Biden’s Economic Package Risks Languishing in Senate Into 2022

(Bloomberg) -- Senate Majority Leader Chuck Schumer insists the Senate will pass President Joe Biden’s nearly $2 trillion tax-and-spending package before Christmas, but there’s still much work to do and time is running short.

A delay into the new year risks slowing momentum for Democrats who need this legislative victory behind them as they fight to maintain narrow majorities in the House and Senate in the 2022 midterm elections. The signature bill includes spending on Democratic priorities such as child care and climate change and drastically changes the tax cuts Republicans won under President Donald Trump. 

“There is no way they’re going to be ready to vote on their big bill,” Senator John Thune of South Dakota, the No. 2 GOP leader, said on Thursday. Democrats “probably need to nip that fairly soon because it’s just not practically going to happen,” he added.

Key pieces are still under negotiation, including a House-passed provision for four weeks of paid family and medical leave that moderate Democratic Senator Joe Manchin opposes. His vote is crucial for passage without any Republican support.

“As majority leader, I am fighting tooth and nail to make this happen,” Schumer said.

The White House says the stakes for most American families are high as the expanded child tax credit, which provides as much as $300 a month per child, expires on Dec. 31. Without an extension of that credit in the bill, families’ monthly budgets will take a hit just as they grapple with rising costs on everything from gas to groceries.

Democrats need the support of all 50 members of their caucus to push the legislation through the evenly divided Senate, but Manchin, of West Virginia, and Kyrsten Sinema of Arizona haven’t signed on. Manchin cites rising inflation and the discovery of a new variant of the Covid-19 virus that he said could “give you cause to pause.”

A Friday report showed an annual 6.8% gain in the consumer price index. Biden said Friday he would speak to the Manchin early this week.

SALT Debate

The economic package would boost taxes on the wealthy and corporations while providing universal pre-K, childcare subsidies, climate-change protections, expanded Obamacare health insurance subsidies, and the ability of Medicare to negotiate prices on some medicines.

Also unresolved is an expansion of state and local tax deduction, or SALT, that currently has a $10,000 cap. The House-passed version of Biden’s so-called Build Back Better bill lifted the cap on the write-off to $80,000.

Senators Bernie Sanders, a Vermont independent, and Bob Menendez, a New Jersey Democrat, say the House approach is too generous. They are instead looking at limiting the tax break to those under a certain income threshold, but disagree on what that should be.

“We are making progress,” Menendez said Thursday.

Democrats are also discussing tweaking the 15% corporate minimum levy on financial profits, known as a minimum “book” tax. Democrats are looking at ways to ensure that the minimum tax wouldn’t undercut the value of other tax preferences, like renewable energy credits and incentives for companies to contribute to workers’ pension funds.

A special tax credit for union-made electric vehicles could also face changes. The legislation includes a $4,500 tax credit for consumers who buy U.S.-made, union-assembled electric vehicles. That incentive is on top of a $7,500 credit available to most electric vehicle buyers. But Manchin, whose state is home to a non-union Toyota factory, has said he doesn’t like it.

Senate Parliamentarian

Meanwhile, Senate Parliamentarian Elizabeth MacDonough could pose an even bigger challenge for Democrats.

MacDonough last month heard both parties’ arguments about whether a plan to shield as many as 6.5 million undocumented immigrants from deportation can be in the legislation. Democrats are using the reconciliation process to avert a GOP filibuster, but the bill must adhere to strict rules for them to do so. MacDonough still hasn’t made a determination.

The parliamentarian still has to hear arguments on all other aspects of the legislation this week. The high-stakes review threatens to make Swiss cheese of the package if key tax, health care, and some climate provisions like the tax credit for union-made electric vehicle are axed. 

“We’ve got a good case for everything,” Senate Finance Committee Chair Ron Wyden, an Oregon Democrat, said. “We’ve done our work.”

Idaho Senator Mike Crapo said Republicans have been “working for weeks, line by line going through to prepare” for the meetings with the parliamentarian. 

“We want to pare it down as much as we can,” he said.

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