The Morning Dispatch: Democrats Inch Closer to Reconciliation Deal

Happy Tuesday! Lots of lawyers out there like to claim they are fighting for the little guy, but only a few truly walk the walk.

Thank you, Spencer Sheehan of Great Neck, New York, for suing Kellogg’s and bringing to light this injustice: Strawberry Pop-Tarts allegedly contain more pear and apple flavoring than they do strawberry.

Quick Hits: Today’s Top Stories

• Sudan’s military seized power by force on Monday, detaining Prime Minister Abdalla Hamdok and cracking down on protesters, reportedly killing three. Coup leader Gen. Abdel Fattah al-Burhan said on television he was dissolving the country’s government, and that the military will remain in charge until elections are held in July 2023.

• The Biden administration on Monday further clarified the COVID-19 restrictions that will go into effect when the United States lifts its international travel ban on November 8. Barring a handful of exceptions, all non-citizen travelers to the United States 18 and older will need to present both proof they are fully vaccinated with an FDA or WHO-authorized vaccine and a negative COVID-19 test within three days of departure. Unvaccinated travelers—either American citizens or those meeting the exemption criteria—will now need to present a negative COVID-19 test from within one day of departure.

• Amnesty International announced Monday it will close its two Hong Kong offices by the end of 2021 because of the region’s recently implemented national security law, which it says “has made it effectively impossible for human rights organizations in Hong Kong to work freely and without fear of serious reprisals from the government.”

• The Treasury Department announced Monday that state and local governments distributed about $2.8 billion in rental assistance in September, meaning more than 75 percent of the $46.5 billion Congress allocated for rental assistance over the past year remains unspent.

Democrats Inch Closer to Reconciliation Deal 

Not much has changed since we last updated you on the back-and-forth in congressional negotiations on the Democrats’ massive spending plans—lots of activity but very little real progress. Those following the haggling closely in recent weeks have seen provisions added to the hypothetical reconciliation package, then removed, then added again—all in a matter of hours.

But there are a couple of soft deadlines coming up—President Biden is leaving for Europe at the end of this week, and funding for the federal highway system is set to expire on Sunday—so Democrats have kicked negotiations into overdrive in recent days in the hopes of reaching a deal. Sens. Chuck Schumer and Joe Manchin even made the trek up to Delaware over the weekend to meet with Biden over breakfast.

One thing seems clear: Whatever deal is reached in the coming days—if any—is going to be far smaller than some Democrats’ initial $6 trillion proposal and the party’s “pared back” $3.5 trillion framework. The biggest remaining questions are which legislators’ priorities make it into the final bill, and which get the axe. Today’s Uphill has the latest. 

Child tax credit: One of the most popular provisions facing cuts is the expanded child tax credit, which passed in March as part of Democrats’ COVID-19 relief legislation. Since payments began over the summer, tens of millions of Americans have received up to $300 per child each month. Democrats, looking to scale back their bill to win over moderates, may extend the program for one year instead of four years.

Manchin has also called for the legislation to add work requirements and to include a lower income cap to determine  which families receive the credit. Families making up to $400,000 are currently eligible for the full amount.

Paid leave: Another component expected to be pared down is the plan to create a national paid family and medical leave program. The White House’s initial proposal would gradually offer 12 weeks of paid leave to every U.S. worker per year. The time off would kick in at the birth, adoption, or fostering of a child, in the event of serious illness, and in other circumstances. It was expected to cost $500 billion. 

Now, Democrats are considering more modest provisions, Biden said last week: four weeks of leave that would primarily be available to low-income workers. The program would sunset after three to four years, costing closer to $100 billion. 

But even the reduced proposal is on tenuous footing. Manchin sounded skeptical when asked about it in the Capitol Monday. “I’m concerned about an awful lot of things,” he told reporters.

Drug prices: In the original House bill, Democrats had a plan to lower the cost of prescription drugs—a promise Democrats commonly make on the campaign trail. The provision would  empower the federal government to negotiate with pharmaceutical companies to obtain lower prices for many Medicare drugs. But Pharmaceutical Research and Manufacturers of America (or PhRMA) has loudly opposed the plan, arguing it would take away industry resources for researching new drugs. According to the Washington Post, PhRMA has spent $22.4 million lobbying against it. 

Several House members have said they won’t support the idea, as well as key senators, including Sinema of Arizona and Sen. Bob Menendez, a New Jersey Democrat.

Medicare expansion: In the early stages of the reconciliation negotiations, Democrats set out to include dental, vision, and hearing coverage for anyone enrolled in Medicare. Senators Manchin and Sinema are opposed to this expansion, citing cost as the main concern. President Biden acknowledged this in his CNN town hall last week, saying that keeping all three would be a “reach.” 

Democratic leaders haven’t given up including some form of coverage in the bill, such as vouchers for dental work. 

Tuition-free community college: Biden said last week that the proposal to make two years of community college available without cost—or cost to the students, at any rate—is dead at the moment. “So far, Mr. Manchin and one other person has indicated they will not support free community college,” he said. (The “one other person” is likely a reference to Sinema. And community college would not be “free,” of course, but would be financed by taxpayers and/or additional debt.) Democrats are still considering an expansion of the federal Pell grant to help students from low-income families. 

Democrats also appear to have settled on a new potential funding mechanism: An annual tax on billionaires’ unrealized capital gains.

Democratic leaders hope the tax can win support from Sen. Sinema, who has opposed hikes for corporations. With an evenly split Senate, the party has to be completely unified in that chamber to approve the reconciliation bill over GOP opposition.

As Wall Street Journal tax expert Richard Rubin writes, the tax change would alter the way income is defined, including increases in asset value. This change would affect only the extremely wealthy, though—fewer than 1,000 people are estimated to face such a tax. Rubin explains:

The tax would be calculated on the difference between an asset’s value at the beginning of the year and at the end of the year.

For example, someone who owned $2 billion of stock on Jan. 1 and saw it grow to $2.5 billion on Dec. 31, would owe capital-gains taxes on the $500 million gain, even if they didn’t sell any of the stock. The current top tax rate on capital gains is 23.8%, plus state taxes.

Senate Finance Committee Chair Ron Wyden, who is behind the plan, said Monday that his team will complete legislative text of the tax changes in the next two days.

“This is not a wealth tax,” Wyden told reporters. “It is a billionaire’s income tax. It is being written so that when nurses and firefighters pay taxes with every paycheck, billionaires who have figured out how to not pay taxes because they don’t take a wage, they’re going to have to pay their fair share each year.”

Some House Democrats have been skeptical of Wyden’s plan, calling instead for their bill’s more clearly defined rate hikes on wealthy Americans. Ways and Means Committee Chair Richard Neal said Monday that the billionaire’s tax will be difficult to implement as a reliable source of revenue.

“Do I like the politics of it? Yeah,” he said. “I think it’s sensible. I think the implementation of the plan is a bit more challenging.”

The plan is also likely to face legal challenges if passed.

Turmoil in Sudan

After a steady—albeit uneven—two-year march toward civilian leadership, Sudan is once again under military rule. On Monday, generals detained Prime Minister Hamdok and other government officials and dissolved the transitional government established in the wake of Omar al-Bashir’s 2019 deposition. 

Thousands of protesters took to the streets in Sudan’s capital of Khartoum in defense of the previous civilian-military governing coalition—called the Sovereign Council—but were met with brutality from the country’s security forces. At least three civilians have been shot dead according to the Sudan Doctors’ Committee, and another 80 were injured. Netblocks reported severe internet outages in the hours after the coup, claiming connectivity in the region was the worst it had seen since the military opened fire on protesters in 2019 and killed more than 100.

“Sudanese Armed Forces have announced they are in control of the government. Demonstrations have been reported in Khartoum and around the country,” the U.S. Embassy in Sudan told Americans in a bulletin advising them to shelter in place. “There are unverified reports of violence against protesters. Flights are not leaving the country.”

Sudan—sitting at the intersection of different war-torn and politically unstable neighbor states, including Ethiopia and Libya—has grappled with economic disrepair and autocratic leadership since its independence in 1956. Between 1989 and 2019, the country was under the Islamist dictatorship of Bashir, who was removed from power by an army-executed coup after popular demonstrations in opposition to his regime.

In August 2019—four months after Bashir’s ouster—military and civilian leaders announced the formation of the 11-member Sovereign Council, which they claimed would lead the country through a transition period of about three years until elections could be held. Under the agreement, military leader Gen. Abdel Fattah al-Burhan would head the council for 21 months, at which point a civilian leader would succeed him for another 18. 

Al-Burhan had already overstayed his agreed upon welcome, but civilian leaders and protesters had begun ramping up pressure in the weeks prior to complete the transition by mid-November. The military chose another path, detaining Hamdok and saying it will usher the country into democracy.

Citing debilitating infighting within the new government’s civilian branch, al-Burhan announced the suspension of some of the transitional constitution’s protections and the temporary takeover of “competent” military leadership. “We guarantee the armed forces’ commitment to completing the democratic transition until we hand over to a civilian elected government,” he said, promising to hold elections in 2023. 

The apparent coup was met with backlash from around the world, as global leaders urged the Sudanese armed forces to respect the power-sharing agreement established two years earlier. U.N. Secretary-General António Guterres demanded the release of Hamdok, and Secretary of State Antony Blinken announced the U.S. would halt $700 million in emergency assistance destined for Sudan “intended to support the country’s democratic transition.”

Speaking of the coup, Blinken said: “These actions contravene Sudan’s Constitutional Declaration and undermine the democratic aspirations of the Sudanese people who have repeatedly called for peace, justice, and liberty in their country. An immediate return to the principles of Sudan’s peaceful revolution and the transitional framework laid out in the 2019 Constitutional Declaration and the 2020 Juba Peace Agreement is essential. Concerns about the uneven pace of the democratic transition do not justify abandoning this path.”

A bipartisan group of foreign policy-focused congressional leaders—Sens. Bob Menendez and Jim Risch, Reps. Gregory Meeks and Michael McCaul—issued a statement Monday as well. “The military junta must immediately end the state of emergency, release Prime Minister Hamdok and members of his cabinet unharmed, restore the civilian-led transitional government, and respect the rights of Sudanese citizens to peacefully protest,” it reads. “Today’s events are a stunning betrayal of the hard-fought gains of the Sudanese people and their steadfast commitment to a democratic, civilian-led Sudan. The junta’s failure to reverse course will result in dire consequences.”

Worth Your Time

• How should a society allocate its most important, lucrative, and prestigious positions? In an essay for American Purpose, Michael Mandelbaum comes to the defense of meritocracy. “The flight from meritocracy … has the perverse and ironic consequence of restoring the system of allocating positions that, over the decades, meritocracy supplanted,” he writes. “A policy of allocating positions and opportunities by group membership threatens to turn the societies and economies of the countries that adopt it into racial and ethnic spoils systems, with each constituent group striving to elbow aside all the others. This is a recipe for the kind of bitter conflict based on tribalism that plagues much of the world but which Western societies have managed for the most part to avoid since World War II.”

• In Politico, Alex Isenstadt has a story on the institutional Republican Party’s embrace of former NFL player Herschel Walker’s Trump-backed Georgia Senate bid after months of keeping him at arm’s length. “Scrutiny of Walker’s erratic past at first led Senate Republicans to voice concern about whether the former running back can win, but he has made significant inroads since then,” he writes. “In the latest illustration of the shift, South Dakota Sen. John Thune, the No. 2 Senate Republican, is set to endorse Walker on Monday. In a statement to POLITICO, Thune called Walker ‘a fighter, a uniter, and a proven winner.’ Thune is the first member of Senate GOP leadership to endorse Walker, and his support is the newest evidence the former football star has tacitly won the party hierarchy’s blessing. While Minority Leader Mitch McConnell has yet to give the Hall of Famer his explicit backing, the Kentucky Republican told POLITICO last month that ‘there’s every indication he’s going to be a good candidate.’”

Something Fascinating

Presented Without Comment

Also Presented Without Comment

Toeing the Company Line

• Natural gas prices are soaring in Europe, and Bill Wirtz explains how the increases could hamper climate change efforts, shape elections, and create tension between member nations.

• Ryan checks in on the Pennsylvania GOP Senate primary, where the most prominent candidates all either have ties to Donald Trump or have supported the former president.

Let Us Know

Setting aside Herschel Walker, is there a professional athlete—active or retired—that has always struck you as particularly thoughtful and who you hope runs for public office?

Reporting by Declan Garvey (@declanpgarvey), Andrew Egger (@EggerDC), Charlotte Lawson (@lawsonreports), Audrey Fahlberg (@AudreyFahlberg), Ryan Brown (@RyanP_Brown), Harvest Prude (@HarvestPrude), and Steve Hayes (@stephenfhayes).