Bipartisan infrastructure negotiators scramble for deal as key funding option dropped

The group of 10 bipartisan infrastructure negotiators was already having trouble coming up with ways to pay for nearly $600 billion in planned new spending, but Senate Majority Leader Chuck Schumer setting a Wednesday deadline for a key test vote on their bill turned up the heat and pressure significantly.

"That’s pretty aggressive. That means we have a lot of work to do," said Sen. Lisa Murkowski, R-Alaska, a key GOP negotiator, announcing that she and her colleagues would be working through the weekend to try to finish up the details of their $1.2 trillion plan.

ABC News has learned that one of the key components that negotiators had been relying on to finance the package -- a boost in IRS tax enforcement to go after unpaid taxes -- is out, leaving negotiators scrambling to come up with a replacement for a proposal that was expected to generate around $100 billion in estimated revenue to help offset the $579 billion in new spending in the legislation.

"I think we’re all trying to think about other ways to get there," said Sen. Mark Warner, D-Va., emerging from a nearly four-hour marathon negotiating session behind closed doors Thursday night. About halfway through that meeting, senior White House officials joined the bipartisan group, including senior counselor Steve Recchetti and Biden’s Legislative Affairs Director Louisa Terrell -- a sign of just how important the measure is to the president's agenda.

According to an aide to a negotiator who requested anonymity to discuss the state of play, wary Republicans wanted to put so many guardrails on the IRS in exchange for getting the money to increase enforcement that "it was untenable."

Conservative groups have railed against the proposal to empower an agency that they claim once targeted their ranks based on political leanings starting in 2010, as they sought tax-exempt status. The IRS in a 2017 settlement apologized for failing to provide controls and guidance to its employees, though a 2014 House GOP investigation found no connection to or coordination with the Obama administration.

And getting an official amount for that finance option from the nonpartisan Congressional Budget Office (CBO), which prices out legislation for lawmakers, was also not possible because the government already assumes it will get all of the annual taxes it is owed.

This further exacerbated the problem for negotiators, who admitted that they were only ever going to get an estimate -- perhaps in the neighborhood of $70 billion to $100 billion, according to sources close to the matter. That would not be enough for some Republicans, including in leadership, who demanded a hard "score" or price tag to show the spending was fully offset.

Negotiators said they plan to work through weekend, but they are under the gun to publish final legislative text as soon as possible so that they can prevail in the vote on Wednesday.

And some GOP sponsors of the bipartisan plan -- including its lead author, Sen. Rob Portman of Ohio -- made clear Thursday that they will not vote to proceed if it is not yet complete.

Others have tried to argue that the vote on Wednesday, a procedural move to start debate on a shell of the bill which will require the support of 60 senators, is simply the start of a week-long process before final passage. Anyone wanting to support the bill could simply vote "aye" on Wednesday, start debate and substitute in the final text when it is ready.

"My goal this weekend is to make sure that we can all get there, that we've got not only the agreement but we've got text that people can look at so that we're not in a situation where we [say], 'I don't know what I'm voting on, I just hope that it's good,'" said Murkowski, referring to Wednesday as "just the beginning."

The deadine set by Schumer is undoubtedly a high-stakes gamble as he tries to get infrastructure legislation well on its way before the August recess, including a related $3.5 trillion budget resolution that contains the remainder of President Joe Biden's infrastructure priorities. Schumer also demanded that his caucus reach a final agreement by Wednesday on that product, so that it can move soon after the bipartisan legislation.

Under special, fast-track budget rules, Democrats plan to pass their $3.5 trillion blueprint legislation without a single Republican vote but only if the caucus remains united behind the sweeping outline that includes everything from Medicare coverage expansion to universal child care, climate change and immigration reform.

Still, even though the budget resolution -- which Schumer and House Democrats have demanded must be linked to the bipartisan infrastructure deal -- is merely a blueprint to be fleshed out later by multiple committees, some Democratic senators are insisting on more details in advance of any vote in the coming weeks.

Sen. Robert Menendez, D-N.J., told Roll Call that he wants to see the details behind his colleagues' plan to wring revenue out of the pharmaceutical industry to help pay for about $600 billion of their massive plan.

Democrats have for years sought to have Medicare negotiate drug prices to bring them on par with prices paid by other countries. Menendez told Roll Call: "The only industry that gets directly, I'll call taxed, mostly is the pharmaceutical industry. You have to show me that you're reducing the cost of prescription drugs to the consumers."

Sen. Chris Murphy, D-Conn., said he would be looking for adequate funding to modernize the dilapidated northeast corridor rail, while Sen. Elizabeth Warren, D-Mass., said she would be "fighting to make sure universal child care and enough money to attack the climate crisis head on" are in the bill.

"And that we make sure that billionaires and giant corporations pay a fair share," she said, a reference to key sources of revenue Democrats plan to use to finance the $3.5 trillion in new spending over the next 10 years.

Sen. Joe Manchin, D-W.Va., a key moderate negotiating the bipartisan plan who has also signaled that he won't derail this bigger budget measure, told reporters that he is very concerned about inflation and protecting his coal state from Washington climate mandates.

"I'm concerned about inflation. I want to see more of the details of what's going on," Manchin said, noting that he had not had one conversation with the broader budget deal's lead author, Senate Budget Committee Chairman Bernie Sanders, I-Vt.

"I'm concerned also about maintaining the energy independence the United States of America has. And with that, you cannot be moving towards eliminating the fossil. You should be innovating and using more technology. And we should be leading the rest of the world with the technology that you can use all the above energy sources, and I told (Schumer) that I was concerned about some of the language I'd seen that moves us away from fossil," Manchin said.

It is that kind of concern from Manchin that also raises eyebrows among progressives in the House where Speaker Nancy Pelosi holds a slim majority and has pledged to hold onto any Senate-passed bipartisan infrastructure bill until the $3.5 trillion budget blueprint -- also called a "reconciliation" bill after the procedure used to fast-track it -- is approved.

"The bipartisan infrastructure bill is much smaller, and it does not meet the same needs that the overall proposal for what frankly the Biden administration has outlined is necessary," influential progressive Rep. Alexandria Ocasio-Cortez said in a virtual town hall Thursday night, calling the group of 10 plan "way too small."

"We do not need a bipartisan deal in order to pass this bill," she claimed, pushing back on the argument from the White House and Democratic moderates about the importance of trying to working with Republicans. "It's great that Republicans are wanting to join some Democrats, that's wonderful. But this country and people across this country elected Democratic majorities ... Republicans are not in charge of dictating what policies we pass and what policies we don't pass."

"We will tank the bipartisan infrastructure bill unless we also pass the reconciliation bill," she threatened.

ABC's Ben Siegel and Allie Pecorin contributed to this report.