Senate Democrats Approve $3.5 Trillion Budget Blueprint

August 10, 2021

Overnight, the Senate passed the Democrats $3.5 trillion budget resolution by a vote of 50-49. The budget resolution provides instructions to the Senate committees to begin crafting a reconciliation bill that would address climate and social initiatives, including subsidized child care, expanded Medicare and paid family and medical leave benefits.

Adoption of the budget measure now unlocks the reconciliation process, which empowers the majority party to eventually clear the final bill with just 51 votes in the Senate, rather than the usual 60-vote hurdle. In a letter sent Monday morning, Majority Leader Chuck Schumer (D-N.Y.) told Democrats that the goal is for committees to write legislation to fulfill the spending targets by Sept. 15.

The Senate conducted a 15-hour “vote-a-rama” prior to passage and considered 47 amendments. During the debate, Senate Republicans—with the support from some moderate Democrats—were able to win votes on a number of non-binding amendments on volatile political issues, including Critical Race Theory, fracking, inflation, the Green New Deal, police funding, sanctions on Hamas, taxpayer funding of abortion and opposing tax increases on any American making less than $400,000 annually, among others. When the House considers the budget resolution the week of Aug. 23, they can accept these provisions, or it can move to strike the language and send the revised resolution back to the Senate.

The budget framework includes instructions to committees that include specific spending targets. Major elements include:

  • $726 billion for the Health, Labor, Education and Pensions Committee with expansive instructions to address some of Democrats’ top priorities. Those areas include universal pre-K for 3- and 4-year-olds, child care for working families, tuition-free community college, funding for historically black colleges and universities and an expansion of the Pell Grant for higher education.
  • $107 billion for the Judiciary Committee, including instructions to address “lawful permanent status for qualified immigrants.”
  • $135 billion for the Committee on Agriculture Nutrition and Forestry, including instructions to address forest fires, reduce carbon emissions and address drought concerns.
  • $332 billion for the Banking Committee, including instructions to invest in public housing, the Housing Trust Fund, housing affordability and equity and community land trusts.
  • $198 billion for the Energy and Natural Resources Committee, including instructions largely related to clean energy development.

The Senate budget resolution’s reconciliation instructions require the Senate Finance Committee to raise as much tax revenue as needed or reduce other budget outlays to offset the cost of the tax relief and spending proposals within the committee’s broad jurisdiction. The Senate Finance Committee is expected to consider revenue-raising proposals offered by President Biden that include a corporate rate increase, international tax changes, an increase in the top ordinary individual income tax rate, and changes to the taxation of investment income.

The Finance Committee also may consider additional revenue-raising proposals offered by members of Congress. For example, Finance Chairman Ron Wyden (D-Ore.) recently released draft bills that (1) limit and modify the Section 199A 20 percent deduction for certain pass-through business income; (2) modify the treatment of derivatives and expand the scope of the mark-to-market rule; and (3) modify the treatment of carried interest income by investment fund managers and end the deferral of certain tax payments. 

Democrats plan to use special budget rules to pass new spending without the threat of a Republican filibuster in the Senate. Republicans have broadly rejected plans for additional spending and have said Democrats are threatening chances of bipartisan support for other critical economic issues, such as increasing or suspending the debt limit.