Senate Democrats develop broad spending deal

On July 13, 2021, Senate Democrats announced a broad agreement on a framework for a $3.5 trillion spending deal to fund President Joe Biden’s infrastructure proposals. This agreement appears to encompass much of the administration’s two proposals, the American Jobs Plan and the American Families Plan, announced earlier this year. No legislative text currently exists as details, especially the tax provisions intended to pay for the bill, are still being negotiated.

This package is separate and distinct from the almost $1 trillion bipartisan physical infrastructure bill being negotiated between a group of 22 Republican and Democrat senators and the White House. The bipartisan package includes funding for roads, bridges, waterways and airports as well as broadband, electricity and electric vehicle charging stations.

Prospects for passage

Since there is already a bipartisan infrastructure proposal in the works, it is unlikely there will be any Republican support for this larger spending deal. Generally, legislation requires 60 votes to pass in the Senate while using the budget reconciliation process requires only 50 votes (plus that of the vice president to break the tie). As a result, Senate Majority Leader Chuck Schumer has indicated his intention to pass this deal using the budget reconciliation process for the fiscal year beginning Oct. 1, 2021. However, it remains unclear whether the proposed plan will garner support from moderate Democrats or if it would meet the Senate parliamentarian’s budget criteria.

Consequently, we expect significant negotiations among Democrats to forge a passable compromise. Sen. Schumer stated his wish to bring a final bill for a vote on the Senate floor before the Aug. 9 summer recess. Given the scarcity of details of both the spending proposals and the funding mechanisms, the White House fact sheets remain the best source to identify the spending priorities and potential tax changes.

Spending priorities

The $3.5 trillion includes funds for Medicare expansion and for policy initiatives in child care and college education. Moreover, renewable energy priorities, such as clean energy technology and research projects and jobs, appear to be a significant beneficiary in the plan. According to the White House, elder care services and housing, electric automobiles and nationwide charging stations, lead pipe replacement, water infrastructure, public school upgrades, workforce trainings and modernizing veteran hospitals will also be highlighted.