(Bloomberg) — The U.S. Congress returns from its week-long Thanksgiving recess facing urgent deadlines to avoid both a federal government shutdown and a debt limit default, pass the annual defense bill and finalize President Joe Biden’s signature tax and spending bill. 

Failure to pass the debt ceiling or funding bill would have devastating consequences for both the country and the party that is in power. In addition, failure to reach a final version of the House-passed $2 trillion Build Back Better bill may cement voters’ perceptions about Democrats being too busy infighting to legislate. 

Due to the necessity of Republican cooperation on regular funding bills, and the unanimous Democratic caucus agreement for the passage of the separate economic agenda bill through a special budget process in order to avoid a GOP filibuster, the Senate will focus on activity related to the December to-do lists. 

The House’s priority will be the Dec. 3 deadline to avoid a shutdown while also attempting to raise the debt ceiling around Dec. 15. According to someone familiar, House Democrats may propose a new stopgap spending plan that would fund the federal government through January. 

Here are the items on Congress’s jam-packed December calendar:

The Stopgap:

To avoid a government partial shutdown on Friday night, Dec. 3, the House must pass a temporary spending bill. All 12 annual spending bills to fund federal agencies in the fiscal year beginning Oct. 1 were not enacted. 

Some legislators have discussed a temporary bill that would last until Dec. 17, to force all parties to agree to full-year spending bills. Others worry about the possibility of a longer measure into February or March. A person who was familiar with this matter stated Monday that it seemed most likely that the measure would run through the middle to late January. 

Rosa DeLauro, House Appropriations Chair, stated to reporters that Democrats were willing to reach a compromise with Republicans regarding funding levels. She also urged Republicans to offer a counteroffer for Democratic suggestions. The Senate Democrats offered a 13% rise in the domestic social program and a 5% defense increase last month. 

Republicans desire equal defense-to-nondefense increases, but they have demanded from Democrats that they drop several policy provisions called riders. Before talks can begin, however. Democrats proposed ending federal funding bans for abortions, and revoking many workplace regulations.

DeLauro indicated that Democrats would not agree to give these riders up in order for talks to begin. 

Debt Ceiling

Janet Yellen (Treasury Secretary) has advised Congress that the U.S. could not meet its obligations to pay all of their payments sometime after December 15. 

Democrats in Congress haven’t settled on a plan to raise the debt ceiling, although using the same fast-track budget reconciliation process they are using to enact Biden’s economic agenda appears more and more likely. Republicans have been resistant to voting for Treasury to pay its bills.  

While some Senate Republicans were instrumental in passing a $480billion increase to October, to give Democrats extra time to complete the budget reconciliation process, Mitch McConnell, Minority Leader of the Senate, vowed to not do this again.

Democrats would have to use the budget process. They will need to amend 2022’s budget resolution, and then they can pass either a separate bill or part of the $2 trillion tax- and spending bill. Republicans suggested that they are willing to skip some delays associated with amending the budget in order to speed the process. 

A debt limit rise would most likely continue through December 2022. However, this is after the midterm election and before the possible Republican takeover. The GOP could then demand budget cuts or concessions from Biden to get a new increase. 

Rebuild Better

The House this month passed its version of Biden’s tax and spending bill. Before the December 25 holiday, Biden’s tax and spending bill will be up for debate in the Senate. 

The key players are Joe Manchin, a moderate Democrat from West Virginia, and Kyrsten Sinema in Arizona. Manchin has objections to the overall price tag, spending in early years paired with offsets in later years, as well as the bill’s four weeks of paid family leave and Medicare hearing coverage. Sinema kept all details of her objections private. 

According to the White House, the White House said that they would reach an agreement on spending of $1.75 trillion. This is a reduction from the House bill. It will likely be more than $2.2 trillion. 

Wrangling over the federal deduction for state and local taxes, or SALT, will be one of the most contentious issues for Democrats as they re-shape portions of the House’s version of the Build Back Better Act. Senator Bernie Sanders, who is taking a lead on SALT, says the House’s approach to allow taxpayers to write off up to $80,000 regardless of income would give too many tax benefits to millionaires. Instead, Senator Bob Menendez from New Jersey and Bernie Sanders want to reduce the SALT deduction for those with incomes below $400,000 by phasing out tax breaks that allow the most high-earning individuals to claim the $10,000 deduction. Senator Michael Bennet opposes any reduction in the SALT limit. 

Sen. Elizabeth Warren could also amend the corporate minimum tax. This would mean that large corporations must pay 15% or more of their profits. Credits and deductions may be used to reduce their IRS bills. Renewable energy project supporters argue that the minimum tax may decrease companies’ credit value.

The deadline to complete the BBB bill is not set, but it may slip into January. 

Defense Bill

Congress has passed a defense authorization bill for 60 consecutive years, though last year it hit a snag when the House and Senate voted to override then-President Donald Trump’s veto of the bill on Jan. 1, two days before the new Congress started. 

The Senate will vote this week to stop debate over the most recent annual measure. This could lead to final passage around December. There are several impasses, such as blocking funds for Taliban funding and the removal of a requirement that women register for the military draft. And if the National Defense Authorization Act doesn’t make it over the finish line, troop pay raises could be added to a continuing resolution or passed on its own. DeLauro has said that until there’s agreement on full-year appropriations, she will not back a pay increase in a CR.

China Bill

Just before the break, Schumer revealed his anti-China legislation — The U.S. Innovation and Competition Act — will ride to victory in the defense bill. Schumer made an abrupt change of heart a few days later and stated that he would negotiate with Congress a deal on a standalone China bill. 

There’s still a few items to be ironed out there, however, as the House doesn’t have its own comprehensive bill. House Foreign Affairs Committee Chair Gregory Meeks says he wants to tackle climate change — China is one of the world’s leading emitters of greenhouse gases — and Republicans are concerned the bill isn’t tough enough on Beijing. 

If there’s no agreement on the broader package, some lawmakers want the $52 billion in the bill to boost domestic semiconductor manufacturing passed separately. This could jeopardize the bipartisan coalition who drafted the larger bill.

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