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Washington Watch: Congress returning to brawl over COVID aid, China competition bill

U.S. lawmakers return to Washington this week in what some analysts see as the beginning of a critical period for President Joe Biden’s agenda — and the markets.

“The next five weeks likely represent the final air pocket for unified Democratic government to build momentum on Biden’s stalled fiscal agenda,” wrote Chris Krueger of Cowen Washington Research Group in a note on Friday.

Awaiting Congress when lawmakers file back into the Capitol are brawls over COVID-19 aid, immigration policy, a China competition bill, more cash for Ukraine and salvaging parts of the president’s stalled Build Back Better social-spending and climate legislation.

Now read: Biden officials warn that lack of additional COVID aid will mean not enough vaccine doses, reduced testing capacity

There’s “only a fair chance” that some of the Build Back Better proposals could pass Congress this summer, according to Greg Valliere, chief U.S. policy strategist at AGF Investments. In a note Friday, Valliere wrote that Democratic aides have said there will be a final attempt this summer to pass some of the president’s initiatives.

“Biden will focus on four objectives,” he wrote. “Lowering the cost of prescription drugs
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which has strong voter support in recent polls; funding for new Green
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projects; child care, probably pre-kindergarten measures; and raising taxes on wealthy Americans and highly profitable corporations.”

Facing what appears to be a daunting outlook for the midterm elections, how Democrats try to achieve their goals is the big question. The party could again try the budget reconciliation process, which allows tax and spending legislation to pass with just 50 senators — thus allowing Democrats to bypass the need for any GOP votes. Whether Democrats can pass another such bill “will be determined in the next five weeks,” writes Krueger.

Also see: Republicans may win not just House but also Senate in midterm elections — here are 2022’s Senate races to watch

Valliere writes that it’s possible there could be agreement on Biden’s four objectives, albeit with a 10-year price tag of under $1 trillion. Late last year, the House passed a nearly $2 trillion version of Build Back Better.

“The era of massive spending is coming to an end,” Valliere writes in what he sees as market
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implications. What’s more, the analyst sees items like a capital-gains tax hike unlikely to pass.

Meanwhile, lawmakers will resume a battle over pouring an extra $10 billion into pandemic programs, an effort halted before the congressional spring break by Senate Republicans who wanted a vote on what’s known as Title 42. That Donald Trump-era policy allowed expelling migrants at the border during the pandemic.

As Politico reported Friday, those issues may collide with Biden’s plea for more aid for Ukraine. Senate Majority Leader Chuck Schumer, a New York Democrat, reportedly wants to combine Biden’s Ukraine request with the same COVID aid that Republicans stalled.

Congress is also returning to face finalizing a bipartisan innovation and competition package, which among other items is expected to contain more than $50 billion in subsidies for chip makers
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 as well as billions more for other industries to build out U.S. manufacturing capacity and compete with China.

As MarketWatch reports, other provisions could take aim at the sale of counterfeit goods on online marketplaces, but there are competing approaches and a lobbying battle over them.

Read: A sticking point in China competition bill: what to do about fake products

MarketWatch’s Victor Reklaitis contributed to this story.

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