Why We Remain Cautiously Constructive on FY22 Reconciliation

Why We Remain Cautiously Constructive on FY22 Reconciliation

By Maxwell Reale

February 23, 2022

History tells us there will be a successful Senate vote at some point this year on Democrats’ FY22 Reconciliation bill (“Recon 2”) though the timing and contents of that effort will remain in flux until April at the earliest. Since the modern budget reconciliation process was created in 1974, twenty-eight reconciliation bills have been introduced in Congress. Before the introduction of Recon 2, all twenty-seven previously introduced reconciliation bills received votes in the Senate, with twenty-six of them eventually passing Congress: a 96% success rate.

Senior Democratic members are likely to coalesce around notions of legacy building in pivoting to a smaller Recon 2 package.

The caveat to Congress’ baseline success in passing prior reconciliation bills is the unprecedented nature of the current legislative environment. Despite their majority in Congress, Democrats are approaching the 2022 mid-terms with dwindling support and enthusiasm as voters blame them for the daily frustrations of COVID-19 restrictions and rising prices. And within the caucus itself, Democrats blame leadership for allowing ego and overpromising to derail partisan priorities on climate and healthcare.

Compounding these external and internal challenges to success on Recon 2 is the shrinking legislative window for Senate Democrats. While Democrats have until September 30th to pass Recon 2, the political and logistical complications of mid-term election campaigns set late June as a more realistic deadline for passage. Even the slightest delay in the other legislative to-dos will weigh on resurrecting the momentum for Recon 2.

The House and Senate return to the Capitol on February 28th to attend the State of the Union on March 1st. Congress will have until March 11th to pass a government funding bill or risk further delaying other legislative matters. Once a government funding bill is passed, we expect Democrats to spend the remainder of March – and likely into early April – confirming President Biden’s Supreme Court nominee before pivoting to a final push on Recon 2.

Beyond the scheduling complications of passing Recon 2, Democrats’ efforts could be stymied by a myriad of factors beyond their control. Inflation could remain high or worsen, eroding support for incremental government spending. War in Ukraine could distract the administration and Congress. Delay tactics by Republicans – such as not attending the Senate Judiciary Committee hearing on said nominee in protest – could halt Biden’s Supreme Court selection. Unexpected personal or health matters could temporarily reduce Democrats’ 50 seat majority. Poor strategy by Democratic leadership could fail to appease moderate concerns with a new reconciliation bill. Or ideological grandstanding by more progressive caucus members could sink a Recon 2 package designed to appease more moderate members. The list of reasons for failure on Recon 2 goes on.

Nevertheless, we remain cautiously constructive on a Recon 2 bill passing Congress before July 2022, though we are adjusting our odds of a bill passing downward from 70% to 65% to reflect Democrats’ mounting obstacles.

While precedent plays a role in our outlook for Recon 2, there are several other reasons we expect a deal to be reached this year. Democrats already recognize common deal space in healthcare and energy that can be built upon. Apart from existing areas of agreement, Recon 2 provides a vehicle for other legislative priorities such as COVID-19 relief funding, domestic manufacturing support, deficit reduction, and anti-inflation messaging.

Moreover, we believe senior Democratic members are likely to coalesce around notions of legacy building in pivoting to a smaller Recon 2 package, while desperation will force acceptance of incremental gains over ideological purity from progressives. Meanwhile, the pressure to cement credibility – and prevent Democrat campaign promises in 2022 and beyond from ringing hollow – will override the safety of inaction throughout the entire Democratic caucus. Finally, we predict the triumphant culmination of the Supreme Court nomination process in April will galvanize Senate Democrats, lending new energy to the Recon 2 process. That is, unless poor leadership strategy, thin margins, or Republican opposition derail that plan as well.

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