Thought of the Week:
Since January 6, partisan tensions in Congress have led to outbursts, tit-for-tat retaliations, and a clogged legislative pipeline. The Freedom Caucus has blocked bills that in previous Congress’ would have passed with bipartisan support through quick voice votes; a number of Democrats continue to refuse to partner with Republicans due to their votes against certifying the Electoral College results; and even the simple act of traveling to the House floor to vote has become contentious, as Republican members remain irked at having to pass through metal detectors and wear masks. It has added up to a contentious atmosphere ahead of what will likely be a hectic summer of legislating as incumbents—and possibly former President Trump—also get ready to hit the campaign trail ahead of the 2022 midterm elections. The partisan temperature, which one staffer told us “has been nuclearized,” may be one reason President Biden seems to be walking back efforts to pass an ambitious agenda on a strict party-line basis in favor of scaling back spending, curtailing legislative ambitions, and even courting Republican support. The administration is beginning to face the realities of narrow Democratic majorities in Congress and an uneven economic recovery—following a second straight month of disappointing job numbers President Biden himself said he would not attempt to renew the enhanced unemployment benefits in the stimulus package, which are set to expire in September. Over the next few weeks, the White House may be lured even further out of its partisan bubble as an increasing number of independent economic analysts agree with GOP’s concerns. Former Obama economic adviser Larry Summers, a critic of the administration’s stimulus plan who has been warning about the risks of inflation, has consulted with the White House, and Jason Furman, another former Obama economist, said that Summers’ view was widespread with over 90% of economists believing Biden’s stimulus was too large. While officials had previously portrayed Summers as an ideological renegade, even though he was merely offering mainstream viewpoints, underscores just how far the president had been rolled by the progressive wing of the Party. Trimming the size of the package to near $1 trillion and abandoning efforts to raise the corporate tax rate would be the type of compromises originally expected from this administration. The reality is that, with an evenly divided Senate, the president doesn’t have a mandate to spend trillions in federal dollars for a grab bag of Democratic priorities, and the cautionary economic signals amplify the political threat Democrats face if they simply take cues from their progressive base. While Senators Manchin (D-WV) and Sinema (D-AZ) often take the heat for being wary of a big-government agenda, their stances reflect a sizable view within the caucus. By pursuing a scaled-back proposal, the president would demonstrate he realizes the scope of his limitations and might even lead to a legislative achievement with Republican buy-in. In the end, if the White House can show that the president is governing to the middle—and pushing back against outspoken progressives—his party may have a shot at holding its legislative majorities. Please do not hesitate to contact the Washington office for information on prospects for the infrastructure package or any piece of legislation in the congressional pipeline.
Thought Leadership—from our Associations, Think Tanks, and Consultants:
AEI: America’s Overlooked Energy Revolution – In 2020, the U.S. became a net exporter of petroleum and petroleum products for the first time since 1949. Over the past decade, gross exports more than tripled due to improving energy efficiency and rising domestic petroleum output. Greater energy efficiency stemmed from the price and supply shocks of the 1970s, while domestic petroleum production benefited from innovations in horizontal drilling and fracking technology. Although net exporter status does not mean independence from foreign oil, it does provide considerable economic and strategic benefits enjoyed by neither America’s European and East Asian allies nor China. The Biden administration should recognize that an ambitious green agenda would likely make America import dependent again, including on Chinese “green” technology components, which would turn economic and strategic gains into consequential risks.
Observatory Group: Infrastructure Talks Near Inflection Point: Negotiations between President Biden and Senate Republicans over a potential bi-partisan infrastructure bill are nearing a critical juncture. Based on recent comments by Biden administration officials, it appears the President is willing to give the talks another week to see if there is a firm basis for a mutually agreeable compromise. If the two sides cannot come to an agreement in the near term, the White House and Congressional Democrats will likely move to seek passage of the President’s economic agenda, including infrastructure, under budget reconciliation rules without Republican votes in the Senate. The two sides have not bridged much of the gap between their initial positions even after extensive talks. Prospects for a bi-partisan infrastructure deal, given the large gulf between the two sides over the size, composition, and needed revenue to finance any deal remain uncertain. Although talks between President Biden and Congressional Republicans have gone on longer than expected, we seem to be nearing the limit of how much longer talks will continue. The continued discussion reflects a need by the administration to placate a number of Congressional Democrats who insist that Biden make a serious effort to reach a bi-partisan agreement before they agree to vote for the President’s overall economic agenda on a straight party-line vote. The most likely scenario is that Democrats ultimately choose to employ budget reconciliation rules to pass an infrastructure bill and other elements of his economic agenda; however, there remains a possibility that Biden will decide to strike a deal with Senate Republicans to pass some of his infrastructure proposals on a bi-partisan basis and then have Democrats pass remaining elements of his economic agenda, including tax increases, under reconciliation rules. The odds for this two-part strategy are modest, in a range of 20-25%, but not negligible.
In Other Words (Quote):
“President Trump and I have spoken several times since we left office and I don’t know if we’ll ever see eye to eye on that day.”
— former Vice President Pence on the events of January 6
Did You Know:
Martin Van Buren was the first American-born president.
Image of the Week: