Pelosi Fumbles for a Path Forward

Plus, the tax rate on billionaire ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey [*] Pelosi, Dems Press for Signs of Progress on Biden Agenda Democratic leaders appear to have a plan to try and resolve the intraparty divisions threatening to derail President Joe Biden’s economic agenda: Show enough progress on a contentious — and unfinished — $3.5 trillion spending and tax bill to ease the concerns of progressives who want to see that legislation done before voting for a $1 trillion bipartisan infrastructure package. House Speaker Nancy Pelosi (D-CA) has promised moderate in her party that the infrastructure bill will be brought up for a vote next week, but progressives have threatened to oppose that bill if lawmakers don’t first address a larger package to expand the social safety net and combat climate change. With the prospect of an embarrassing defeat or delay looming, Pelosi, the White House and Senate Democratic leaders are reportedly scrambling to pull together a framework for the larger budget reconciliation bill that moderates and progressives can coalesce around, clearing a path for the infrastructure bill to pass with the support of liberals. It won’t be easy — but that apparent plan may explain why Senate Majority Leader Chuck Schumer announced Thursday morning that the White House, Senate and House had agreed to a “framework” for paying for whatever they agree to in their reconciliation package. “It’s a menu of options, and it will pay for whatever the agreement on the investments comes to,” Schumer [said](. He added that the menu had been agreed upon by House Ways and Means Committee Chairman Richard Neal (D-MA) and Senate Finance Committee Chairman Ron Wyden (D-OR). Nothing new? But while party leaders were clearly eager to tout any sign of progress, they also made clear that the agreement did not mean they had settled on a topline number for the size of the budget reconciliation package, and they provided little in the way of details. So the announcement may not be much of a breakthrough. “If you and I both walk into the Cheesecake Factory and ask for menus, we have agreed upon a framework for lunch, but we haven’t actually decided anything,” NBC News’s Garret Haake [noted](. A number of key Democratic lawmakers were reportedly surprised by the announcement and unaware of the details. Some reportedly criticized the announcement privately, saying it was more about trying to demonstrate momentum that making real progress. "We've been through this a million times. There are many, many approaches as to how you can raise money ... so if that's what the menu is, nothing particularly new I think," Sen. Bernie Sanders (I-VT) said initially, according to [The Hill](. And Sen. Joe Manchin (D-WV) said he hadn’t seen the framework. “We don’t know what they’re talking about,” he said. A rare weekend vote: In another sign that Democratic leaders are urgently trying to reach some consensus on the reconciliation package, House Democrats said they would look to push ahead with a Budget Committee markup of the proposed $3.5 trillion package [on Saturday]( potentially setting the stage for the full House to take up the package next week. The package isn’t done, though, and Politico [notes]( that “the most critical parts of the party-line social spending plan — including any changes to the $3.5 trillion price tag — would need to come through a leadership-written ‘manager’s amendment.’ And that won’t be ready for this weekend, since it's still missing budget scorecards from the Congressional Budget Office.” Thursday’s announcements came after President Joe Biden on Wednesday hosted a trio of meetings with 23 lawmakers that lasted some five hours. The White House and lawmakers expressed optimism after the meetings, using terms like “productive” and “constructive,” but the intraparty tensions hadn’t miraculously melted away — and their plan for next week’s infrastructure vote remained unclear. “There is more work ahead in the coming days, and [Biden] and his team will have follow-up meetings, starting tomorrow, to continue to advance the process of passing these critical bills,” the White House said in a readout released Wednesday night. A senior White House official told [Politico]( that the most important development from the meetings was that “moderates agreed that they need to coalesce around an offer to the liberals.” But Manchin reportedly refused a request by Biden Wednesday to specify a topline spending number he would agree to, and Democratic leaders are hoping that their menu of pay-fors can draw some specifics from Manchin and other centrists who have balked at a $3.5 trillion price tag. “Democratic senators say the biggest obstacle to reaching a deal on a top-line spending number has been the lack of success in getting Manchin to lay out precisely how large he thinks the reconciliation package should be and what key provisions he could or couldn’t support,” The Hill [reports]( adding that one unnamed Democratic senator said it was unclear to them whether Manchin “will actually come to yes on any of this.” What it all means: The scramble by Democratic leaders is all about restoring trust, or at least a overcoming the mistrust that has emerged between progressives and moderates. “I think having a framework will add more confidence to people as to what we are really planning on doing,” House Majority Leader Steny Hoyer (D-MD) said. “One of the problems now is, people aren’t sure what’s going on.” There’s no way the budget reconciliation package can be written and brought to a vote in the Senate by Monday — and it’s unlikely that Democrats can settle on a budget reconciliation framework in time, either. So Thursday’s announcements ultimately did little to clarify the path forward on the two legislative packages. The one thing that is clear: The week ahead is going to be hectic. Federal Government Prepares for a Shutdown With lawmakers still wrangling over how to fund the government when the new fiscal year begins on October 1, the Biden administration instructed federal agencies on Thursday to begin preparing for a possible shutdown after September 30. A spokesperson for the Office of Management and Budget said the move is being made as a precaution. “We fully expect Congress to work in a bipartisan fashion to keep our government open,” OMB’s Abdullah Hasan said. “In the meantime, prudent management requires that the government plan for the possibility of a lapse in funding.” Funding expected: Leaders from both parties have expressed confidence that a shutdown can be avoided, though they have been unable to agree on how to do so. Earlier this week Democrats in the House passed a continuing resolution, known as a CR, to fund the government at current levels through December 3, but Republicans in the Senate have vowed to kill the bill because it includes a measure to suspend the federal debt ceiling. Pelosi told reporters Thursday that as far as she is concerned, there will be no shutdown. “Whatever it is, we will have a CR that passes both houses by September 30,” she said at a press conference. Senate Minority Leader Mitch McConnell (R-KY), who has led the Republican opposition to the House bill, has indicated that he would support a continuing resolution to keep the government open as long as it does not include a provision addressing the debt ceiling, which he wants Democrats to deal with on their own, with no help from the GOP. Lots of work to do: Although the path forward seems to be clear — Congress will likely vote on some kind of continuing resolution before the end of the fiscal year to keep the government open for a period of weeks or months – there is still a lot of work to and little time to do it, especially given the other pressing issues facing lawmakers. While just about everyone in Washington expects to avoid a shutdown next week, the extremely tight timeframe, combined with the recent hostilities between party leaders over the debt ceiling, means that there is still a chance things could go awry. Shutting down the government is expensive and wasteful, and as the Bipartisan Policy Center’s Bill Hoagland told [The Washington Post]( it would be particularly problematic in the middle of a pandemic. “This would be the first shutdown during a declaration of national emergency,” Hoagland said, noting that parts of the Centers for Disease Control and Prevention and the National Institutes of Health would be closed in a shutdown. “In the midst of an ongoing pandemic and non-resolved issues related to the delta virus, to have a shutdown of some of the major federal agencies would add unbelievable complications to our ability to recover.” Ultra-Wealthy Pay 8.2% Tax Rate: White House Report The 400 richest families in the U.S. — worth between $2.1 billion and $160 billion and representing the top 0.0002% of all taxpayers — paid an effective tax rate of 8.2% between 2010 and 2018, according to a [new analysis]( released by a pair of Biden administration economists. The analysis is part of the White House’s effort to pay for new social spending by increasing the tax burden on the country’s wealthiest households, who don’t pay “their fair share in taxes,” as President Biden put it earlier this week. How do the ultra-wealthy get away with paying such low effective tax rates? Here’s how White House economists Greg Leiserson and Danny Yagan explain it: The wealthy pay low income tax rates, year after year, for two primary reasons. First, much of their income is taxed at preferred rates. In particular, income from dividends and from stock sales is taxed at a maximum of 20% (23.8% including the net investment income tax), which is much lower than the maximum 37% (40.8%) ordinary rate that applies to other income. Second, the wealthy can choose when their capital gains income appears on their income tax returns and even prevent it from ever appearing. If a wealthy investor never sells stock that has increased in value, those investment gains are wiped out for income tax purposes when those assets are passed on to their heirs under a provision known as stepped-up basis. Unrealized capital gains are a big part of the story, but are also controversial when it comes to measuring income and taxation, since technically such gains aren’t income unless and until the underlying assets are sold. But the White House economists included capital gains as income in their analysis, arguing that they are an important source of wealth that can be “tapped to finance consumption and can improve financial wellbeing.” As Jim Tankersley of The New York Times [notes]( other analyses of taxes paid by the ultra-wealthy have found higher average rates. An analysis by the Tax Policy Center, for example, found that the top 0.001% — roughly 1,400 households — paid an average effective tax rate of 24% in 2015, compared to an average effective rate of 14% overall. TPC did not include unrealized capital gains in its analysis, producing lower income estimates and higher tax rates for wealthy households. A Message From Our Partner Connect the dots between financial policy, politics, and citizen and legislative action, with the latest from The American Prospect. Read it [HERE](. --------------------------------------------------------------- Send your feedback to yrosenberg@thefiscaltimes.com. 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