Testing Ron Wyden’s willingness to challenge the rich and powerful

With the $550 billion bipartisan infrastructure package through the Senate, the chamber began work this week on a much bigger, more ambitious package: the $3.5 trillion reconciliation bill, teed up by the 2022 budget resolution, which the Senate wrapped early Wednesday. According to recent reports coming out of the House, the former won’t be moving any closer to Joe Biden’s desk until the latter is similarly passed.

In theory, negotiations could be relatively straightforward, given that each bill depends on the other’s survival. Anything that could plausibly be called the "Biden agenda" is coming on track two of the two-track approach, the bank-shot strategy that is supposedly going to bring intransigent Democratic senators Kyrsten Sinema and Joe Manchin and several deficit-conscious House Democrats on board to push through a reconciliation package with only Democratic votes. But a lot can happen as the different pieces of the budget resolution pass through their various committees.

While much has been made of Bernie Sanders’s position atop the Senate Budget Committee, which designated the $3.5 trillion topline, the committee that will have unique, outsized influence on the final outcome is the Senate Finance Committee. It’s not exactly the friendliest roster for sweeping social spending and tax increases. Committee Republicans are certain to be a chorus of unified opposition; its 14 Democrats, outside of recent addition Elizabeth Warren and holdover Sherrod Brown, are among the most conservative members of the party, including Tom Carper, Maggie Hassan, and Mark Warner. It’s chaired by Sen. Ron Wyden (D-OR), who has found himself in the national news more than usual lately (more on that shortly).

Here’s some of the social spending that the Finance Committee is tasked with covering: paid family and medical leave; Obamacare subsidy extension; filling the Medicaid coverage gap; expanding Medicare to include dental, vision, and hearing benefits, and (potentially) lowering the eligibility age; home and community-based care services under Medicaid; addressing health care provider shortages (particularly in graduate medical education); Child Tax Credit/Earned Income Tax Credit/Child and Dependent Care Tax Credit extension; long-term care for seniors and persons with disabilities; tax incentives for clean energy and manufacturing and transportation; labor protections under the PRO Act; a sweeping health equity commitment (maternal, behavioral, and racial-justice health investments); housing incentives; and any other investments within the jurisdiction of the committee (such as more environmental spending that was slimmed from the bipartisan deal).

According to the official guidance, the package entrusts the Finance Committee with "$1.8 trillion in investments for working families, the elderly and the environment," just over 50 percent of the total spending in what is Biden’s signature legislation. That’s more than the rest of the committees involved combined.

But perhaps even more important than the new spending Wyden and his colleagues will be in a position to shape are the package’s spending offsets, nearly all of which also find themselves under the remit of the Finance Committee. All of the spending the committee comes up with on its own must be offset, and an undefined (but likely substantial) portion of every other committee’s work, too. Biden has been adamant that all new spending be "paid for," though the reconciliation instructions indicate that some of it can be covered by long-term economic growth. It’s unlikely that Manchin and Sinema will go for too much of that, however, so the Finance Committee will unquestionably be responsible for finding multiple trillions of dollars in taxes and savings.

Moreover, because this is a reconciliation bill, it cannot be like its bipartisan stepsibling, where the pay-fors were never really produced, the Congressional Budget Office scored it hundreds of billions of dollars deficient, and Republican and Democratic senators alike shrugged their shoulders and pushed it through regardless. In a reconciliation package, where to be eligible everything has to directly impact the budget by raising revenue or adding to the deficit, those pay-fors actually have to be firm and producible as a rule, not simply hand-waved away.

According to the plan, those offsets will come from corporate and international tax reform, increased taxes on high-income individuals (branded as "tax fairness"), closure of the carried interest loophole, beefed-up IRS tax enforcement, health care savings in the form of prescription drug pricing reform, and a carbon polluter import fee. Working against those offsets is a substantial tax cut for rich people: the repeal of the cap on the state and local tax (SALT) deduction, which the Democrats are insisting on as a "historic tax cut for Americans."

This bill will literally have to do it all.

To be sure, any proposal this critical will make room for substantial input from every Senate Democrat (since all of them need to buy in), as well as the White House. But details matter, and the Finance Committee will be responsible for a staggering number of them. And there’s a reasonable concern that so many moderate Democrats there will whittle the bill down drastically before it gets anywhere near passage.

Where might the trouble begin? Robert Menendez, a senior committee member, is likely to be the lead antagonist to prescription drug pricing reform, given his position as the senior senator from New Jersey, a hub for the drug industry. Carper, Hassan, and Warner, of course, were three of the infamous Democrats who intervened to prevent the $15 minimum wage from getting into the American Rescue Plan Act. All are on the committee and could bristle at any number of those aforementioned tax increases or social welfare programs.

But Warner also sits on the Budget Committee, and in theory already extracted his cuts to the program during the round of deliberations that led the initial Sanders-introduced budget resolution to drop from $6 trillion to the $3.5 trillion we’re currently talking about. Rather, it’s the pay-fors that look like the biggest challenge, and Finance chair Wyden, one of the committee’s relatively progressive members, could pose a surprising obstacle to the process.

In the bipartisan infrastructure package (again, not paid for), the only real industry that was facing down new taxes was the cryptocurrency industry. Crypto is not, it should be said, a major lobbying force in Washington. But when the industry and famous investors like Twitter founder Jack Dorsey pushed back on the proposed tightening of reporting standards, which would have enabled taxation of groups like Bitcoin brokers and miners, and raised an estimated $28 billion, Wyden teamed up with Republicans on an amendment that would undercut the existing language and exempt cryptocurrency miners from tax reporting.

That maneuver was surprising for many; Wyden has been an advocate for higher taxes on the wealthy, and vocal on environmental issues as well. Given cryptocurrency’s well-known energy consumption, any chance to rein in the sector would have been expected to be a positive for a senator representing a state like Oregon. Instead, he lashed out against it, and by Monday, a compromise had been proposed that was celebrated by lobbyists, senators including Republicans Pat Toomey and Cynthia Lummis, and even Treasury Secretary Janet Yellen alike as a positive step. Wyden, conspicuously, didn’t even endorse it.

The industries and interest groups targeted to pay for the $3.5 trillion spending package are much more organized, powerful, and fearsome than the Winklevoss twins and their crypto mining cohorts. In many senses, crypto was the smallest ox that needed to be gored. It does not portend good things that Wyden is now tasked with raising taxes on large corporations, major financial firms, hedge funds, and millionaires and billionaires. Collectively, these targets control an astonishing amount of money, power, and influence in Washington. Wyden bombed the dress rehearsal, and the main event has far more riding on it.

There are plenty of proposals in the package that Democratic Finance Committee members are expected to fight hard for. Bob Casey’s home and community-based services (HCBS) proposal is in there, as is Debbie Stabenow’s Advanced Energy Manufacturing Tax Credit. Elizabeth Warren recently introduced a minimum corporate tax, which would hit 1,300 public companies with over $100 million in annual profits and raise $700 billion over a decade. For his part, Wyden’s big tax proposal in recent years is a "mark to market" tax that would levy capital gains every year, eliminating the benefit of "buy and hold" but adding significant complexity to the system.

But so far, while Democrats in the Biden era have managed to find plenty of courage to spend big, they haven’t found any courage to take on the country’s biggest corporations and most monopolized industries, despite popular support. If Democrats fail at this, and Biden and the moderates demand dollar-for-dollar offsets to the spending bonanza, the whole thing will screech to a halt. If they can’t find the gumption to tax, their breakthrough on embracing tax-and-spend policy will be dragged down, the latter by the former.

Getting Republicans to agree to a bipartisan package was in some ways the easy part. Now, the real challenge begins.