The White House is considering reworking President Joe Biden’s economic plan to emphasize deficit reduction in a bid to secure support from Democratic Senator Joe Manchin, a person familiar with the administration’s discussions said.
Top congressional Democrats have also in recent days discussed adding deficit reduction measures in hopes of winning over the holdout Democratic senator. Such a shift would have the added benefit for Democrats of heading off expected Republican charges of fiscal irresponsibility in midterm election campaigns.
While the White House has insisted that the president’s plan is fully paid for, Manchin has stalled the $2 trillion package of climate, tax and social spending initiatives, citing his concern about the impact on federal debt as well as rising inflation.
“The most important thing we have to deal with is our fiscal responsibilities and basically our financial position that we’re in in our country,” Manchin told reporters at the Capitol Thursday after the government reported 7.5% annual inflation in January.
The administration’s new approach was first reported by the Washington Post.
With Manchin a pivotal vote in the 50-50 Senate, Biden and most congressional Democrats have already conceded that the president’s plan, known as Build Back Better, would have to be shrunk, and the contours of what it might look like are already known.
The plan could be reworked into a deficit reduction package by keeping the same level of taxes on the wealthy and businesses in the House bill while cutting the amount of spending by consolidating it into a few key programs.
Manchin has talked favorably in the past of the $555 billion in climate change tax incentives in the House bill as well as the provisions cutting costs for prescription drugs. Those items combined with the revenue increases could yield nearly $1 trillion in cuts to budget deficits over 10 years.
The House-passed version of the Build Back Better bill includes about $1.5 trillion in tax increases over a decade on corporations and wealthy individuals. The legislation also includes about $300 billion in other savings, including some from prescription drugs, that gives Democrats a total of $1.8 trillion to offset spending or reduce the deficit.
That House tax plan is the result of careful negotiations between Democratic leaders and Senator Kyrsten Sinema, an Arizona Democrat, resulting in a tax proposal that would likely be able to pass the Senate. Manchin has consistently supported raising taxes on the wealthy and corporations.
Sinema opposes increasing the 21% corporate tax rate or the 37% top rate on individuals. However, the legislation sidesteps overt rate increases, instead opting for more roundabout tax hikes, including a surtax on millionaires and a 15% corporate minimum tax. The legislation also imposes more taxes and penalties on U.S. companies who move profits overseas and calls for more audits on businesses and top earners.
The places to begin cutting the bill to win over Manchin have been obvious for months but each component has strong support among other Democrats.
Manchin has resisted expanding Medicare benefits to dental, vision and hearing, because Manchin said West Virginians are worried their basic Medicare benefits will be cut in a few years when the trust funds start running out, as well as paid family leave and the child tax credit as proposed in the House.
Manchin also has said that any programs started in the bill should be paid for over 10 years, rather than allowed to expire in order to reduce the bill’s price tag. He has called starting a program without permanent funding sources a budget gimmick that will explode the true cost of the bill over time.
It is not yet clear if Manchin would vote for a deficit reduction package using the tax increases in the House bill. His office declined to comment.
There could be significant difficulties in selling the package to progressive in the House, according to one senior House Democrat. Spending $800 billion would be a 75% cut from last year’s goal of a $3.5 trillion package. Trimming it down to primarily the climate change initiative would leave just one or two other programs, leaving many member priorities on the cutting room floor, the Democrat said.
House Speaker Nancy Pelosi can only afford to lose 4 Democratic votes to pass a bill without GOP support.
The federal budget deficit is already on a downward trajectory thanks to the fading of pandemic-relief spending. The gap for the fiscal year through September was $2.77 trillion, compared with the $3.1 trillion peak seen in the previous year. The Congressional Budget Office forecasts this year’s deficit at less than $2 trillion.
The Congressional Budget Office has said the House version of the Build Back Better plan would add $367 billion to U.S. budget deficits over the decade while the White House produced its own rival score for the bill showing a $112.5 billion deficit decrease, when its estimate of revenue gains from stricter tax enforcement is included.
