The House and Senate reconvened on Monday at noon and 3 p.m., respectively. 

What to Watch

President Biden delivered his first State of the Union address last Tuesday, during which he outlined the contours of a slimmed down version of the Build Back Better Act (BBBA). His top priorities include drug pricing and healthcare reform, child care assistance, home and community-based services, affordable housing and clean energy. 

The president maintained that the package would be offset by ensuring wealthy Americans and corporations “pay their fair share,” imposing a 15% minimum tax on corporations and implementing the Inclusive Framework negotiated by the Organization for Economic Cooperation and Development. 

Click here for the complete Brownstein analysis of the State of the Union address. 

In response to the items President Biden listed, longtime holdout Sen. Joe Manchin (D-WV) said the president went “a little bit far.” Later in the week, Manchin detailed what he would like to see in an updated BBBA. Speaking with reporters, he said, “the revenue producing [measures] would be taxes and drugs. The spending is going to be climate,” adding that " the social issues, we basically have to deal with those.” Manchin also wants to partially roll back portions of the Tax Cuts and Jobs Act by increasing tax rates on higher-income taxpayers and corporations, saying recently that he wants to “just fix the tax code.” Finally, he wants half the revenue raised to fight inflation or reduce the deficit. 

As BBBA interest reignites, lawmakers are facing another appropriations deadline. The current continuing resolution (CR) will expire on Friday, March 11. If Congress fails to enact an omnibus appropriations measure or another CR, the government will be forced to shut down. 

Appropriators have reportedly made progress on a 12-bill omnibus and must advance the measure this week. Tax lawmakers aim to attach a bipartisan retirement security measure to the omnibus. Both House Ways and Means Committee Chair Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) suggested last week that passing the Securing a Strong Retirement Act, or “SECURE 2.0,” alongside the omnibus would be ideal. The retirement security has already passed Ways and Means with unanimous support, and according to Neal, he is “looking at options to get this done in the next few days.”

However, the inclusion of a new supplemental package could complicate matters. The $32 billion emergency supplemental contains $10 billion in military and humanitarian assistance for Ukraine and $22 billion to replenish depleted COVID-19 programs. While providing U.S. support to Ukraine enjoys overwhelming bipartisan support, a disagreement about the source of the funding has caused Republicans and Democrats to clash. The White House could request additional Ukrainian assistance as the war unfolds. According to Office of Management and Budget Acting Director Shalanda Young, she expects “additional needs may arise over time” in Ukraine. The COVID-19 funding has also proven controversial since some Republicans are concerned about potential unspent COVID-19 funds.  

The war between Russia and Ukraine will dominate Capitol Hill again this week. The congressional tax committees are exploring potential responses. Senate Finance Committee Chair Ron Wyden (D-OR), for example, last week introduced legislation, the No Most Favored Nation Trading with Russia Act, that would revoke Russia’s Permanent Normal Trade Relations status and allow the president to increase tariffs on Russian products. Senate Finance Committee Ranking Member Mike Crapo (R-ID) endorsed the bill later in the week, increasing its odds of passage. 

On the Floor

The House is scheduled to vote on an omnibus appropriations package and a supplemental spending package that contains aid for Ukraine and replenishes COVID-19 programs. House Democrats are scheduled to travel to Philadelphia on Wednesday for a policy retreat. 

The Senate will vote on the Postal Service Reform Act, which has already passed the House, and could potentially vote to confirm Maria Pagan, President Biden’s nominee to be deputy U.S. trade representative. 

In Committee

House Financial Services Committee

On Tuesday, the full committee will hold a hearing entitled “The Inflation Equation: Corporate Profiteering, Supply Chain Bottlenecks and COVID-19,” during which the following witnesses will testify:

• Demond Drummer (managing director equitable economy, PolicyLink)
• Tyler Goodspeed (Kleinheinz fellow, Hoover Institution)
• Rakeen Mabud (chief economist and managing director of policy, Groundwork Collaborative)
• Sandeep Vaheesan (legal director, Open Markets Institute)
• Mark Zandi (chief economist, Moody’s Analytics)

Inflation has proven a persistent problem for months, causing some lawmakers to reverse course as to whether it is transitory. During his State of the Union address last week, President Biden argued that his Build Back Better Act would combat inflation. He also suggested that the Federal Reserve has considerable influence on inflationary pressures through its monetary policy tools. In this week’s hearing, members are instead expected to focus on how supply chain bottlenecks and “corporate greed” in various industries contribute to recent inflationary spikes. 

Senate Banking Committee

The full committee will hold a hearing entitled “Examining Mandatory Arbitration in Financial Services Products,” during which the following witnesses will testify: 

• Remington Gregg (counsel for civil justice and consumer rights, Public Citizen) 
• Todd Zywicki (George Mason University Foundation professor of law, Antonin Scalia School of Law)
• Myriam Gilles (Paul Verkuil research chair and professor of law, Cardozo School of Law) 

In mandatory arbitration, parties are compelled to solve disputes through mediation instead of a court of law. Members could discuss issues related to a bill that passed the House Financial Services Committee last year but has since stalled in the Senate. That bill, the Investor Choice Act, would prohibit broker-dealers and investment advisers from including mandatory arbitration in customer agreements. The Senate companion was introduced by Sen. Jeff Merkley (D-OR) and is cosponsored by committee members Sens. Sheldon Whitehouse (D-RI), Elizabeth Warren (D-MA) and Catherine Cortez Masto (D-NV). 

Tax Committees

Neither the House Ways and Means Committee nor the Senate Finance Committee have any hearings scheduled this week. 

Tax and Finance Rewind

In case you missed it…

• Chair of the Board of Governors of the Federal Reserve System Jerome Powell testified again before the Senate Banking Committee last week, this time to present the central bank’s Monetary Policy Report. During his testimony, Powell discussed how the Federal Reserve can combat inflation, saying it is “attentive to the risks of potential further upward pressure on inflation expectations and inflation itself from a number of factors.” Please contact a member of the Brownstein team for a complete readout of the hearing. 
• The Congressional Budget Office (CBO) sent a letter last week to Senate Finance Committee Ranking Member Mike Crapo (R-ID) explaining the budgetary effects of higher inflation and interest rates. 

Upcoming Activity

Below is a complete list of all tax and financial services events in Congress, the administration and private sector for the upcoming week. 

Private Sector

Monday, March 7

American Bankers Association
Washington Summit 

Wednesday, March 9

Peterson Institute for International Economics 
Trade-offs of Central Bank Digital Currencies and the Digital Euro Project