Said Sen. Cory Booker (D), “We knew we were sort of in the crosshairs before. But now the floodgates have opened.”
But the state’s parochial concerns — which include restoring a major tax break used by about 40 percent of the state’s filers and protecting its powerful drug industry — are starting to conflict with the larger Democratic agenda of overhauling climate policy, reshaping the tax code and delivering new assistance to American families through a sweeping expansion of social programs.
Every dollar used to preserve a tax break mainly enjoyed by the wealthy or preserve pharmaceutical company profits, other Democrats say, is a dollar that can’t be used on more urgent priorities.
New Jersey Democrats need to “realize they’re part of a team,” said Rep. Pramila Jayapal (D-Wash.), who chairs the Congressional Progressive Caucus. “This is about whether or not Democrats deliver for the people on the promises we made.”
The state’s influential congressional delegation has not been deterred, however, and the intraparty conflict — amounting to hundreds of billions of dollars — has put the Garden State at the center of the action as Democrats try to maneuver the biggest social agenda in a generation through the smallest congressional majorities in decades.
Some New Jerseyans say they recognize that if the party is to pass anything over the unified Republican opposition, they — and other states looking for post-Trump payback — might have to sacrifice some of their goals, though not without a battle.
Rep. Bill Pascrell Jr. (D-N.J.) said he will fight “vehemently” for the state’s priorities, but ultimately the choice will be straightforward.
“It’s going to come right down to: Do you want to keep the process going, or do you just want to have nothing?” Pascrell said. “So we’ll have to make the decision as to what’s more beneficial for the state and what’s more beneficial for the party. We understand the position that we’re in.”
Such tensions, between the broader liberal moment and states clamoring for their own priorities, are coming increasingly into focus as Democrats plunge into the nitty-gritty of writing their bills and Congress heads into what could be a big week for Biden’s agenda.
Central to that agenda is a $3.5 trillion catchall bill that could directly affect New Jersey’s economy. Also at stake, in a parallel bipartisan negotiation that could yield a deal as early as Monday, are billions of dollars of backlogged infrastructure needs, including a disproportionate amount in that state.
New Jersey’s clout is enhanced by major Democratic players who hail from the state, including Sen. Robert Menendez, a senior member of the tax-writing Senate Finance Committee; Rep. Frank Pallone Jr., chairman of the House Energy and Commerce Committee; and Rep. Josh Gottheimer, co-chair of the Problem Solvers Caucus, a bipartisan group of centrists.
No issue has united the state’s congressional delegation more than the fate of the state and local income tax deduction — known as SALT — that was dramatically scaled back by Republicans in their marquee 2017 tax overhaul. The curbing of the deduction to a maximum of $10,000 hit New Jersey residents especially hard, due to the state’s combination of high incomes and high property taxes.
While the rich took the most serious hit, thousands of middle-class households in New Jersey and other states also saw their federal income taxes rise under the GOP bill, which cut taxes for virtually every other class of taxpayer.
Curbing SALT also exacerbated the historical imbalance between the state’s federal tax contribution and what it gets back from Washington. A 2020 study by the Office of the New York State Comptroller found that, in fiscal 2018, New Jersey received less back on every federal tax dollar paid — 79 cents — than any other state.
That disparity has fueled the desire for action, said Mike Cerra, executive director of the New Jersey League of Municipalities, which lobbies Capitol Hill on behalf of the state’s cities and towns.
“The biggest underlying sentiment is that we pay a premium and we get a discounted return,” he said. “At this point, it’s a matter of fairness.”
Added Rep. Bonnie Watson Coleman (D-N.J.), “We’ve been typically a giving state, so it’s about time we got something back.”
But restoring the deduction, even partially, could cost the federal government hundreds of billions of dollars, a problem for Democrats who want to generously fund social programs. And some New Jersey lawmakers are also resisting one potential way to make up that money — cracking down on prescription drug prices.
New Jersey is the unquestioned epicenter of the U.S. pharmaceutical industry: 13 of the 20 largest drug companies, representing billions of dollars in annual research and development spending, are headquartered in the state — from Johnson & Johnson, the world’s largest, to hundreds of smaller biotechnology firms.
But Democratic leaders are targeting pharma revenue to offset large chunks of their broader spending agenda. The crux of their plan is to allow the government to use its massive purchasing power to negotiate drug prices with manufacturers.
That would save potentially hundreds of billions of dollars in Medicare spending over the next decade. Even some New Jersey Democrats want to include such provisions in the spending bill, despite the industry’s opposition.
Pallone, most prominently, has written legislation that would require Medicare to negotiate drug prices — and force manufacturers to offer those prices to private insurers. Pallone’s bill would also cap a drug’s price at 120 percent of its average price in six other industrialized countries, which generally pay far less for drugs than the United States does.
The Congressional Budget Office estimated in 2019 that a version of that legislation would save the federal government $456 billion over 10 years.
Pallone, in an interview, downplayed any divide among New Jerseyans over how much to rein in the drug industry. “I have major pharmaceutical companies in my district, and the public is very much supportive of negotiated prices, even though many people work in the industry,” he said.
But Menendez, for one, is already warning he will stand in the way of any attempt to use the pharmaceutical industry as a piggy bank for Democratic priorities, saying any revenue wrung from drugmakers should go to consumers, not government programs. Menendez has proposed his own legislation, which would cap out-of-pocket costs for seniors without directly lowering drug prices.
“It is the only industry in the entire legislation that is specifically pursued for revenue as a specific industry,” Menendez said in an interview. “What has happened here is we have used the industry for revenue for [things] largely having nothing to do with pharmaceutical and prescription drug costs.”
Booker, too, has his own drug plan, which would create a federal agency to oversee drug prices. But in a careful statement, he lent support to both Pallone’s and Menendez’s legislation, saying, “Every American should have access to affordable prescription drugs. Period.”
The industry’s main national trade group, Pharmaceutical Research and Manufacturers of America (PhRMA), is already blasting the incipient plan, an early version of which was embedded in a rough budget outline that Senate Budget Committee Democrats agreed to this month.
“This isn’t about lowering costs for prescription drugs. The real goal of this budget is to upend Medicare to help pay for Tesla tax credits and other government programs at seniors’ expense,” said Debra DeShong, PhRMA’s executive vice president of public affairs. DeShong is also a former aide to the New Jersey Democratic State Committee and then-Sen. Robert Torricelli (D-N.J.).
BioNJ, a trade group, estimates the industry generates nearly $50 billion of economic activity in New Jersey each year. Debbie Hart, BioNJ’s president and chief executive, warned in a statement that Pallone’s legislation would result in many fewer drugs being developed, while praising Menendez’s approach.
“We believe there are right and wrong ways to address drug pricing concerns,” she said. “We look forward to working with Senator Menendez and our congressional delegation to deliver both lower patient costs and tomorrow’s cures.”
Gottheimer, who is among a group of House Democrats resisting the push to include far-reaching drug price measures, criticized the timing of such a move as the nation struggles to emerge from covid-19.
“You mean, destroy the companies that just saved humanity? We should cut their legs out from underneath them right in the middle of a pandemic?” Gottheimer said. “Some people think that’s a good idea. I’m happy to have that debate.”
New Jersey, meanwhile, also has some of the country’s most dramatic infrastructure needs, and it shares with New York the single most ambitious transportation project in the nation: the Gateway project to overhaul rail access to and from Manhattan, including digging new $11 billion tunnels for Amtrak and New Jersey Transit commuter trains.
While the Biden administration has removed key obstacles to Gateway’s progress, New Jersey lawmakers are still smarting over the Trump’s handling of the project — delaying its progress and, at one point, attempting to use it as a bargaining chip with Democrats in his quest to build a border wall.
An infrastructure bill the House passed last month included more than $200 million in earmarks for smaller projects in New Jersey, outstripping three more populous states.
Amplifying the state’s clout is its growing political significance for Democrats. The party has seen its support grow substantially in the suburbs over the past decade, and the dividends have been paid out disproportionately in New Jersey. A House delegation that was evenly split 6-6 between the two parties in 2016 is now divided 10-2 in favor of Democrats.
House Speaker Nancy Pelosi (D-Calif.) and the party’s political strategists are keen to protect the party’s suburban gains as they face tough midterm elections, and taking care of New Jersey could be an important part of doing that.
“The majority will be won or lost in Jersey,” Gottheimer said. “We’ve got a four-seat margin. We’ve got to be extremely cautious about every step we take.”