Sen. Joe Manchin III (D-W.Va.) disclosed to members of his caucus that the number is $1.5 trillion, far below the $3.5 trillion the liberals wanted to spend.
But the disagreement over top-line funding hides what could be a much bigger fight about the programs in the bill. We also learned about a memo, dated July 28 and first reported by Politico last week, from Manchin to Senate Majority Leader Charles E. Schumer (D-N.Y.), in which he outlined his priorities on the spending bill beyond the dollar figure. The specifics there and in his recent statements telegraph more difficulties ahead for Democrats.
The memo, which you can see in full here, is a one-page, double-spaced list written in a rudimentary fashion, with a heavy dose of Senate jargon.
It’s worth decoding six items on his list to understand what Manchin, whose vote is necessary to pass any party-line proposal in the 50-50 Senate, wants and doesn’t want. These also show us where it could be hardest to get to a final deal.
1. No new programs
“No additional handouts outs or transfer payments” is the line in the memo that sets up perhaps the biggest standoff to come for Democrats.
Liberals have known since August that they might have to slash the overall cost of their proposal, and most expected they could just shorten the length of the ambitious programs they would authorize.
House Majority Whip James E. Clyburn (D-S.C.), who supports expanding Medicaid to help the working poor access health insurance in Republican-led states, says he would accept just three to five years of that expansion, so that the proposal would be cheaper in the 10-year estimate of its cost.
Same with Sen. Bernie Sanders (I-Vt.) and his proposal to expand Medicare’s benefits for the elderly to include vision, dental and hearing benefits. The dental side of that expansion would take five years to set up and, therefore, cost less in that 10-year window.
But Manchin is opposed to new programs like that because he has expressed concern that the initial estimate from the Congressional Budget Office will never fully capture their true cost. He rejects estimates from Sanders about the overall cost of the plan being less than $2 trillion from all the tax revenue that would be raised to finance his ambitions.
“It costs $5 [trillion] or $6 trillion by the time he gets done with it, because those programs will never go away,” Manchin told reporters Wednesday.
He recalled how in 2017, when Republicans controlled every lever of power, they could not repeal the Affordable Care Act despite seven years of promises to do so. The same will happen to any attempt to rip away Medicare or Medicaid benefits, the thinking goes, turning them into permanent programs.
If Manchin sticks to this approach, it could spell doom for the biggest liberal goals in the legislation, such as universal pre-K, free community college and up to 12 weeks of federally guaranteed paid family and medical leave.
As he put it in a formal statement released Wednesday, “Spending trillions more on new and expanded government programs, when we can’t even pay for the essential social programs, like Social Security and Medicare, is the definition of fiscal insanity.”
2. He wants the spending to be more targeted to benefit low-income Americans
“Needs based with means testing guardrails/formulas on new spending” is a jumble of bureaucrat speak, but those words formed the foundation of Manchin’s concerns about the $1.9 trillion American Rescue Plan (ARP) that he ultimately supported in March, a massive bill designed to help with the pandemic recovery that passed with only Democratic votes.
Manchin has said he would approve extending many of those benefits, but only if they are curbed for upper-income beneficiaries.
“Any expansion of social programs must be targeted to those in need,” he said in his formal statement.
The child tax credit, part of the ARP, has grown to monthly payments of up to $300 per child, lifting millions of children out of poverty. It might be the most popular piece of the rescue plan, and Manchin loves the plan, up to a certain point.
In his talk with reporters Wednesday, he discussed how families in West Virginia earning more than $150,000, more than triple the state’s median family income, were receiving the child tax benefit.
If he were to support expanded benefits to the elderly, possibly through Medicare, he wants to cut them off to avoid giving the benefit to the rich.
Sanders and his allies, however, have based many of their proposals on the idea of near-universal benefits, to spread them into as many income areas as possible to increase their political popularity.
Manchin is adamantly against that. “Let’s see where the need really is,” he told reporters.
3. He wants to bolster his own control over energy regulations
“Sole ENR jurisdiction on any clean energy standard” might be the most insider of insider demands in the July 28 memo.
Simply put, Manchin wants to be fully in control of any new mandates or regulations of the coal and energy industry that has fueled his state’s economy for more than a century. ENR stands for Energy and Natural Resources Committee — the panel whose chairman is none other than Manchin.
He opposes any new energy standards falling under the control of the Senate Environment and Public Works Committee, which has traditionally been dominated by coastal liberals hostile to coal- and energy-producing states.
4. He’s on board with paying for the plan by raising taxes on the wealthy
“Offsets Conditions” is Manchin speak for taxes, the revenue Democrats want to raise to finance their sweeping plan. And on this, the senator from a rural state with high poverty is actually a bit closer to most of his Democratic colleagues than on the other proposals.
“The one thing, you understand, that all Democrats agreed on — and there’s not a whole lot we all agree on, right — the 2017 tax cuts were unfair and weighted to the high end. Let’s fix that,” Manchin told reporters last week.
He supports raising the top rate to 39.6 percent, as proposed, and wants the top capital gains rate to move to 28 percent, up from 20 percent.
He supports a top corporate tax rate of 25 percent, which is only slightly lower than the original Democratic proposal of 26.5 percent.
5. He wants Congress to step in on ‘easy money’ — but that’s not its job
“Federal Reserve ends quantitative easing” is a line that has received little attention but should raise alarms in Democratic circles. Manchin placed it in bold near the very top of his memo to Schumer.
He is demanding President Biden and Democratic leaders achieve something that is beyond their reach and that they are forbidden from doing: forcing the independent Federal Reserve to stop its policy of encouraging low interest rates, which started in the wake of the 2008 Wall Street implosion.
This “easy money” policy has remained in effect since the coronavirus pandemic shut down much of the economy.
In late August, Fed Chair Jerome H. Powell indicated the reserve board would begin to taper its monetary policy later this year but wants to continue to see employment rebound. Powell has not been as alarmed as Manchin, and many Republicans, about signs of inflation as the nations moves out of the pandemic.
Manchin’s demand is something that simply cannot be met by Biden or Schumer or anyone other than the full membership of the Federal Reserve Board. It’s an independent board that was constructed to be immune from political pressure.
Demands like this are why every liberal should fear the final line of Manchin’s July 28 memo.
6. He left himself an escape hatch
Manchin put the last line of his memo in bold: “Senator Manchin does not guarantee that he will vote for the final reconciliation legislation if it exceeds the conditions outlined in this agreement.”
Basically, unless every demand is met, he has given himself an excuse to vote against the plan.
That’s why the focus on the top line has missed so much. Yes, Manchin says he wants to spend only $1.5 trillion, but maybe he can be talked into $2 trillion or more, given that he has already voted for so many trillions of dollars in pandemic relief funds.
But those policy differences stack up to be the biggest hurdle yet to getting his vote. And he has set up an escape hatch to oppose the legislation if a single one of his demands is not met.
After Politico unearthed the memo, Manchin summoned the congressional press corps outside the Capitol.
He went through his political history, serving in a couple of statewide offices in West Virginia, including governor, and winning in a state where Donald Trump’s margins of victory were 42 and 39 percentage points.
“I’ve never been a liberal in any way, shape or form,” Manchin said, explaining there was one clear way for liberals to advance their agenda.
“All they need to do is, we have to elect more liberals.”