ECONOMY AND POLICY
November 22, 2021
Washington Policy Analyst Ed Mills details notable exclusions and next steps for the legislation.
The House passed the $1.7 trillion “Build Back Better” (BBB) reconciliation bill on Nov. 19 with a vote of 220-213, sending the bill to the Senate for final revisions. Passage by Democrats in the House with key moderate and progressive votes increases the chances of the bill’s approval sometime in December. Remaining work includes adjustments to policy provisions in the House version of the bill (tweaking or outright removal), final clearance from the Senate parliamentarian on allowable provisions under reconciliation rules, and a second vote in the House to clear the Senate’s version of the bill.
Budget talks and action on the debt limit are complicating factors on the ultimate timing, and the ten “in session” days remaining for Congress through the rest of the year create an additional time crunch, although this can be extended. We see the Dec. 15 date indicated by Treasury for the ability of the U.S. to finance government operations under the debt limit and the end of December holiday recess (historically a force for finalization of year-end business) as likely December catalysts for Congress to get a reconciliation bill across the finish line.
Rising odds of final passage
The process in the Senate still poses difficulties for Democrat party leaders to keep the bill on track, and the remaining policy issues are some of the most contentious – such as SALT, immigration, paid leave and drug pricing. Volatile headlines on policy changes are likely in the coming weeks as the Senate works on the bill.
We ultimately see the bill as on track, and policy reservations among Senators are likely to follow the path of moderate Rep. Stephanie Murphy’s (D-FL), who announced support for the BBB with the caveat that reservations on the overall size and policy are outweighed by the “badly-needed investments” contained in the bill.
What’s not in the House bill?
No changes to the corporate, capital gains, long-term dividend, estate, or individual tax brackets are included in this legislation. Nor is the proposed changed to the step-up in basis for assets transferred after death. Individuals with income above $10 million annually will see new surcharges and a new corporate minimum tax of 15% will be imposed. SALT taxes would have a new $80,000 maximum deduction (up from $10,000), but this is subject to ongoing negotiations.
With the new Dec. 15 debt limit date, reconciliation remains an option for debt limit action. There is growing openness among lawmakers on using the reconciliation process to either include the debt limit provision in the broader reconciliation bill or for Democrats to raise the debt limit on a separate party-line vote. Inclusion in the reconciliation package could further increase the leverage of Democratic leaders to win the support of hesitant lawmakers, driven by urgency on the debt limit. If debt limit remains on a separate track, we continue to see the pre-holiday period in December as the natural point for Congress to finalize and pass the bill.
Overall, uncertainty on the path forward with key aspects of D.C.’s year-end agenda remains, but factors opposing the bill’s final passage continue to be minimized.