bill ever – but Manchin is from West Virginia where coal is king. In my view it may be possible to get a bipartisan consensus on a standalone climate bill where some moderate Republicans would join Democrats to make up for the loss of Manchin; but it can’t be part of the BBB package which is clearly a Democratic partisan measure that Republicans are committed to oppose.
West Virginia is one of the poorest states in the nation, and Manchin sits in the seat of former Senator Robert Byrd who became a legend in West Virginia by bringing money to the state. Remove anti-coal climate provisions and there are likely social spending issues from childcare to family leave that Manchin can support. BBB 2.0 is possible but it will need to overcome the anger of progressive Democrats in the House, obviously win over Manchin, Sinema and at the same time hold Sanders and Warren to get a compromise passed. As the old political saying goes “elections have consequences” and likely loss of the House in the midterms may be the magic potion that gets both sides of the Democratic coalition to unite and pass BBB 2.0.
Jay Powell confirmation
With Congress returning to DC, I expect the Senate Banking Committee to announce hearing dates for Jay Powell’s re-nomination for a four year term as Fed Chair. Progressive Democrats led by Senator Elizabeth Warren are likely to want a day of hearings with witnesses who oppose the Powell nomination, and of course the highpoint will be the Chairman’s testimony. It is likely to come later in January or the first week of February when Fed policy will be under a microscope as they continue the taper policy and plan for the inevitable rate increase. Fed watchers will be examining every word the Chairman says.
Senator Warren goes into the hearing firmly opposed to the nomination and is a tough questioner that could lead to fireworks in the public hearings. Other Senators will also be looking for good soundbites in the hope that their question is the one that makes the evening news. The main challenge for Powell is to steer a middle of the road course. There will definitely be Democratic defections from the President’s nominee; Powell, a Trump appointee, should be able to get more than enough Republicans to make up for the lost Democratic votes. However his challenge is to avoid saying anything at the hearing that turns Fox News, Trump and other Republican opinion leaders into opponents of his nomination.
Government Funding 2/18 deadline
While February 18 is long into the future by DC standards, one day it will come. The government is operating on a Continuing Resolution that is funding the departments of government under spending levels and priorities established for fiscal year 2021. With dislocations caused by the pandemic, and new defense priorities that were approved in the recently passed National Defense Authorization Act (NDAA), it is time to pass budgets that reflect FY 2022 needs.
Republicans and some Democrats are anxious to respond to the Chinese military buildup and the aftermath of the Afghanistan withdrawal with new money and priorities for Defense. The NDAA increased the DoD authorization from Biden’s $713B request to $740B; but this higher level of spending needs to be approved in the Department of Defense appropriations bill. While the higher spending level is opposed by some Democrats, a deal seems to be possible where Congress would approve high Defense FY 22 spending, along with higher levels of Health and Human Services (HHS) to get a bill passed. Finding the right balance will be the focus of Congressional appropriators and leadership in the coming weeks, as Congress and the Administration will want to avoid a government shutdown threat on February 18.
