Thought of the Week:
Last night, former Washington National and future Hall of Famer, Max Sherzer recorded the first save of his career to send the Los Angeles Dodgers to the National League Championship Series against the Atlanta Braves. As exciting as the game was, for politicos it was nowhere near as intriguing as the “inside baseball” that is going on in the nation’s capital. Over the past two weeks, we have witnessed a near miss on the debt ceiling and seen the Biden administration cut its topline on the budget reconciliation bill from $3.5 trillion to $2 trillion. Washington insiders tell us that although there remains a lot of uncertainty, assuming any bill gets passed, the total spending topline for reconciliation will be closer to $1.5 trillion, which is based on Senator Manchin’s (D-WV) stated topline. In fact, many analysts have now settled on a total of $2 trillion being an overall target—$1.5 trillion from the budget reconciliation bill plus another half trillion in incremental spending from the bipartisan infrastructure bill. Regardless, it is hard to overstate the level of tension in D.C. right now, and doubts are growing doubt whether the bipartisan infrastructure plan and the budget reconciliation bill will pass at all. While a number of Washington-based consultants we have connections to have upped their odds to 40% that both bills might fail, Punchbowl News (https://email.punchbowl.news/t/ViewEmail/t/92A21571020CFEDF2540EF23F30FEDED) believes the odds of success or failure are 50%. To quote: “Right now, having talked to a lot of Democratic lawmakers and aides this week in both the House and Senate, we’d say the odds may be 50-50. The way the whole bipartisan infrastructure fight went down last week wasn’t a great confidence builder, that’s for sure.” Punchbowl is a new service that is written by a team of former Politico writers, and is one of the new news services that everyone in DC seems to be reading in these polarized times. Meanwhile, Congressional Budget Office (CBO) Director Swagel sent a letter to Senate Minority Leader McConnell saying that CBO has scored only 4 of the 13 committee bills that went into creating the Build Back Better Act, and he cannot say when the office will finish the rest. Bottomline: it is not possible to pass the bill, complete the bill, or even decide how to modify the bill until the scoring is complete. Add this real-world requirement to the political polarization, both within the Democratic Party and between the two parties, and it is easy to see why the odds of failure are increasing.
Thought Leadership—from our Associations, Think Tanks, and Consultants:
Bloomberg: Covid Quickens Tilt Within GOP from Pro-Business Brand to Populism. The current conflict between businesses and Republican leaders over vaccine mandates highlights the GOP’s shift from a pro-business, anti-regulatory party to one that answers to its populist base. Disputes are playing out in Washington, and nationally, over vaccine politics, and while business groups and companies say vaccines and other mitigation measures are crucial to beating the pandemic and spurring economic recovery, GOP politicians are responding to populist voters who have made minimizing the virus an act of personal freedom. This approach may cost some Republican candidates the corporate support they once could rely on. In fact, a recent Gallup poll found that 56% of Americans favor requiring proof of vaccination to go to an office or work site, but that support plunges among Republicans to only 24%, compared to 88% of Democrats, and 43% of independents. What’s more, polls show that Republicans are not as concerned about business interests as they once were—while satisfaction with big business among Democrats remained unchanged at 25%, the number of Republicans who are satisfied with the size and influence of corporations has fallen to a record-low 31%. No doubt businesses are still more aligned with the GOP than Democrats on issues such as taxation, the more that U.S. party politics is defined by culture, the more it puts businesses—especially big business—in conflict with traditional Republican partisan allies. As a whole, businesses oppose states telling them they cannot require employee vaccinations or other coronavirus mitigation measures as much as they object to the Biden administration’s requirement that all companies with 100 or more employees must have their workers vaccinated or tested weekly; businesses say they should be allowed to operate as they see fit.
Politico: Republicans Warn Secretary Yellen that Global Tax Agreement Requires Treaty Changes. Top Senate Republicans are warning that any global tax deal requires changes to American treaties—something that could not happen without substantial Republican support. In a letter to Treasury Secretary Yellen, lawmakers pushed back against suggestions that the Biden administration can enact an OECD agreement without touching existing tax treaties. According to Senate Republican leaders, the proposal would “require provisions within all of the United States’ existing bilateral tax treaties to be modified or overridden.” Senate Republicans complain that the administration has not adequately consulted with them on the OECD plan, and they note that “each of these bilateral tax treaties was approved in the same manner—by a two-thirds vote of the Senate.” They say, “sweeping changes to modify these treaties and alter long-established protocols under these agreements must be processed through the same constitutionally mandated process.” Anything less, Republicans say, would “erode the exclusive treaty authority the Constitution provides to the Senate.” The letter comes as 136 countries have agreed to a detailed plan to rewrite international tax rules ahead of a meeting of G20 leaders. The agreement would distribute authority to tax large companies working across borders according to where they sell, and would also impose a new 15% global minimum tax. Changing tax treaties to include the plan would require 67 votes in the Senate—an unlikely outcome considering that Democrats control just 50 votes and many Republicans have publicly rejected parts of the OECD pact. The White House believes there are ways to bypass the Senate and enact the agreement through congressional executive agreement or through legislation overriding the existing treaties.
In Other Words (Quote):
“A lot of people have asked, isn’t something better than nothing? And the answer, quite simply, is no,”
Rep. Pramila Jayapal (D-WA-07) on the Build Back Better reconciliation bill.
Did You Know:
Abraham Lincoln was the last major-party presidential nominee to name a member of the other major party as his running mate.
Image of the Week:
-IMF/World Bank meetings are ongoing in Washington. Recent pandemic headwinds have resulted in rising growth and inflation risks, weakening the outlook for the global economy. While there is little consensus on the duration of weakness, the IMF has lowered 2021 forecasts, particularly for the U.S. and China.