Climate: Democrats search for an alternative

The single biggest part of the spending bill has been hundreds of billions of dollars to fight climate change. Democrats have remained optimistic that most of the initial White House climate proposal — including $300 billion in clean energy tax credits — is likely to be approved in the final bill. But Manchin’s demands appear to have forced Democrats to question whether they will have to jettison perhaps the linchpin of their climate initiatives: the Clean Energy Payment Program that would create incentives and penalties for utility companies to encourage them to transition to clean energy sources. Some Democratic lawmakers have been adamant that they can still reach their carbon reduction targets even without the clean energy program. But others are skeptical, arguing that without the utility program, the plan will lack sufficient impact to mitigate catastrophic warming. A host of potential alternatives — including a carbon tax and emissions trading system for industry — have surfaced in recent days, but it is unclear whether these alternative options will end up in the bill. The White House and senior Senate Democrats are working through what policies could both get Manchin’s approval and provide adequate financial resources or new regulations to address the threat of climate change. Biden told CNN on Thursday that the provision had not yet been eliminated but acknowledged Manchin’s opposition. He also suggested adding the $150 billion originally allocated for the Clean Energy Payment Program for new incentives to reduce fossil fuel intensive expenditures.

Care: Early education programs appear secure

Beyond the climate provisions, the bulk of the Democrats’ package is designed to expand federal safety net and social programs through new initiatives in health care, education, housing, child care, elder care, and other areas. Of the social programs, the two that have consistently emerged as the safest are Democrats’ plans to establish a universal prekindergarten program and a new national child-care program. Manchin has indicated his support for universal pre-K, which already exists in West Virginia. Biden initially proposed $200 billion to extend free and universal pre-K, as well as an additional $225 billion to subsidize child care, proposing to cap at 7 percent of income the amount families can spend on child care for children younger than 5. These plans appear likely to pass largely intact, although a report in the People’s Policy Project, a left-leaning think tank, argued this week that the child-care provision could dramatically increase costs for middle class families not eligible for the program’s new subsidies. Democrats have denied that claim.

Child tax credit: Crown jewel faces challenges

In its stimulus bill passed in March, the White House approved a one-year expansion of the child tax credit, so the benefit gave out substantially more money per child and was also extended to reach millions of children in poverty previously denied the payment. The White House proposed extending the more robust child benefit through 2025 at a cost of roughly $450 billion, a measure it has called necessary to achieve major reductions in child poverty. The program now appears vulnerable. Manchin has called for new work requirements on government programs as part of the package, which could prevent parents who do not work from receiving the benefit. The administration has also discussed whether the child tax credit would only be extended for one additional year, after which Democrats would seek to extend it further, as they try to bring down the cost of the package overall. If Democrats lose the midterms in 2022, it could mean that Biden’s signature expanded child tax credit may die after only a brief trial run. Yet the White House is still trying to seek approval to permanently ensure the program reaches the poorest families. The original expansion of the child tax credit from earlier this year was able to reach more families because it was extended to those families who had no earnings. The White House wants to ensure that change does not expire, as it is set to under current law. Biden said he does not support adding a work requirement to the child tax credit.

Taxes: Democrats weigh massive changes to plan

To pay for all the spending in the measure, the White House proposed trillions of dollars in new tax hikes on corporations and the rich. House Democrats advanced a roughly $2 trillion tax plan that similarly raised tax rates on individuals, corporations and wealthy investors, among other measures. But because of resistance from Sinema, the administration is being forced to consider alternative approaches as the package inches forward. On a call this week with congressional Democrats, senior administration officials said they are discussing a series of measures that would not raise tax rates — which Sinema has opposed — but still raise trillions of dollars in new revenue, primarily from companies and the rich. The measures discussed by the administration officials on the call included a new minimum tax on corporations, a plan to beef up tax enforcement through the Internal Revenue Service, a tax on companies issuing stock “buybacks” to company shareholders and, perhaps most surprisingly, a new tax on the assets held by American billionaires. The White House has been adamant its spending package will be fully paid for with new revenue, meaning it likely has to reach a deal on the tax provisions for the proposal as a whole to advance.

Health: Priorities put senior Democrats at odds

While there is close to unanimous support among Democrats about the early education programs, party leaders are dramatically split on how to expand health care through the legislation. Although left out of the administration’s initial economic plan, White House officials this summer agreed to back Senate Budget Chairman Bernie Sanders’ (I-Vt.) proposal to extend new dental, vision and hearing benefits to tens of millions of American seniors on Medicare. The initial provision cost as much as $380 billion, but Democratic lawmakers have suggested this week that the program may have to be cut to above $150 billion. But including all three benefits is a “reach,” Biden said at a CNN town hall on Thursday. He said Manchin is opposed but that Democrats could cut a deal on an $800 voucher for dental care instead. On hearing benefits, Biden pointed to a new proposal from federal health officials to allow consumers to buy over-the-counter hearing aids as a way to make products more affordable without changing Medicare. On vision, Biden says there is no consensus yet. Meanwhile, drafters of President Barack Obama’s Affordable Care Act, including House Speaker Nancy Pelosi (D-Calif.), have pushed hard for more robust subsidies for those purchasing insurance on the public exchanges. That measure could also prove expensive. Democrats are considering only extending the improved subsidies for Obamacare shoppers for only four years, though Pelosi wanted the plan approved for significantly longer. Separately, other party leaders have pushed for the inclusion of an expansion of Medicaid to 2.2 million poor adults in mostly Republican-led states refusing Obamacare’s expansion. Lawmakers such as House Majority Whip James E. Clyburn (D-S.C.) and Sen. Raphael G. Warnock (D-Ga.) — Democrats in Southern states that rejected the Obamacare expansion — have argued doing so is crucial to closing the racial inequities in the country’s health-care system. Most Democrats would support all three health-care programs, but party officials differ on which should be funded with limited resources.

Prescription drugs: Pricing reforms face defections

To pay for the health-care spending, Democrats have pushed for changing existing law to allow Medicare to negotiate lower prescription drug prices, a measure aimed at both saving the government money and reducing seniors’ prescription drug costs. But that plan is under fire from a trio of House lawmakers who support a more limited drug negotiation measure and voted against the bill during a key committee hearing in September. On the other side of the Capitol, a plan has not yet come together, as Senate Finance Committee Chairman Ron Wyden (D-Ore.) has worked for months to try to strike a balance between moderate and more liberal Democratic members.

Housing, elder support, paid leave: Some cuts

The White House is widely expected to be forced to cut a range of other programs — such as its proposals for housing, elder care for seniors, and paid family and medical leave — from its initial ambitions. The administration’s initial housing plan included hundreds of billions of dollars to create millions of new housing units and to house hundreds of thousands of homeless Americans. The housing program also would have funded vouchers for low-income tenants and repairs to public housing units. The overall amount of spending on housing is expected to be cut dramatically, possibly from $300 billion to $100 billion. But it’s not clear which housing programs are on the chopping block. Similarly, the White House initially pitched as much as $400 billion to help the elderly and those with disabilities receive in-home care from workers who often make below minimum wage. With the nation rapidly aging, the administration said the plan is necessary to help clear the backlog of thousands of people waiting years to receive in-home care from Medicaid. But the home-care program may be cut by as much as a third or more. Yet another White House program — $225 billion to create a national paid family and medical leave program — also faces major downsizing. Initially, Democrats had looked to create 12 weeks of benefits for families and sick workers, but that number is now down to four weeks, and the program might not start until 2024, well after the 2022 midterms.

Immigration: There remains hope for reforms

Democrats have not given up on including immigration reform from the reconciliation bill, allotting $100 billion to the matter. But how it gets divided up still depends on what the Senate parliamentarian rules as germane to include in the sweeping budget proposal. Democratic senators, led by Majority Leader Charles E. Schumer (N.Y.), Richard J. Durbin (Ill.), Alex Padilla (Calif.) and Robert Menendez (N.J.), are preparing their third proposal for the parliamentarian in the coming days. Unlike the previous proposals that focused on creating a pathway to citizenship for a broad swath of undocumented immigrants, current negotiations are focused on reforming the green card visa system to make it more accessible to certain undocumented groups like farmworkers and recipients of Deferred Action for Childhood Arrivals. There is division among Democrats on whether the parliamentarian’s word is final, with some pushing to override her rule.

Overall: ‘More and smaller’ beats ‘bigger and fewer’

When it became clear the White House would have to shrink its legislation by as much as 60 percent, administration officials faced a difficult choice: They could either pursue a plan that contains partial investments across a wide range of areas, or one that approved a handful of programs but each one done in a durable and robust way. Several administration officials privately said they prefer legislation that took aggressive and comprehensive action on only a handful of priorities. Ultimately, however, the party appears to be pursuing the more diffuse approach. While free community college appears to be out of the plan, Democrats say they remain intent on pursuing virtually all of their biggest programs, at least for now. While some administration officials agree that it would be better to implement a few large-scale programs, the White House needs every Democrat in the House and Senate to support the legislation for it to pass, and no Democrat wants his or her particular priority axed entirely.

Economic Policy

Where the White House economic plan stands: From taxes to health to climate to immigration

By Jeff Stein

Rachel Roubein

and

Marianna Sotomayor

October 22, 2021 at 6:00 a.m. EDT

Sen. Joe Manchin III (D-W.Va.) speaks to reporters on Capitol Hill last month. (Andrew Harnik/Associated Press)

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13 min

Even as negotiations over President Biden’s economic package continue, Democratic officials have started signaling which parts of the White House agenda could be cut from the legislation and which are likely to be approved.

Biden, for instance, said on Thursday night that his plan to create universal free community college had fallen out of the bill. The president acknowledged his new clean energy plan to incentivize utility firms to move away from fossil fuels is in danger of being jettisoned. By contrast, universal prekindergarten and a national child-care program are widely seen as all but guaranteed to be included, enjoying the backing of the Democratic caucus.

The bill is also likely to retain significantly smaller versions of a wide range of Biden’s proposals, such as initial plans to provide roughly $300 billion for housing and homelessness, $400 billion on elder care for seniors and $450 billion for the child tax credit. Each initiative stands to be cut from anywhere from a third to a half of their initial proposed amounts, though estimates on how much vary by significant margins.

White House faces grueling choices as it debates cuts to economic plan

And while a higher corporate tax rate may be out of a deal, because of the demands of Sen. Kyrsten Sinema (D-Ariz.), a new tax on billionaires’ accrued wealth is newly in play as part of potentially significant shifts in Democrats’ tax plans to fund the legislation.

The emerging changes to the package come as Biden this week told House Democrats that the legislation may have to spend up to $1.9 trillion. The White House and Democratic officials initially agreed to a $3.5 trillion plan — itself smaller than what the administration had initially pitched — and House Democrats’ version of the bill costs as much as $4.5 trillion, experts say.

Sinema and Sen. Joe Manchin III (D-W.Va.) have been adamant that overall spending figures must be dramatically cut, forcing difficult decisions about which programs to shrink or eliminate. But Democrats are also worried that failure to reach an agreement could lead to no bill at all being passed, a potentially calamitous outcome for the party.

Below is a rough rundown of where key provisions surrounding the bill stand, based on interviews with more than a dozen congressional aides, lobbyists and administration officials with knowledge of the negotiations. These people, who spoke on the condition of anonymity to discuss sensitive matters, stressed that negotiations are moving very swiftly and key provisions could change.