Democrats undecided on full or partial offsets for massive budget bill

Schumer 'hopeful' for agreement as Budget Democrats discuss topline spending, revenue targets

Senate Majority Leader Charles E. Schumer will need 10 Republicans, in addition to all 50 Democrats, to vote for the motion to begin debate on the House infrastructure bill before he can offer any amendments. (Caroline Brehman/CQ Roll Call)
Senate Majority Leader Charles E. Schumer will need 10 Republicans, in addition to all 50 Democrats, to vote for the motion to begin debate on the House infrastructure bill before he can offer any amendments. (Caroline Brehman/CQ Roll Call)
Posted July 13, 2021 at 6:48pm

Senate Democrats discussed Tuesday whether to fully offset trillions of dollars in new spending in a budget reconciliation package, a request from centrist Democrats that Majority Leader Charles E. Schumer said the caucus has yet to resolve but “is doable." 

The discussion of offsets reflects a divide among centrist Democrats who want to avoid adding more debt and progressives who favor some deficit financing for one-time spending on things like infrastructure and climate programs that could produce long-term economic benefits. 

“One of the things that was presented in our caucus is that we could fully pay for the bill,” Schumer, D-N.Y., told reporters after the Senate Democratic Caucus’s weekly Tuesday lunch. “That’s one of the options that is on the table. But that is doable, absolutely.” 

Using the budget reconciliation process allows Democrats to avoid a Republican filibuster, but they will need to keep all 50 members of their caucus on board to pass a big spending and tax bill. 

Key centrist Sen. Joe Manchin III reiterated Tuesday that he is against further government borrowing.

“Everything should be paid for. How much more debt can y'all handle?” the West Virginia Democrat told reporters. 

But Manchin did not go as far as to say he’d vote against a reconciliation package if it wasn’t fully offset, signaling some flexibility for compromise with his more progressive colleagues.

“I’m not a hard 'no' on anything. I'm just saying that I like to find ways to pay for things,” he said. 

Deficit hawks' push got a lift of sorts with new inflation data out Tuesday.

The Bureau of Labor Statistics reported that the Consumer Price Index rose by 5.4 percent in the 12 months ending in June, the largest such increase since August 2008. Stripping out volatile food and energy prices, the index rose by 4.5 percent over the past year -- the biggest boost since November 1991.

With higher inflation comes lower demand for fixed income investments, like bonds sold by the U.S. Treasury to cover borrowing costs. When bond prices fall, interest rates rise -- which in turn makes it more expensive for Treasury to issue debt. And yields on a range of longer-term Treasury securities jumped Tuesday after the inflation figures were released, particularly after weak demand for 30-year Treasurys at an auction later in the day.

Schumer seemed optimistic after Tuesday’s lunch that his members won’t try to extract too many demands in a reconciliation package because of the need to keep the caucus unified in order to pass something.

“I said there’s importance to unity and don’t draw lines in the sand,” he said. “And everybody agreed.”

“We all know that the worst outcome for the American people is for us to do nothing -- I think every Democratic senator understands that,” Schumer added.

‘Hopeful’ for budget agreement

The full caucus discussion on reconciliation will likely help guide Schumer and Budget Committee Democrats as they meet Tuesday night, following a two-hour meeting Monday evening, to try and come to an agreement on topline spending and revenue targets.

[Budget blueprint for massive spending package starts to take shape]

Those figures will be used to write reconciliation instructions in a fiscal 2022 budget resolution Democrats want to adopt this month. The committees of jurisdiction will then take their instructions and flesh out the policy details into actual reconciliation legislation Democrats hope to pass sometime this fall.

“The Budget Committee will meet tonight. I’m hopeful that we can come up with an agreement,” Schumer said. 

Budget Chairman Bernie Sanders, I-Vt., however, declined to say whether he expected his committee members to reach consensus during Tuesday’s meeting. 

“We're working on it,” he said.

Democrats are focused solely on finding consensus on spending and revenue targets in their own party, but whatever they decide could have broader implications for a separate $579 billion bipartisan infrastructure bill that is being drafted to move on a parallel track.

Several Republicans have expressed hesitancy to support the bipartisan bill because it would make it easier for Democrats to pass more spending through reconciliation.

“The issue of linkage with reconciliation I think is still a big one too, and whether or not voting for an infrastructure bill enables the subsequent reconciliation bill, which is going to have the massive spending ... and the tax increases that our members are going to be very opposed to,” Senate Minority Whip John Thune, R-S.D., told reporters after the Senate GOP Conference lunch Tuesday.

Whatever assurances centrist Democrats like Arizona’s Kyrsten Sinema, who led negotiations on the bipartisan bill, Manchin and others can provide about their plans to place limits on reconciliation would be helpful to winning Republican support, he  said. 

“If they have a hard ceiling on what they would vote for reconciliation-wise or what they would vote for tax increase-wise, that they would be willing to make public or something like that, all that helps,” Thune said. “But the assumption is at this point that notwithstanding what the president said about not having these linked, that Schumer and [Speaker Nancy] Pelosi are still talking about that linkage. And I think that's problematic for a lot of our members.”

Debt limit, immigration decisions 

As Democrats make decisions about what to include in a reconciliation package, there are a handful of policy areas where they have to tread carefully for political and vote-counting reasons. 

One of those is the debt limit. Democrats have not decided whether to include reconciliation  instructions for raising the debt limit, the current suspension of which expires July 31, according to Sanders.

[Democrats mull keeping debt limit out of budget reconciliation]

Raising the debt limit through reconciliation is probably Democrats' best shot to ensure Republicans can’t extract concessions for the routine act of ensuring the government can pay its debt obligations. But then they’d be out on their own taking a difficult political vote that the GOP could use to attack Democrats in the 2022 midterms. 

The Budget Committee Democrats did not discuss the debt limit in their meeting with Schumer Monday, and it was unclear if it would come up when they meet again Tuesday evening. 

Another controversial policy issue some Democrats are looking to include in a reconciliation package is an immigration overhaul that would provide a path to citizenship for millions of undocumented immigrants. Republicans have already hammered Democrats for pushing “amnesty” without legislation to beef up border security and strengthen asylum laws. 

Senate Budget Committee member Alex Padilla, D-Calif., said on a press call with immigration advocates that it’s “very realistic” for immigration provisions to be included in the reconciliation package this fall so long as the Senate parliamentarian rules them in compliance with the rules governing the budget reconciliation process.

“Thus far, my understanding and expectation is that immigration is included in that reconciliation package,” he said. “We just need a few important things to fall in place.”

Senate Judiciary Chairman and Democratic Whip Richard J. Durbin, D-Ill., told reporters he is still working with Republicans to try to pass an immigration overhaul through regular order, “but if the parliamentarian gives us a green light, I’ll be looking to reconsider.” 

Suzanne Monyak and Jennifer Shutt contributed to this report.