The passage of President Biden’s sweeping economic plan could shorten the time frame in which Congress must act to avert a debt default even as Democrats remain divided over how to raise the borrowing limit, The Hill reported. The U.S. last week exhausted the $480 billion in new debt authorized by a bipartisan deal last month and may need to raise or suspend the ceiling shortly after December begins. The Treasury Department has already begun taking “extraordinary measures” to avert a default, but Treasury Secretary Janet Yellen warned it may not be able to do so beyond Dec. 3. While budget experts say the Treasury Department should be able to keep the U.S. solvent beyond that date, a provision of the bipartisan infrastructure deal could accelerate that countdown. The $1.1 trillion measure would transfer $118 billion from the Treasury’s General Fund to the Highway Trust Fund. It’s unclear when Treasury would have to make that transfer, but doing so before a debt ceiling increase would deplete cash that could be used to avert a default.
House Democrats are looking to pass both the social spending and bipartisan infrastructure bills as early as Tuesday, a leadership aide told The Hill. An aide for Democratic leadership told Axios that committees were notified by House leaders that they had to finish any changes on the spending bill by Sunday and that the House Rules Committee could meet as soon as Monday to mark it up. An aide told The Hill that committees have until Sunday to make revisions to the social spending bill's text and that both bills could be voted on as early as Tuesday, though the aide noted that the schedule was “not set in stone yet.” “Pens down Sunday for committees to make any changes for revised text. Then Rules would meet as soon as Monday, floor as soon as Tuesday. Schedule not set in stone yet,” the aide said. The projected deadline comes after progressives scored another win earlier this week to delay a vote on the bipartisan infrastructure bill.
The White House released a $1.85 trillion framework designed to show progress in months of social spending and climate talks that fell short of persuading progressives to quickly approve a parallel, roughly $1 trillion infrastructure bill, the Wall Street Journal reported. President Biden met with House Democrats in the morning to pitch them on the new framework, a far slimmer piece of legislation than the $3.5 trillion package the party originally had outlined. Democrats have been rushing to complete negotiations on the bill so that they can also move forward with the public-works legislation, which passed the Senate over the summer but has languished in the House. Party leaders initially signaled they wanted to hold a vote on the infrastructure bill later Thursday, but abandoned that plan in the evening in the face of progressive opposition, instead approving a short-term patch for transportation programs that were expiring at the end of the month. Progressives endorsed Mr. Biden’s framework but said they still needed to see more detail of the social policy and climate bill before they could support the infrastructure legislation.
Puerto Rico’s Senate and House approved a bill Tuesday that would slash the central government’s debt by half but has also sparked protests and led to fiery exchanges between lawmakers and a federal control board that oversees the U.S. territory’s finances, the Associated Press reported. The bill aims to end a bankruptcy-like process that began after Puerto Rico announced in 2015 that it could not pay its more than $70 billion in public debt accumulated during decades of mismanagement, corruption and excessive borrowing. In May 2017, the government filed for the biggest municipal bankruptcy ever in the U.S. The bill would allow Puerto Rico to cut its debt by more than $30 billion, issue new debt worth $10 billion and award some $7 billion in cash to bondholders who have not been paid for nearly five years. Critics say Puerto Rico’s government does not have the finances to adhere to the proposed debt service and warned of upcoming austerity measures. However, the bill, which squeaked by in a 14-13 vote in the Senate and later 34-12 in the House, is still in limbo because it does not have the control board’s support, although Puerto Rico Gov. Pedro Pierluisi is in favor of it.
Congressional Democrats yesterday continued to clash over a slew of policy disagreements that have stalled roughly $3 trillion in new economic spending initiatives, raising the prospect that President Biden could depart for a foreign tour this week without a long-sought deal in hand, the Washington Post reported. Two days before the trip, Democratic lawmakers in the nation’s capital still had failed to resolve some of their most intractable disputes. Talks advanced between the party’s warring moderate and liberal factions, but they still appeared far apart on their plans to expand health care coverage, invest in green energy, provide paid leave to all Americans and overhaul the tax code. One of their more contentious ideas — a new tax targeting hundreds of the country’s billionaires — remains in political limbo. A number of Democrats had hoped to create it in a way that raised more than half of its revenue from just 10 people, including Tesla co-founder and CEO Elon Musk and Amazon founder Jeff Bezos. But others questioned whether the “billionaires tax” actually would work, clouding its political prospects. The late-stage scramble over the details added to the steep task Democrats already faced in financing their new proposal, which could be valued at $1.75 trillion over 10 years.
A new annual tax on billionaires’ unrealized capital gains is likely to be included to help pay for the vast social policy and climate package lawmakers hope to finalize this week, senior Democrats said yesterday, the Wall Street Journal reported. “We probably will have a wealth tax,” House Speaker Nancy Pelosi (D-Calif.) said yesterday, noting that Senate Democrats were still working on their proposal, which isn’t technically a wealth tax but bears a strong resemblance to that idea. The proposal under consideration from Senate Finance Committee Chairman Ron Wyden (D-Ore.) would impose an annual tax on unrealized capital gains on liquid assets held by billionaires, Treasury Secretary Janet Yellen said yesterday. “I wouldn’t call that a wealth tax, but it would help get at capital gains, which are an extraordinarily large part of the incomes of the wealthiest individuals and right now escape taxation until they’re realized,” Ms. Yellen said. Groups such as the National Taxpayers Union have objected to the tax on billionaires’ unrealized capital gains, saying it would add more bureaucracy to the tax system and impose new burdens on business investors. The tax is expected to affect people with $1 billion in assets or $100 million in income for three consecutive years, according to a person familiar with the discussions. The idea, for which President Biden recently expressed support after excluding it from his campaign plans and administration agenda, would affect a narrower group of people than the capital-gains changes that have already flopped among congressional Democrats.
Sen. Elizabeth Warren (D-Mass.) has proposed a new measure that would empower creditors in chapter 11 cases to pursue allegations of self-dealing by private-equity owners, rights that currently lie with corporate directors selected by those investment firms, WSJ Pro Bankruptcy reported. The senator introduced a revised version of her Stop Wall Street Looting Act yesterday, modifying a two-year-old proposal to rein in the private-equity industry and including fresh provisions targeting perceived abuses of the chapter 11 system by investment firms. In the bill’s new form, creditors’ committees in bankruptcy cases would have the exclusive right to pursue company insiders who have stripped assets, siphoned value or otherwise elevated their interests over those of lenders, suppliers and employees. As the Bankruptcy Code currently stands, corporate boards themselves have those rights, often delegated to an independent director of their choosing. These independent directors can carry significant weight with bankruptcy courts, which tend to defer to their findings that a particular transaction was fair or not. But some researchers allege that independent directors have an inherent conflict of interest, as they are typically appointed by the shareholders responsible for the potential misconduct at issue. Creditors pay the price for this structural bias, according to legal researchers who examined 770 large chapter 11 filings between 2004 and 2019 and found that independent directors sometimes stifled investigations, rejected potential legal claims and rushed negotiations with private-equity firms. Under Sen. Warren’s bill, independent directors “won’t be able to just tidy-up claims against insiders,” said an author of that study, Jared Ellias, a professor at the University of California Hastings College of Law. The new legislation would also give creditors the right to compel directors and officers of a bankrupt business to sit for an examination, subject to a judge’s approval, for potential conflicts of interest. Sen. Warren also proposed other changes to chapter 11, such as lengthening the statute of limitations to eight years from two years on unwinding transactions that defraud creditors. Read more.
