Democrats to Move "Human Infrastructure" Bill Through Budget Reconciliation

On July 13, Senate Majority Leader Chuck Schumer (D-NY) announced that Senate Democrats have agreed to a so-called “Human Infrastructure” proposal that would cost nearly $3.5 trillion spread over 10 years. This figure would combine Democratic budget proposals on education, sustainability, and welfare, and increase spending for childcare, climate change, education, homecare and housing. No Republican in either the House or the Senate is expected to support the plan. Therefore, if the Democrats are to pass this package, they will have to go it alone despite their slim majority of 3 seats in the House and a tied Senate, with Vice President Kamala Harris being the tie-breaking vote. Under the Democratic plan, the spending proposal will be offset by tax increases on corporations and wealthy individuals, with many powerful constituencies all but certain to oppose the increases.

In a successful effort to keep the American economy from collapsing during the COVID-19 pandemic, lawmakers spent more than $6 trillion. The money, which went to programs that included forgivable loans to small businesses, increased unemployment assistance, direct payments to individuals, relief to industries, and more kept the economy buoyant and credited with making the quick and strong economic recovery possible.

However, almost all that spending was paid for with borrowed money and federal debt exploded to the largest debt-to-GDP ratio that has existed since World War II as a result. The country was fortunate that record-breaking low-interest rates had softened the blow of financing the deficit. However, some economists argue that the low rates will not last forever, and a significant portion of Treasury obligations will have to be refinanced over the next five years, most likely at higher rates.

Democrats see their $3.5 trillion proposal to combine all their initiatives into one package as a compromise from their initial $6 trillion proposal. The plan will consist of numerous provisions that have been on the Democrats’ wish list for years. We have so far only had glimpses of the proposal, but it is expected to include:

• An extension of the child tax credit that was passed in COVID-19 relief funding that allows for the credit to be given without any employment or employment-seeking requirements
• Tax credits for investments into clean energy and electricity with the goal of reducing carbon emissions by 50% throughout the entire economy
• Universal Pre-K for children at the age of three and four and additional subsidized childcare
• An expansion of Affordable Care Act subsidies and Medicare benefits
• Paid family and medical leave

To put the proposal into perspective, this $3.5 trillion price tag would only be a portion of the overall Fiscal Year 2022 budget, even though the entire budgets of fiscal years 2009 through 2017 only ranged between $3.4 trillion to $4 trillion. Therefore, if adopted as it is written, overall outlays of the federal government would be among the highest in American history. 

More moderate Democrats, including Senators Joe Manchin (D-WV) and Senator Jon Tester (D-MT), have voiced concerns over additional debt, wanting to see any additional spending paid for with revenue increases. As a result, there have been proposals from the Biden administration and Congressional Democrats to raise revenues through increases in taxes on the highest income earners, increased capital gains taxes for those making more than $1 million per year, corporations, and more. Likely, any such increases could only be approved through the budget reconciliation process, where budget matters cannot be filibustered and can pass the Senate with a 50-vote threshold rather than the standard 60 votes.

No amount of compromise is likely to garner Republican support. Democrats are nonetheless expected to compromise between their moderate and progressive wings by paring down the spending programs to keep their moderate members on board. At some point, more progressive Senators may threaten to walk away from any bill that does not fully fund their priorities. Moderates, however, hold almost all the cards, as nothing can happen without their support. Both the House and Senate are more likely than not to have Republican majorities after the 2022 Congressional elections.