Infrastructure Plans Hit Major Roadblock: Deficit Concerns

Plus, the deficit topped $2.2 trillion in nine months  [The Fisc](   By Yuval Rosenberg and Michael Rainey Democrats Search for Consensus on Massive Spending Package Democratic lawmakers are rushing this week to complete the blueprint for a massive, multi-trillion-dollar spending package they plan to offer alongside a smaller, bipartisan infrastructure bill, and as [Politico reports]( Tuesday, they are cramming as many priorities as they can into the plan, which is likely their last opportunity to pass legislation via budget reconciliation this year — a process that would theoretically require no GOP support. The package is expected to include programs left out of the bipartisan infrastructure package agreed to by the White House and Senate negotiators. Many of those priorities have been laid out in President Joe Biden’s $4 trillion economic agenda. In addition, progressive lawmakers are pushing to add some of their own priorities to the mix. Here are some of the programs being discussed for inclusion in the still-developing plan, according to Politico: * Universal prekindergarten, * Free community college for two years, * Paid family leave, * Paid medical leave, * Free meals for all public school students, regardless of income, * Permanent child tax credit, * Tax breaks for renewable energy, * Tax subsidies for affordable housing, * Tax break for child care expenses, * Subsidies to promote green farming practices, * Additional funding for election infrastructure, * Funding for broadband internet, * “Prevailing wage” mandate for federal projects, * Electric vehicle charging stations, * Empowering Medicare to negotiate lower drug prices, * Medicare coverage expansion for dental, vision and hearing care, * Lowering the age of Medicare eligibility. Funding is crucial: Paying for all the proposed spending could be a decisive issue for many lawmakers, especially following a pandemic year with trillions in federal relief spending that sent deficits and debt soaring. Sen. Joe Manchin (WV), a key vote in a closely divided Senate, repeated his belief Tuesday that the package must include sufficient revenues. “Everything should be paid for,” he said. “How much more debt can y’all handle?” Other Democrats say they don’t think every cost needs to be covered by new revenues. “My view is that some of that one-time infrastructure spending doesn’t need to be offset dollar for dollar,” Sen. Chris Van Hollen (D-MD) said Monday. Senate Majority Leader Chuck Schumer (D-NY) reportedly thinks he can find roughly $3.5 trillion in revenues. “It is not going to be easy, but it is certainly going to be worth it,” Schumer said Monday. “The federal government has not made a significant stand-alone investment in infrastructure in decades.” Despite concerns, Democrats are determined: New inflation data released Tuesday showing that inflation rose 5.4% from a year earlier has added to concerns about the size of the reconciliation package. But Democrats are still pushing ahead, seeing this as a once-in-a-generation opportunity to change the trajectory of the country. “The most important thing is we go big,” Senate Banking Chair Sherrod Brown (D-OH) told Politico. “The public wants us to go big. We make a difference for a generation on some of these issues.” Republicans Waver on Bipartisan Infrastructure Deal As Democrats debate the size and scope of their “human infrastructure” package, the bipartisan deal for core infrastructure investments that senators reached with the White House is reportedly at risk of stalling as Republicans raise concerns about the proposed financing. Eleven Republican senators have endorsed the plan, which calls for nearly $600 billion in new spending on road, bridges and other “hard” infrastructure over five years. But five of the 11 [told CNN]( on Monday that they could still withdraw their support given their concerns about some of the proposals to pay for the measure — including increased IRS enforcement — and Democratic plans to push a larger partisan bill alongside the bipartisan effort. “Part of the motivation is trying to make certain that we don’t spend $6 trillion," Sen. Jerry Moran (R-KS) said on Monday evening, according to [Politico](. If "this is lending itself toward that outcome then I would no longer be a yes at that point in time." Sen. Richard Burr (R-NC) reportedly said he wants to see the final language in the bill, and a cost estimate from the Congressional Budget Office. Budget experts have said that the mix of revenue raisers and spending reductions proposed to cover the new spending will [fall well short]( of fully offsetting the costs. Sen. Rob Portman (R-OH), one of the negotiators behind the deal, reportedly acknowledged as much on Monday, saying that the CBO estimate might exclude gains from some of the stepped-up IRS enforcement. “We’ve always thought the infrastructure pay-fors were going to be a challenge,” Portman [said](. “We want to have pay-fors. We’ve got some good ones. The CBO might not give us full credit.” That could lead Republicans to bolt — or at least force the negotiators to try to find some additional financing. “I think a lot of our members are going to look at, how credible are the pay-fors? And how large is this?” said Senate Minority Whip John Thune (R-SD). “For our members, it’s really going to come down to, is this going to be all put on the debt and financed on top of all the other debt and spending that we’ve done in the last 15 months? Or are some of these pay-fors actually going to be pay-fors?” Who’s solid and who’s on the fence: Politico notes that the five GOP senators who negotiated the deal remain solidly behind it. Those five are Portman, Bill Cassidy of Louisiana, Susan Collins of Maine, Lisa Murkowski of Alaska and Mitt Romney of Utah. But the support from Sens. Burr, Moran, Lindsey Graham of South Carolina, Mike Rounds of South Dakota, Thom Tillis of North Carolina and Todd Young of Indiana is less firm. Adding to the uncertainty, Senate Minority Leader Mitch McConnell (R-KY) has yet to back the bipartisan deal. “Republicans believe that if he urges his colleagues to vote against the bipartisan deal, it could ultimately collapse,” CNN notes. Senate passage of the bipartisan package would require 10 Republican votes, assuming the chamber’s 50 Democrats unite behind the bill, which is not given. What’s next: The bipartisan senate group behind the bill was expected to meet again on Tuesday, and the drafting of the legislation is expected to drag into next week. "We're going to have to spend the time and energy to deal with all the issues outstanding, and there are a lot of issues that are outstanding," Romney said, according to CNN. "This is a major piece of legislation, which deals with the work of many committees, and so I can't possibly predict how long it will take." If Republican support for the deal collapses, Democrats would have to roll the two bills being crafted into one large package that they could try to pass via reconciliation. Deficit Tops $2.2 Trillion Over First Nine Months of Year The federal budget deficit topped $2.2 trillion over the first nine months of the fiscal year, the Treasury Department said Tuesday. The June deficit was $174 billion, down from a record $864 billion in June 2020, when pandemic response measures resulted in a massive monthly gap. Receipts last month totaled $449 billion, while outlays totaled $623 billion, a 44% drop from the prior year. The difference is largely due to the cost last year of the Paycheck Protection Program. The Small Business Administration, which ran the program, had outlays of more than $500 billion last year but just $31 billion this year. The deficit for the first nine months of the year is down from $2.7 trillion over the same period last year, but the Congressional Budget Office projects that the full-year deficit will again reach $3 trillion, close to the record $3.1 trillion gap in fiscal year 2020. The Committee for a Responsible Federal Budget last week noted that the federal government has borrowed over $10 billion per day for the last 15 months. Quote of the Day “We are going to come out of this cycle with a much higher opinion about the efficacy and timeliness of fiscal policy as a counter-cyclical tool. Frankly, it was very effective -- almost too effective.” – Stephen Stanley, chief economist at Amherst Pierpont Securities, in a [Bloomberg News article]( previewing Federal Reserve Chairman Jerome Powell’s testimony before Congress on Wednesday and Thursday. Democrats are expected to prod Powell to support additional government spending as they look to enact large infrastructure and social welfare plans, while Republicans are expected to highlight the risks of additional deficit spending and inflation, Bloomberg’s Craig Torres reports. Send your feedback to yrosenberg@thefiscaltimes.com. Follow us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. And please tell your friends they can [sign up here]( for their own copy of this newsletter. News - [Senate Democrats, Republicans Grapple With Price Tag for Biden’s Infrastructure Agenda]( – Washington Post - [Biden’s Two-Track Economic Agenda Hits Turbulence in Senate]( – Bloomberg - [Bipartisan Senate Group to Finalize Infrastructure Bill This Week]( – The Hill - [Budget Blueprint for Massive Spending Package Starts to Take Shape]( – Roll Call - [Democrats Mull Keeping Debt Limit Out of Budget Reconciliation]( – Roll Call - [New Concern for Biden: Could Larry Summers Be Right About Inflation?]( – Politico - [Surging Prices for Used Cars, Gasoline, Food and Airfares Are Driving the Jump in Inflation]( – CNBC - [Fired and Defiant, Former Social Security Chief Is Cut Off From Agency Computers]( – Washington Post - [Yellen Sees U.S. Companies Pushing to Back Global Tax Deal]( – Bloomberg - [US Treasury Chief Warns EU Against Hobbling Coronavirus Recovery With Tight Spending Rules]( – Politico - [G.O.P. Lawmakers Question Amazon’s Connections on Pentagon Contract]( – New York Times - [House Appropriators Want Pentagon to Get Tough on Extremists in the Ranks]( – Roll Call - [Lawmakers Pan Biden’s First Space Force Budget]( – Roll Call - [Navy Secretary Nominee Supports Expanding Fleet, but Says More Money Is Needed]( – Military Times - [The IRS Is Sending Out 4 Million Refunds This Week to Taxpayers Who Overpaid on Their 2020 Unemployment Benefits]( – CNBC Views and Analysis - [Biden’s Agenda — and Legacy — Are on the Line This Summer in Congress]( – Christina Wilkie and Jacob Pramuk, CNBC - [Inflation Surged in June. The Fed Should Do Nothing About It]( – Eric Levitz, New York - [The Child Cash Benefit Could Give Families Security and Flexibility They’ve Never Known]( – Catherine Rampell, Washington Post - [The New Child Tax Credit Could Lift More Than 5 Million Kids Out of Poverty. Can It Help Them Learn, Too?]( – Moriah Balingit, Washington Post - [Vermont’s and South Dakota’s Covid Infection Rates Are Remarkably Similar — but Their Outcomes Are Not]( – Ashish K. Jha, Washington Post - [GOP Anti-Vaxxers Are Sacrificing Citizens’ Lives for Political Gain]( – Michael Gerson, Washington Post - [Republicans Refusing to Get Vaccinated Are Owning No One but Themselves]( – Eugene Robinson, Washington Post - [How Republicans Hope to Scam Democrats Into Committing Political Suicide]( – Greg Sargent, Washington Post - [What Infrastructure Really Means]( – Peter A. Shulman, The Atlantic - [Biden Can Promote Both Workers and Competition]( – Karl W. Smith, Bloomberg - [The Bogus GOP Claim That Biden Is Responsible for Higher Gasoline Prices]( – Glenn Kessler, Washington Post - [Democrats Are Pressing Forward on Allowing the Government to Fund Abortions]( – Paige Winfield Cunningham, Washington Post - [Want to Know Why a Wealth Tax Won’t Work? Remember the Time Michael Jackson’s Estate Landed in Tax Court]( – Howard Gleckman, Tax Policy Center - [Kristi Noem’s National Guard Deployment Is America’s Future]( – Eric Schnurer, Atlantic Copyright © 2020 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, [thefiscaltimes.com]( or through Facebook. The Fiscal Times, 399 Park Avenue, 14th Floor, New York, NY 10022, United States Want to change how you receive these emails? [Update your preferences]( or [unsubscribe](