The Senate Passed a Tax and Infrastructure Bill. Here's What Comes Next.

Senate Majority Leader Chuck Schumer, D-N.Y., hailed as "one of the most significant days in the Senate" the passage Wednesday of Senate Democrats' $3.5 trillion 2022 budget proposal advancing President Joe Biden's tax and economic agenda.

A day before, the Senate passed the $1 trillion infrastructure bill. The Senate Democrats' budget plan was crafted primarily by Senate Budget Committee Chairman Bernie Sanders, I-Vt.

Schumer said Wednesday in a news briefing that he wants to get the reconciliation bill done on Sept. 15.

The two-track strategy, Schumer said, "is moving full steam ahead. When I said earlier this year that we were going to pass both the bipartisan infrastructure bill and the budget resolution before we broke for the August recess, many said it was an impossible task. But Democrats in the Senate are determined, fiercely determined, to move President Biden's Build Back Better agenda forward."

Now, Schumer continued, "we have to continue working at it. I'm pleased that the two-track strategy is right on track."

The bipartisan infrastructure package passed with the support of all 50 Democrats and 19 Republicans.

Schumer relayed that he's met with the chairs of the committees of jurisdiction and that "we're going to be working very hard in the next month to get the reconciliation bill done in September."

The Senate-passed infrastructure bill contains much of Biden's American Jobs Plan's investments, House Majority Leader Steny Hoyer, D-Md., said in a mid-August statement. The Senate-passed budget resolution "is a necessary step as we move toward a budget reconciliation bill that will allow us to implement the American Families Plan," Hoyer said.

House to Vote on Senate Budget Week of Aug. 23

The House, Hoyer said in a "Dear Colleague" letter, will return from recess on the evening of Aug. 23 to vote on the Senate-passed budget resolution and will remain in session until its business for the week is concluded.

As the Committee for a Responsible Federal Budget explains, Biden's Build Back Better agenda consists of two parts: the bipartisan Infrastructure Investment and Jobs Act and a plan to use reconciliation instructions to enact $3.5 trillion of spending and tax breaks, mostly related to family benefits, health care and climate change mitigation.

"The bipartisan infrastructure bill will cost about $400 billion over 10 years, based on Congressional Budget Office (CBO) estimates, which includes indirect increases in highway spending beyond the five-year highway bill," the committee explained in a statement.

Meanwhile, the Senate budget resolution's reconciliation instructions allow a maximum combined deficit increase of nearly $1.75 trillion over 10 years — though lawmakers could borrow less, the committee said. "If these plans were both enacted with the maximum allowed borrowing, it would cost about $2.4 trillion over 10 years, inclusive of $380 billion in interest costs," the committee said.

Hoyer noted that the infrastructure bill, "coupled with the reconciliation package that Democrats are working on to enact the rest of President Biden's American Jobs Plan and American Families Plan, will provide our businesses and our people with the tools to make it in America."

As the Committee for a Responsible Federal Budget explained, Senate Democrats' fiscal 2022 budget plan allows up to roughly $1.75 trillion of new borrowing through the reconciliation process.

The budget resolution contains reconciliation instructions for 12 Senate committees that allow them to increase deficits over the next decade, the committee said.

"Most significantly, the budget resolution would allow over $726 billion of borrowing for the Health, Education, Labor, and Pensions (HELP) Committee and $332 billion for the Banking, Housing, and Urban Affairs Committee."

The Senate Finance Committee is instructed to reduce deficits by at least $1 billion, which would allow the panel to put forward up to $1.8 trillion of spending and tax breaks, the committee said.

The congressional committees are required to submit legislation to the Senate Budget Committee by Sept. 15, though the date is not binding, the Committee for a Responsible Federal Budget said.

Senate's Budget Resolution Details

The Senate Finance Committee is instructed to put forward $1.8 trillion in spending offset by corporate and international tax reform, tax adjustments targeting high earners, IRS tax enforcement, health care savings, and a carbon polluter import fee, Raymond James analysts explained.

An increase in the deduction limit for state and local taxes is also included as part of the instructions, Raymond James analysts said, "formalizing its likely inclusion" in the final reconciliation bill.

"The instructions include a constraint to not increase taxes for incomes below $400,000 (unclear whether this is defined as households or individuals)," the Raymond James analysts said.

The analysts see the final reconciliation package including "fewer health provisions" than proposed.

"Lowering the Medicare age is off the table, despite it being reinserted here in our view," they opined. "We continue to believe that excluding the home and community based services provisions (they can be offset elsewhere), the total health spend will be likely around $400-450B and that will be offset by cuts or new revenue from healthcare accounts."

The most likely offsets, the analysts said, "include repealing the rebate rule (around 130B), cutting Medicare Advantage (we believe 100-150B range at this moment), and lowering prescription drug prices … but we do not believe Medicare negotiation is likely. Other offsets like extending the Medicare sequester are possible."

Greg Valliere, chief U.S. strategist for AGF Investments, said Thursday in his Capitol Notes email briefing that at least two Democrats are expected to demand a final price-tag far below Senate democrats' $3.5 trillion.

"The likelihood of a lower price tag and only modest tax hikes will enrage the Democrats' powerful progressives, led by Alexandria Ocasio-Cortez, [D-N.Y.] who controls a powerful faction. Just how good are Biden's negotiating skills? We'll find out this fall."

Bottom line, said Valliere: "There's so much money at stake — not to mention a dramatic escalation of Big Government — that even a scaled-back package of spending and tax hikes can prevail. But Democrats on Capitol Hill are telling us that it's far too early to declare victory."