J. Scott Applewhite/AP Photo
Speaker of the House Nancy Pelosi meets with reporters to discuss progress on President Joe Biden’s domestic agenda, September 8, 2021, at the Capitol.
In theory, it should be a hopeful day for those seeking a better future for American families. The most important House committees begin their markups of the $3.5 trillion Build Back Better Act (sometimes called the reconciliation bill), setting out the terms of most of the key education, labor, health care, and revenue elements of the legislation.
But instead of debating the finer points of how to most efficiently deliver these benefits, there’s been a combination of anxiety attacks and Sophie’s Choice–style decision-making among the Democratic caucus. Suddenly, a bill that represented the promise of the party’s agenda is being ground down into paste, for the benefit of self-regarding conservative members.
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One shouldn’t get too despondent over this. The path to this bill becoming law was always going to be wobbly, and Democratic aides I’ve corresponded with still exude confidence that some facsimile of the original bill will get through the sausage-making. But the reason it feels so bad, so off of the rails, involves the inevitable consequences of how this was all structured in the first place.
Back in April, I started to get really concerned about the tone being set by the president and his team, stressing deficit neutrality as much as the gaps in society this package would fill. They made very clear that the COVID relief passed in March was unusual emergency deficit spending, and that the investments in the Build Back Better agenda would be offset. “So how do we pay for my Jobs and Family Plans? I’ve made clear that we can do it without increasing deficits,” Biden said in his first address before Congress.
That linkage was critical, because it meant that any rollback on the tax and revenue side would have to be met with shrinkage on the spending side. It wouldn’t have been hard to say something like: “There are excellent reasons to raise taxes on the rich because of the top-heavy society we live in, and we should also make these investments to improve our country and bring dignity to every working person. But they are separate issues and we should deal with them separately.”
Then, as now, there wasn’t any consensus on the revenue side. Democrats, who all seem to regard themselves as tax experts, cannot even agree to simply return to the 2017 status quo, before the Trump tax cuts, which could yield as much as $3 trillion. Then, the corporate tax rate was taken down from 35 percent to 21 percent. There’s now only enough consensus to pull it back to 25 percent, not the 28 percent Biden proposed. Biden’s capital gains tax changes have been under constant assault by the business lobby. The international tax reform envisioned by Senate Finance Committee chair Ron Wyden (D-OR) was so weak it prompted a backlash among committee Democrats. Even with stronger enforcement, there’s nothing close to what would be needed to finance a $3.5 trillion bill.
If the issues were being decided separately, you could just move on with designing the optimal spending and borrow for the rest. That’s what centrists like Sen. Joe Manchin (D-WV) did on the bipartisan infrastructure bill, after all. But Manchin, sensing that Democrats would try to delink spending and revenue, counterattacked by disclaiming the very maneuver he endorsed to get the infrastructure bill passed. He raised skepticism to Axios that you could count on long-term economic growth to finance “‘human’ or ‘soft’ infrastructure proposals.” (This is preposterous; academic research routinely shows that public investments of all kinds pay off; every dollar invested in early-childhood education yields $7.30 in societal benefits, per one account.)
That brought us back to the framework initially set up by Joe Biden and his Treasury secretary Janet Yellen, that all the spending has to be offset. The rest takes care of itself. The taxes have already been eroded, and now we’re seeing the inevitable chipping away of the spending. Manchin told Axios he would only be comfortable with $1 trillion to $1.5 trillion in spending, and really that’s an expression of what taxes he would be willing to support. The artificial scarcity created by linking spending and revenue is killing this bill.
Jonathan Cohn reported Tuesday night that home and community-based services for seniors and disabled people, scheduled originally at $400 billion, was down to $150 billion, a level at which it would be nearly impossible to guarantee services for everyone who needs them and higher wages for caregivers. I heard that number a week ago, and I’m sure Manchin did too, because in the Axios piece he decided to “voice concern” about home care, which he surely already knew was being cut.
A plain-English version of tomorrow’s House Ways and Means Committee markup, available here, shows what happens when you start negotiating with yourself. The fine print now shows that Medicare dental benefits wouldn’t come online until 2028; while Medicare officials had warned it would take up to five years to work out that benefit, clearly this delay is being done to save money in the ten-year budget window, similar to how Obamacare’s benefits didn’t kick in for four years. There’s an ongoing House-Senate fight over whether to permanently fund subsidies for the Obamacare exchanges, offer Medicaid in non-expansion states, or add the Medicare dental, hearing, and vision benefits, rather than do all three, as the proposal initially said. The only way to get to that skinnier topline number is to make these kinds of concessions.
The taxes have already been eroded, and now we’re seeing the inevitable chipping away of the spending.
Similarly, the paid family and medical leave markup begins to significantly lower the replacement rate for workers on leave if they make more than about $34,000 a year. Workers with annual incomes below that figure will get between 75 percent and 85 percent of their wages, but above that, the typical worker is more likely to get around 65 percent. In state family leave programs, a 65 percent level of replacement has made participation in the program too unaffordable to opt in, which of course makes it cheaper. The program also doesn’t start until July 2023, another budget-conscious delay.
One way out of the box is aggressive use of the big budget savings in the bill, prescription drug price reform. But if anything, there are more lobbying forces arrayed against that than the tax increases. And Joe Manchin, the father of former Mylan CEO and EpiPen monopolist Heather Bresch, probably isn’t keen on that idea either.
There’s certainly not going to be any “pause” in the legislation, as Manchin called for last week. But what we’re left with is in some ways worse. The rhetoric of fiscal responsibility serves as a fiscal straitjacket tightening around the Biden agenda. What needs real attention is how to properly design a national paid leave program that interacts with those at the state or employer level (the implementation here frankly looks like a mess), or how to best deliver the Child Tax Credit or universal pre-K or tuition-free college. As centrist Rep. Abigail Spanberger (D-VA) put it, we should be looking at outcomes. Instead, we’re fitting a 50-pound barbell into a 25-pound box, for entirely fake reasons.
This was in part preordained by a Democratic majority so thin that practically every member of Congress is empowered to extract their price. There will be time to assess at the end what the bill actually does and if it improves people’s lives. (At this point, I’d say three or four big things would be more likely to meet that goal now than 15 to 20 compromised and constrained ones.) But the way that Biden set up the deficit blind canyon was uniquely unhelpful. And it’s coming back to haunt him now.
