It was supposed to be simple. With various must-pass priorities behind them, including a historic SCOTUS confirmation, Democrats would return to Washington and finally hammer out a deal to resurrect key swaths of the Biden domestic agenda. After months of quiet, patient maneuvering, Joe Manchin was ready to engage, and the administration had a plan to get him to yes—or so weeks of beltway narrative priming would have us believe.
But a funny thing happened on the way to reconciliation rapprochement. Manchin stuck to his rhetorical guns, insisting that “there’s not a Build Back Better revival,” and repeating reconciliation stipulations that have known objections elsewhere in the caucus. (For its part, the White House did not take the bait, seemingly learning their lesson from December’s messy public spat.) He raised eyebrows in a Senate committee hearing on Thursday, calling the administration’s proposed expansion of the electric vehicle (EV) tax credit “ludicrous” at a time when demand outstrips production and supply. [The full exchange in context suggests it was a flip aside in a wind up to a point about the battery supply chain and the need to invest in hydrogen mobility.] And most notably, Manchin introduced a new variable by opening up bipartisan talks on energy policy with several of his Republican counterparts, an outgrowth of a recess visit to Alaska where he and Senator Lisa Murkowski (R-AK) discussed the importance of ramping up domestic production.
Meanwhile, legislative spillover from the previous work period continues to chew up time and bandwidth, as leadership struggles to move a COVID bill mired in immigration politics, and the chambers finally move to a formal conference on a China competition bill that was first passed nearly a year ago.
So, what should we make of this new wrinkle? Is a bipartisan energy agreement of any sort possible? Could it carry climate-related elements? And what do these talks mean for the odds of a reconciliation deal?
While anything is possible, and the fluid situation in Eastern Europe in particular has potential to change the dynamics here in Washington, my colleague Tim Urban has a clear-eyed look at the potential scenarios, examined here starting with the longest odds:
Both/And: Congress approves both a bipartisan energy policy bill (with over 60 votes in the Senate, presumably more than ten of them coming from Republicans)and a budget reconciliation package (with 50 Democrats approving in the Senate and no Republicans) containing environmental and energy tax titles, and also making a significant down payment on deficit reduction via a revenue-raising package that asks wealthy corporations and individuals to “pay their fair share.” Given the track record of this Congress for expeditiously moving difficult legislation, we think that the various political hurdles presented by achieving the legislative equivalent of a full house in a game of poker is extremely unlikely.
BIF Redux: Ten or more Senate Republicans join with as many as 49 or 50 Democrats to approve a bipartisan energy bill containing a robust title of energy tax incentives and revenue raising offsets. The advantage of this hybrid approach is that Congress has to approve one bill instead of two. However, as the negotiations pick up GOP votes by accommodating their interests in conventional energy, they may lose the votes of the more progressive, climate-minded Democrats. Also, the inclusion of a tax title opens pandora’s box for a bitter partisan back and forth exchange over the contents and revenue offsets, which could imperil the bill. And finally, to obtain more than ten Republican votes the bill likely must have either the passive or active support of the Senate Republican Leader, a canny strategist who is not likely to facilitate a big legislative success story and subsequent positive bump in the polls for congressional Democrats at a time when they are believed to be on the ropes politically. If a glorified highway bill split the GOP in an odd year, and a bipartisan competition bill is proving to be a challenge, the idea of a late-breaking energy package outside the immediate context of Ukraine fallout moving via regular order is hard to imagine in the leadup to a heated midterm election.
BBB Spark: The Bipartisan Gang of X works diligently to get to yes on a big energy package, but in the end fail for the above noted reasons. Having publicly exhausted all reasonable opportunities for a compromise bill, Senator Manchin allows himself to be drawn into redrafting BBB, reducing the revenue offsets, providing for some deficit reduction, eliminating progressive priorities like the expanded Child Tax Credit (CTC) and other contested social spending measures, and the bill is approved by the House and Senate on party-line votes. We continue to believe this is a possible outcome but note that use of a reconciliation bill will possibly exclude some of the energy policy ideas currently being floated due to the operation of the Byrd Rule in the Senate. Also, it may require some adroit coordination to prevent congressional progressives from blowing up the deal, and it will also require clever drafting to ensure that Sen. Manchin’s desire to increase corporate taxes doesn’t create an insuperable schism with Sen. Sinema, who has drawn her own line in the sand over the proposed corporate rate increases.
Bupkis: The bipartisan energy bill process fails after weeks of sincere effort, but in so doing extracts all the oxygen from the room and smothers any remaining chance of moving the Democrats’ budget reconciliation package, the underlying privilege of which expires on September 30, 2022. The unresolved angst over federal energy and tax policy gets unceremoniously postponed until the post-election lame duck period (at the earliest), and taxpayers following the course of the 26 tax credits that expired on December 31, 2021, and the 11 tax credits that will expire on December 31, 2022, become increasingly nervous. This scenario seems to be emerging as the most likely, with the eventual fate of these tax policy items determined by the post-election political incentive structure.
The harried reaction to Manchin's comments this week reflects more commotion than actual motion. The lack of progress and Bartleby-esque repetition of the same rote talking points has shocked previously optimistic Democratic sources and flummoxed their journalistic interlocutors. Very little has actually changed, which is meant less as reassurance than a reminder that things have not been on track for success, and with week one of a make or break stretch now in the rear view there is even less clarity on the horizon. The opening of bipartisan talks is a decidedly negative development on net, a distraction at a time when Dems need to bear down and focus. But as with any legislative enterprise, things sometimes must fall apart before they come back together. The question, as ever, is whether this gut check moves the White House to stop handwringing and send in President Biden to close the deal, or if they risk letting the remainder of his agenda go out with a whimper.
[This is an except from the April 29 PRG weekly reconciliation update. Read the rest of my firm’s reconciliation updates here. And if you like my “Bottom Line” analysis, check out my moderated discussion with my colleague Yasmin Nelson, who pens “The Breakdown” newsletter. Watch on Youtube or listen wherever you get your podcast.]