Increasing tension with the progressive wing of his own party is causing headaches for President Joe Biden and his staff, complicating efforts to get portions of his domestic agenda through Congress. Of late, dissatisfaction with the Senate’s bipartisan infrastructure legislation among many Democrats in the House of Representatives, coupled with a failed effort to extend a residential eviction moratorium which ended on July 31, have opened up a rift between the White House and many congressional Democrats who count themselves as members of the Congressional Progressive Caucus.
With only a three-seat vote margin in the House and an evenly split Senate, and with unified Republican opposition to much his agenda, Biden needs to ensure his legislation garners the support of almost all Democrats for any of it to be passed by Congress and enacted into law.
The Senate’s $1 trillion bipartisan Infrastructure Investment and Jobs Act, being debated this week and supported by the White House, provides spending on traditional infrastructure investments on roads, bridges, ports, and waterways. The $550 billion in new spending would also support many investments long-championed by progressives, including mass transit, rail, expanding broadband internet service, and measures to help communities deal with the effects of climate change.
Yet as one news story put it, “liberal activists found themselves caught between deflated and enraged.” This was in large part because measures to address climate change included in Biden’s original American Jobs Plan infrastructure proposal, which had also been applauded by progressives, were left out of the Senate bipartisan infrastructure deal.
Frustration among many Democratic progressives became outright anger with the White House when the president failed to issue an executive order extending a national eviction moratorium, resulting in its expiration at the end of July. The White House stated it had no legal authority to extend the moratorium, citing a recent Supreme Court decision, requiring that Congress itself would have to pass enabling legislation. The late finger-pointing between congressional Democrats and the White House was symptomatic of the rising tension. As Representative Ro Khanna (D-CA) said on Monday, “Since the president’s term [started], I haven’t seen this much frustration – anger – in the progressive caucus.” The White House buckled under the progressive pressure, and issued an extension while at the same time openly questioning its constitutionality.
Of course, congressional Republicans who have been through their own civil wars and “circular firing squad” sessions during the presidency of Barack Obama are no doubt enjoying the challenges faced by Democratic congressional leadership in managing their caucus. But Biden is facing a possible revolt within his own party in Congress, not the opposition party. While most Americans are too young to remember the travails of President Jimmy Carter’s administration during the 1970s, Biden surely does since he was in Congress at the time. Carter spent much of his term at odds with the liberal wing of his party, leading to a Democratic schism and a challenge from then Senator Ted Kennedy which made Carter the first incumbent president since Herbert Hoover to lose his re-election.
Having lived through this history, Biden and his top advisors will try to address many of the progressives’ goals through the budget reconciliation process and the $3.5 trillion budget resolution that is slated to be voted on before the Senate leaves on its August recess. A budget reconciliation bill is not subject to senate filibuster, meaning Democrats, who control the senate, can pass the legislation by a simple majority vote. It gives the White House the ability to pursue many of the social spending programs proposed earlier this year in Biden’s American Families Plan, such as paid family and medical leave, universal pre-k, free community college, expanded child care and tax credit programs, which are integral to the progressive agenda. Priorities not included in the bipartisan infrastructure package, such as robust funding for electric vehicles, could also be added.
Reconciliation gives Democrats the ability to finance this increased spending by raising taxes on capital gains income, higher-income earners, estates, and businesses. Among the issues of importance to NAIOP members and commercial real estate in this debate are tax deferral for Section 1031 like-kind exchanges, which Biden has proposed to restrict to transactions below $500,000, essentially eliminating their use in commercial real estate. Also at risk is capital gains tax treatment for real estate carried interests, the elimination of which has become a hot-button issue for many on the progressive left.
The details of the reconciliation bill will be the subject of intense negotiations over the next few months, and NAIOP and its real estate allies have been and will continue to oppose provisions harmful to the industry. The debate will be between progressives who seek transformational policy changes in keeping with their agenda, and those centrist Democrats from swing districts who could lose their seats if they are seen as too extreme, with the White House trying to keep the negotiations from coming off the rails.
This is indeed a tall order, since centrist and moderate Democrats in the senate, such as Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have already said they do not agree with the size of the proposed budget resolution, although both are willing to let the process go forward. But the White House is keenly aware that many progressives are willing to deny the president their support if their needs aren’t met. Placating alienated House progressives and convincing them to support what is legislatively possible will be a top priority for the White House over the coming months.
Aquiles Suarez is Senior Vice President for Government Affairs at NAIOP.