Procedural Innovation During The 117th Congress Part 2: How The Senate Avoided PAYGO And Passed The Infrastructure Investment And Jobs Act

Summary

 

This is the second part of a three-post series analyzing how the 117^th Congress used new procedural strategies to enact significant fiscal legislation. Part 1 analyzed how Democratic majorities expanded the ambit of the reconciliation process on a party-line basis to appropriate over a trillion dollars through the American Rescue Plan and Inflation Reduction Act. This post analyzes how a bipartisan coalition of Senators used “directed scorekeeping” to circumvent the Senate’s anti-deficit rules and the traditional distinction between “discretionary” and “mandatory” appropriations to pass Infrastructure Investment and Jobs Act’s (IIJA) transformative investments. This strategy has created a new procedural path through the Senate for bipartisan spending priorities and will likely be used again in the current and future Congresses.

 

Projected Deficits Create Procedural Obstacles

 

The IIJA is by every measure a significant piece of legislation. It increases federal highway and transit funding by $200 billion, provides $66 billion to repair and expand the United States’ passenger rail system, $65 billion to improve electric transmission infrastructure, another $65 billion to expand access to high-speed broadband internet, $55 billion for clean and safe drinking water infrastructure, $50 billion for climate adaptation programs, and tens of billions for dozens of other programs.  Altogether, the Congressional Budget Office (CBO) estimated that the law provide $415 billion of new federal spending, which would only be partially offset by $110 billion of other spending reductions and $50 billion of revenue increases.¹

CBO’s $256 billion deficit projection created two procedural problems for the bill in the Senate.

First, these projected deficits would violate the Senate’s Pay-As-You-Go (PAYGO) rule, which allows Senators to object to any legislation that is estimated to increase federal deficits over several different time periods.² Second, the deficits would also violate the Senate’s point of order against legislation estimated to increase the deficit by more than $10 billion in any year over the subsequent decade.³ These rules equip Senators with the power to immediately kill deficit-increasing legislation on the floor of the Senate.⁴

Typically, there are three solutions for these procedural problems:

1. Offsetting the bill’s deficit increases by adding other “payfor” provisions that either cut spending or increase revenues;
2. Waiving the application of the Senate’s anti-deficit rules, which requires 60 votes; or
3. Negotiating with the bill’s opponent(s) to prevent them from raising these points of order on the floor.

Based on the legislative history of the IIJA, none of these solutions were feasible. The IIJA’s Senate coalition could not agree on enough payfors to completely offset the law’s new spending. The bill’s opponents were determined to challenge it on the floor, and it appears that 60 Senators were unwilling to waive the Senate’s PAYGO or annual deficit rules.

The IIJA passed the Senate, however, because its supporters creatively exploited the limitations of the Senate’s anti-deficit rules and disarmed their opponents’ ability to object to the law’s deficit spending.

 

Senators Find A New Way to Sidestep the Senate’s Anti-Deficit Rules

 

The Senate’s anti-deficit rules only apply measures that affect “direct spending” (commonly referred to as mandatory spending) and do not apply to the “discretionary appropriations” within the jurisdiction of the Senate Appropriations Committee. The distinction between these two types of spending is codified in law, and hinges on whether the spending is required by a federal entitlement program and if the spending is provided by an “appropriation Act” or another form of legislation.⁵

In everyday usage, “appropriation act” refers to legislation within the jurisdiction of the Appropriations Committees. But the Congressional Budget Act of 1974 defines the term more broadly as “an Act referred to Section 105 of title 1 [of the United States Code (U.S.C)]” (2 U.S.C. §622(5)). 1 U.S.C. §105 is only a single sentence that states:

“The style and title of all Acts making appropriations for the support of Government shall be as follows: “An Act making appropriations (here insert the object) for the year ending September 30 (here insert the calendar year).”

This sentence does not reference what committee develops or reports the appropriations act, how it should be considered by Congress, or what type of program(s) the appropriation provides funding for. It is essentially a formatting requirement that reflects the fact that appropriations acts and non-appropriations acts (often referred to as “authorizing legislation”) are drafted using different formatting styles and conventions.⁶

The authors of the IIJA took advantage of this open-ended definition, and drafted the law as an omnibus bill – meaning that law is a composite of multiple pieces of separate legislation, each of which is in a separate division. Divisions A-I are each authorizing laws, and Division J is an appropriations act – drafted in the same style and formatting that the Appropriations Committees use for regular and supplemental appropriations acts.

This drafting strategy was strategic. Division J contains the majority of the law’s spending, appropriating $415 billion of new spending. Whereas Divisions A-I contain $10 billion of new spending, $120 billion of spending cuts, and $50 billion of revenue increases. By routing the majority of the IIJA’s funding through Division J, the law’s supporters were able to eventually exempt the division’s spending from the Senate’s anti-deficit rules, albeit for slightly different reasons.

Without this this drafting strategy the IIJA would have violated the annual deficit rule, as the law’s estimated deficits would have exceeded $10 billion in every year over the next decade.⁷ The rule, however, has an exemption for “measures within the jurisdiction of the Committee on Appropriations.”

By shifting the law’s funding into Division J’s appropriations act, it appears that the IIJA’s supporters were able to take advantage of the rule’s jurisdictional exemption. Like the Budget Act, the Senate’s definition of its Appropriations Committee’s jurisdiction defines “appropriation acts” in terms 1 U.S.C. §105, and no Senator raised a point of order under the annual deficit rule.⁸

In contrast to the annual deficit rule, the Senate’s PAYGO rule does not have an explicit jurisdictional exemption for appropriations acts, but it only applies “direct spending or revenue legislation.” Because of this slight difference, Division J’s formatting as an appropriations act would not necessarily guarantee that the division’s funding would be exempt from PAYGO. Even if funding is provided in an appropriations act, it can still be classified as direct spending and subject to PAYGO if the appropriation is required to fulfill a federal entitlement.⁹ And at least one of Division J’s appropriations was pursuant to a federal entitlement.¹⁰

It is also worth highlighting that although Division J was formatted in the style of a discretionary appropriations act, most of Division J’s individual appropriations are substantively much more akin to mandatory appropriations. The essential hallmark of discretionary appropriations is that they provide short-term funding, either for a single fiscal year or to address a pressing need. A limited exception to this rule are “advance appropriations,” which provide funding for future fiscal years. Congress has traditionally used advance appropriations to provide an additional year of funding to less than two dozen programs and otherwise restricted their use.¹¹

Division J, in contrast, primarily provides advance appropriations. Nearly two-thirds of the division’s total funding are advance appropriations to 60 different programs.¹² But even more noteworthy is the unprecedented length of these advance appropriations. Of the 21 non-IIIJA advance appropriations, only one provides more than one year of advance funding.¹³But the IIJA’s advance appropriations provide four years of advance funding. Regardless of whether these appropriations fund entitlement programs, they more closely resemble mandatory appropriations, like those for the Child Health Insurance Program and other mandatory programs.¹⁴

In order to ensure that Division J’s funding would be classified as discretionary spending and exempt from PAYGO, the authors of the IIJA added a “directed scorekeeping” provision at the end of the division (135 Stat. 1444 – 1445, Sec. 905(c), Title IX, Division J). This provision instructs both CBO and OMB to classify all of Division J’s spending as “appropriations for discretionary accounts” notwithstanding any budgetary rules to the contrary.

This provision removed the ability for CBO and OMB to classify any of Division J’s appropriations as direct spending. Although the chairs of the House and Senate Budget Committees have the authority under the Congressional Budget Act to make these types of scorekeeping decisions, in the majority of cases, they rely on estimates provided by CBO.¹⁵ Without this directed scorekeeping provision, CBO would have classified Division J’s spending according to their interpretation of the applicable statutory requirements and budgetary scorekeeping guidelines.¹⁶

By including this directed scorekeeping provision, Congress required CBO to classify Division J’s $415 billion of spending as discretionary. This removed the spending from the PAYGO deficit calculation, and the remaining direct spending and revenue changes were estimated to reduce the deficit by $159 billion.¹⁷ As a result, it was no longer possible for Senators to raise either of the Senate’s anti-deficit points of order against the law.

 

The Political Dynamics of Waiving PAYGO

 

But why go to all this trouble? After all, it takes 60 votes to waive the Senate’s anti-deficit rules and 69 Senators eventually voted for the IIJA. After reviewing the Senate’s floor debates over the law, I believe the directed scorekeeping strategy was necessary it is because at least nine of the Senators who voted for the IIJA would not have voted to waive PAYGO or the annual deficit rules.

Although it has the appearance of a technical vote, the political dynamics of waiving the Senate’s anti-deficit rules likely would have been more challenging than voting for the IIJA itself. Whereas a vote for the legislation could be framed in terms of the law’s costs and benefits, voting to waive the Senate’s anti-deficit rules could be framed exclusively as Senators “breaking” the Senate’s rules to increase the deficit.

Remarks by Senator Rand Paul illustrated this dynamic. While criticizing the law’s deficit spending, he intimates that some of his colleagues were unwilling to take a separate vote on waiving the PAYGO point of order despite supporting the law. He stated (emphasis added):

The only way to ensure Congress adheres to PAYGO is through a point of order. If this bill is actually paid for, then you should have no trouble supporting the point of order. But if you vote to waive the point of order, if you vote to exempt Congress from its own rule requiring that we be good stewards of taxpayer dollars, then stop telling people something you know is not true.¹⁸

I believe that the fundamental purpose of the directed scorekeeping procedural strategy was to address this political problem. At least half of the law’s 18 Republican supporters in the Senate were cross pressured between supporting the law’s benefits while also wanting to avoid being portrayed as “breaking” the Senate’s anti-deficit rules and increasing the federal deficit.

The brilliance of the directed scorekeeping strategy is that allowed these Senators to sidestep the Senate’s anti-deficit rules rather than confronting them directly. By doing so, it eliminated the IIJA’s opponents’ most powerful objection to the law and gave the IIJA’s marginal, cross-pressured Republican supporters an additional degree of political freedom to support the law.

 

Offense Sells Tickets, Defense Wins Championships

 

I believe the reason that the directed scorekeeping procedural strategy has not received more attention is because it was primarily defensive rather than offensive. The strategy succeeded by preventing an adversarial debate on the law’s deficit spending, which forced the IIJA’s opponents into a weaker political position. Even though the opponents were still able to raise a point of order on the floor, their objection was based on an esoteric aspect of congressional budget procedure with far less political salience.

Ironically, their objection was to Division J’s directed scorekeeping provision itself because it was within the jurisdiction of the Budget Committee but had not been formally reported by the Committee.¹⁹ In response to this challenge, Senator Krysten Sinema offered a motion to waive “all applicable sections of that act [the Congressional Budget Act] and any other applicable budget points of order for purposes of the pending amendment,” which was agreed to by a 64-33 margin.²⁰

Here again, you can see the benefit of the directed scorekeeping procedural strategy, as well as the pressure that the IIJA’s marginal supporters were under. This point of order set up Senator Sinema’s blanket waiver motion, which eliminated the possibility of any additional objections being raised against the law. But even on this question, which was much more favorable political ground than waiving the PAYGO or annual deficit rules, only 64 Senators voted for the waiver motion – five fewer than the final number who voted to support the legislation.

Although we will never know how many Senators might have supported waiving the Senate’s anti-deficit rules, I strongly believe that the IIJA would not have passed the Senate without the directed scorekeeping procedural strategy. Without the IIJA’s authors procedural ingenuity and creativity, the law would have had to been dramatically scaled back to become budget neutral or would have likely been killed on the floor of the Senate outright.

 

A New Procedural Path in the Senate for Bipartisan Spending Priorities

 

The cliché that “imitation is the highest form of flattery” also applies to congressional procedure and the IIJA’s directed scorekeeping strategy. Less than a year after the passage of the IIJA, the Senate used the same directed scorekeeping strategy to pass the Bipartisan Safer Communities Act (BSCAP)– the first federal gun safety legislation enacted nearly three decades.

Like the IIJA, the Safer Communities Act contained an appropriations act as a separate division at the end of the law, and the majority of these appropriations were advance appropriations that provided five years of funding. The law also contained a directed scorekeeping provision at the end of the appropriations division designated the appropriations as discretionary spending.²¹ And, also like the IIJA, it passed the Senate with a strong bipartisan majority.

It is conventional wisdom to describe Congress as being hyper-polarized and gridlocked, and this conventional wisdom is accurate, to a degree. Congressional Democrats and Republicans are more polarized than they have been in over a century, and they are, not surprisingly, constantly arguing with each other. But this conventional wisdom is also incomplete. Despite the constant partisan debates, recent Congresses — in terms of their legislative output — have been incredibly productive.

Innovations like the IIJA’s directed scorekeeping strategy are one of the contributing factors to this productivity. By dampening rather than amplifying areas of partisan disagreement, the IIJA’s supporters were able to succeed where past infrastructure efforts had repeatedly failed.

The architects of the directed scorekeeping strategy deserve far more credit than they have received so far for creating a new procedural path through the Senate for bipartisan spending priorities. The continued utility of this procedural innovation is clear, and — unlike the strategies used to pass the American Rescue Plan and Inflation Reduction Act – the directed scorekeeping strategy will allow bipartisan majorities to enact their spending priorities regardless of which party controls the Senate, House, or White House. Hopefully bipartisan Senate majorities will continue to use it to pass worthwhile spending initiatives during the current and future Congresses