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Biden Stimulus Plans Face Uphill Congressional Battle

By Alan K. Ota · January 12, 2021, 4:02 PM EST

Congressional Democrats face an uphill battle in their push for an ambitious stimulus measure following up on the bipartisan pandemic response package passed in December, as Republicans call for more time to determine if such legislation is needed. 

Key Democrats are lining up behind President-elect Joe Biden's emerging plan for a broad new stimulus package to be considered early in the new Congress, with measures meant to spur an economic recovery. They are laying the groundwork for negotiations aimed at reaching an agreement with Republicans on a range of tax incentives to help working families and businesses, as both parties look to address the fallout from the novel coronavirus, which causes the respiratory disease COVID-19.

Sen. Chris Coons, D-Del., a close ally of Biden, predicted a big stimulus package would be a top priority for the incoming Biden administration and for congressional Democrats in the new session's first weeks. He said it could become a vehicle for a broad range of incentives for working families and businesses.

"The best argument is the needs and the suffering of the American people. We are nowhere near recovering from this pandemic. We are going to need a lot to help the recovery," Coons told Law360.

A Biden transition spokesman was not immediately available to comment on the administration's plans for trying to advance a big stimulus package in the new Congress.

House Ways and Means Chairman Richard Neal, D-Mass., said last week's mob attack on the Capitol would not affect Democratic lawmakers' tax priorities. He said they would remain focused on working with Biden to advance incentives for working families and other items in a stimulus package to follow up on the tax provisions in the year-end $900 billion pandemic relief package and spending agreement  enacted in December.

Neal said it might take time for such a stimulus measure to come together. "What we just did with the $900 billion, that really goes until mid- to late March. So that gives Joe Biden a chance to do his own assessment during these coming three months. It's likely that we need another round," Neal told Law360.

He said the stimulus package could combine a number of items including tax incentives for working families, such as an expanded child tax credit and incentives for infrastructure investment and renewable energy.

"We've been going for stability and relief. Then we go for stimulus. That's the next thing," Neal said.

Sen. Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee, said he also would be pushing for an ambitious stimulus package soon after Biden takes his oath of office on Jan. 20. He predicted the package would be more sweeping than the 2009 stimulus measure known as the American Recovery and Reinvestment Act, which contained tax cuts for families and businesses and incentives for infrastructure and renewable energy.

"Democrats cannot take their foot off the gas too soon. We need to respond to all the needs long term," Wyden told Law360. He is in line to become the Finance Committee's chairman after Democrats cemented a Senate majority by sweeping two Georgia runoff elections.

On the other side, key Republicans have pushed back against an early agreement on a new stimulus package, arguing for more time to evaluate the impact on the economy both of COVID-19 vaccines and of relief measures enacted last month.

Sen. Mike Crapo, R-Idaho, the top Republican on the Finance Committee, said the emphasis early in the session should be on determining whether there is a immediate need for more incentives for the hospitality industry and other business sectors hurt by the pandemic. He made clear he was not convinced that longer-range stimulus measures such as incentives for infrastructure and renewable energy should be part of the negotiations.

"We shouldn't turn a COVID relief bill into something that goes into other areas," Crapo told Law360.

He said he would be interested in hearing pitches for incentives for businesses in certain industries "where the assistance has not reached them," including hotels and restaurants. Crapo has replaced former Finance Chairman Chuck Grassley, R-Iowa, who faced a GOP conference term limit at the end of the last session, as the top Senate GOP tax writer.

As part of the latest pandemic aid package, lawmakers agreed to provide 100% business meal deductions — up from 50% — for two years to help restaurants. Now they are weighing other proposals to aid the hospitality industry, including incentives for tourism and for manufacturers of personal protective equipment and other items important for national security.

For their part, several senior Democrats said there would be a strong drive to advance incentives for working families. For example, they have been pushing to expand the $2,000 child tax credit by making it fully refundable and potentially increasing the credit amount to $3,000. And they have pushed for a broader earned income tax credit for workers without children and for expanding the child and dependent care credit to cover 50% of employment-related care expenses instead of 35%.

In naming several new members of his economic team Friday, Biden made the case for stimulus legislation without revenue-raising offsets or spending cuts to cover its cost.

"With conditions like the crisis today, especially with such low interest rates, taking immediate action — even with deficit financing — is going to help the economy long term and short term," Biden said.

House Budget Committee Chairman John Yarmuth, D-Ky., told Law360 that Democratic leaders had not made a decision on whether to try to move a stimulus package in a potential filibuster-proof reconciliation bill.

Such a bill could pass the Senate by simple majority vote after challengers Jon Ossoff and Raphael Warnock defeated two Senate GOP incumbents in the Georgia runoff elections. As a result of those victories, the Democratic Caucus will have 50 members and could pass a reconciliation bill, with a potential decisive vote by Vice President-elect Kamala Harris.

But several senior Democrats said they expected Democratic leaders to explore the option of moving a stimulus package as a regular bill, which would require support from a filibuster-proof bipartisan Senate majority to win passage.

Frank Clemente, executive director of Americans for Tax Fairness, a coalition of groups favoring liberal tax proposals, said he expected Democrats would settle on a plan for moving the stimulus package as a regular bill and try to build a bipartisan coalition of supporters.

"I think they will try to get a stimulus bill done through regular order. With the economy having crashed, it's an emergency, and the smart thing to do is not pay for the stimulus and to use deficit financing, and look to build consensus support," Clemente told Law360.

While Democrats explore potential vehicles for moving incentives for working families and other priorities, several Republicans said they would examine proposals for business incentives, including refundable business credits. They have also signaled support for proposals to make permanent some temporary business incentives in the 2017 Tax Cuts and Jobs Act, including full expensing for equipment and qualified business property, which will be phased down for four years starting after 2022 and eliminated after 2026.

Rep. Kevin Brady, R-Texas, ranking member on Ways and Means, said he would be promoting items from a House GOP tax plan developed in the last Congress and would look to make parts of the Tax Cuts and Jobs Act permanent, including temporary individual tax cuts, which expire after 2025.

Brady told Law360 he also would push for a proposal to provide a tax credit of 10.5% of the net income of domestic makers of drugs, medical devices and biological products, effectively halving the 21% corporate tax rate.

"We will work with Republicans to make America medically independent from China," Brady told Law360, referring to the proposed domestic medical and drug manufacturing credit.

Democrats have voiced interest in similar incentives aimed at enticing manufacturers to move production of certain goods to the U.S., including Biden's proposal for a 10% advanceable tax credit for investments in domestic manufacturing operations.

Sen. Bill Cassidy, R-La., a member of the Finance Committee and a physician, said he and other Republicans wanted to monitor economic indicators and efforts to fight the pandemic before deciding whether to back a new stimulus package.

"Let's see what happens with the vaccine. Let's see what happens with the infection rate. If the infection rate goes down and the economy takes off, hopefully, we won't need another stimulus," Cassidy told Law360.

Rep. Tom Rice, R-S.C., a member of the Ways and Means Committee, said he also was undecided about whether a stimulus measure was needed, but after last week's mob attack on Congress, lawmakers on both sides might be looking for ways to work together on key issues in the coming weeks.

"I hope that it pulls us together," Rice said.

--Editing by Robert Rudinger and Joyce Laskowski.

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