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Sen. Joe Manchin’s “red line” demands on infrastructure are threatening to effectively neuter President Biden’s signature legislation.
This was a bad weekend for fans of worthwhile economic policy. We saw a series of leaks about Joe Manchin’s red lines for the Build Back Better public-investment legislation, which, if agreed to, would leave a desiccated husk of a bill that might not even be worthwhile on its own terms.
Let’s recap where we’re at. As rumored for a while, Manchin opposes the Clean Energy Performance Program (CEPP) that was intended to be the centerpiece of the climate measures in the bill. CEPP would have made payments to utility companies that added renewable energy and penalized those that kept dirty energy in their portfolios. It’s a key part of President Biden’s target of reducing emissions by 50 percent by 2030.
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But Manchin told the White House two weeks ago that utilities are already greening, so there’s no need to pay them to green any more. (Even if you believe that self-regulation works, this is a bizarre complaint, since CEPP incentive payments by law go to ratepayers, not executive wallets.) There were efforts to offer Manchin concessions, like counting any fossil fuel power plant with a carbon capture system as clean (a contested theory in itself), or just exempting natural gas facilities, but they appear to have failed to move Manchin.
That leaves the clean-energy tax credits and land conservation efforts as the major carbon reduction efforts in Build Back Better. But Manchin’s “red line” agreement with Senate Majority Leader Chuck Schumer included demands that carbon capture be funded in some way, and that fossil fuel tax credits be maintained alongside clean-energy credits. He also wants electric-vehicle tax breaks to incorporate hydrogen fuel, a high-emitting option that some researchers find to be worse than coal.
As for land conservation, an obscure facet of the bill, a leak of the House Agriculture Committee text shows that funding is poured into existing programs that have only rewarded incumbent agribusinesses. For example, the bill gives $9 billion to the Environmental Quality Incentives Program, which will fund methane capture at factory farms, according to family farm activists. This is a persistent problem with Congress, which would rather push funds to existing programs that may be imperfect than create a better program. This inevitably places funds into the hands of incumbent power brokers.
Democrats are scrambling to fashion more-aggressive measures, from a voluntary cap-and-trade system with carbon credit revenues going toward emission reduction efforts, to the perennial idea of a carbon tax. But there’s no guarantee Manchin would agree to any of those, either. So you’re left with a climate proposal that deviates little from the status quo, while funding initiatives to allow fossil fuel extraction to continue.
Manchin also has thoughts about the Child Tax Credit (CTC), the signature proposal that Biden has implemented, albeit for one year, in the American Rescue Plan. The expanded tax credit, which gives $3,600 per year to families with children below age 6 and $3,000 per year to those with children between ages 6 and 17, and delivers the funds on a monthly basis, has high phaseouts beginning at $150,000 a year for families ($75,000 for single parents). But Manchin wants to start the phaseouts at $60,000 of family income, while including a work requirement that would restrict the poorest families from receiving the benefit.
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The CTC is already suffering from poor implementation for non–tax filers; only approximately 13 percent of this population, who need the CTC boost more than anyone, actually managed to sign up for the benefit. But if you phase out the increased tax credit that quickly, and too few people under that threshold actually receive it, the “new” CTC will essentially resemble the one in place since the Trump tax cuts boosted the credit to $2,000 per year for children. Add in Manchin’s work requirements, and the bill would find itself to the right of Trump’s plan.
What is Manchin willing to accept? He seems OK with universal pre-kindergarten, which isn’t surprising once you realize that as governor, he brought universal pre-K to West Virginia. That program took a decade to stand up, and more to the point, West Virginia is a rare red state with a pre-K commitment. The way the Build Back Better Act is structured, pre-K is a state/federal partnership, with the feds picking up total costs for only three years and the split eventually moving down to 60 percent federal, 40 percent state. As we saw with the Medicaid expansion in the Affordable Care Act, this is a recipe for red-state holdouts to never join a pre-K regime, creating steadily more unequal outcomes throughout the country.
You’re left with a climate proposal that deviates little from the status quo, while funding initiatives to allow fossil fuel extraction to continue.
Manchin also would accept the child care subsidy measure in the bill, but he wants “stricter income caps” on that as well. House progressives fought for and won universal subsidies, so that no family would spend more than 7 percent of their income on child care under the bill. However, this proposal is also a federal/state partnership, meaning that some states could refuse to participate. Moreover, there are already some (rather soft) activity requirements and income and asset tests to pass to qualify for subsidies, which seemingly only serve to cause a hassle for recipients. The income co-payments already max out at just 150 percent of the state median income, so bringing those down further would really hit the middle class. And in the first three years, there’s a ramp-up period that forces families to lose all subsidies if they go one dollar above an “income cliff.”
In other words, the child care subsidies are already precariously designed and are likely to frustrate and anger people. Manchin would like to make them worse.
Once winnowed down by Manchin, what’s left of Biden’s proposal? Manchin is “less interested” in paid family and medical leave, or elder care, according to Axios. There’s enough opposition to the drug pricing reform from Democrats other than Manchin to potentially sink it, and typically, it’s the savings from health care–related items that fund other health care advances. In other words, no drug pricing piece could mean no Medicare expansion, Obamacare subsidies, or fix of the Medicaid coverage gap. Biden has acknowledged that his plan for two years of tuition-free community college is likely gone. The immigration measures were bounced out by the Senate parliamentarian, and the PRO Act unionization measures could face the same fate. The housing proposal might have the broadest support of all—AOC and Josh Gottheimer signed the same letter supporting it—and yet that looks to be threatened, too.
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The corporate Democrats’ opposition to the taxes has been well documented. But what programs will the remaining taxes be offsetting? I’ve run through most of the major parts of the bill. Unless you can get Manchin off his red lines, you’re left with a bunch of compromised, pinched, poorly designed measures that in some cases are no better than the status quo. And to save money, some or all of those measures might sunset after a few years.
It’s one thing to sunset a good plan that tangibly benefits people, and dare the other side to let it expire. It’s quite another to sunset clunky plans that don’t work very well; there won’t be much of a popular constituency to maintain them. A permanent program like the ACA can generate momentum for fixes; indeed, there’s the subsidy expansion that could still end up part of this bill. Fixing a temporary program is a heavier lift.
I find it hard to muster up much energy for Build Back Better right now, though this is likely the low point in the negotiations. Maybe something like a compromise that sets apart tax cuts from spending can be reached, with more money available to execute the remaining programs correctly. But that’s a faint glimmer of hope. The Manchin path is one that Builds Back Worse, on long-standing issues on which we cannot afford to skimp.
