Democrats Pressing Biden to Go Even Bigger With Families Plan
(Bloomberg) -- Democratic lawmakers are clamoring to add to President Joe Biden’s package of social spending even before he rolls it out on Wednesday, risking a ballooning price tag and adding to the complications already facing the White House in getting it through Congress.
From taxes to expanding Medicare to subsidizing child care, a wide swath of the party’s lawmakers are arguing that time is running out to act boldly on Democratic priorities before the 2022 midterm elections -- which could flip control of one or both chambers to Republicans.
Biden’s “American Families Plan,” which he’ll outline to a joint session of Congress, is set to include funds for child care, paid family and medical leave, universal pre-kindergarten schooling, tuition-free community college and nutritional assistance paired with a four year extension of the expanded child tax credit enacted in the March Covid-relief bill. He proposes to pay for it with tax increases aimed a high-income earners.
But the party’s progressives are pushing for more. They want the plan to include new health care benefits and to increase the proposed taxes on the wealthy and tax breaks for middle-class and lower-income parents already under consideration.
Meanwhile, Democrats from high-income, high-tax states like New York and California are threatening to withhold their support for Biden’s plan unless it lifts the cap on the state and local tax deduction imposed by Republicans in 2017. They may also balk at some of the president’s proposed tax increases on investment.
There’s no sign that Republicans will go along with any of it.
That leaves House Speaker Nancy Pelosi -- with a narrow majority and few votes to spare -- in a potentially tight spot if her Democratic rank-and-file members do not let up on their demands. Expanding the Biden proposal could jeopardize the ability of Majority Leader Chuck Schumer to get the plan through the evenly divided Senate using special budget procedures. Schumer will need to keep all 50 in the Democratic caucus united, including moderates like West Virginia’s Joe Manchin.
Here are the major flashpoints that have emerged on the American Families Plan:
1. Drug Prices
More than 80 House Democrats, including moderates and progressives, wrote to Biden this week urging him to include a drug-price reduction provision. House Democrats last week reintroduced their proposal to let Medicare negotiate the prices of drugs it purchases, which could save the government nearly $500 billion per year. It would cap out-of-pocket costs at $2,000 for seniors in traditional Medicare. The bill would also allow the Health and Human Services secretary to make the new prices available to private health plans, align U.S. drug prices with an international index and let drug makers issue rebates if they increase prices faster than inflation.
“As we consider the critical investments we must make in this next jobs-and-families plan, we must ensure that we invest in the health of people across America,” Representative Pramila Jayapal of Washington, who heads the Congressional Progressive Caucus, said in a statement.
Senate Budget Committee Chairman Bernie Sanders led a similar letter signed by 17 senators and said Monday he was still in talks with the White House about adding the provision. So far there is no sign it will be included in the Biden proposal and Sanders said that if that is the case Congress must add it to the final bill.
“If we go forward and do this, this is historical because the pharmaceutical industry is the most powerful lobby in Washington and nobody has ever successfully taken them on. I think we can do it,” Sanders told reporters.
Some Democrats have also pushed Biden to include an expansion of Medicare in his plan. Proposals range from lowering the Medicare eligibility age to 60 or 55, or even 50. They are also asking Biden to expand benefits to hearing, dental and vision care.
Expanding Medicare in this way is seen as the first step toward “Medicare for All,” a progressive proposal that would sideline private health insurance. As such, the idea is forcefully opposed by the insurance lobby.
Biden appears to be on track to extend Affordable Care Act subsidies enacted in the Covid-19 relief package as an alternative to expanding Medicare.
3. Child Tax Credit
A major fight looms over extending the temporary child tax credit that was included in the pandemic-relief bill. It was boosted to $3,600 for children five and younger and to $3,000 for those age six and up. Without an extension from Congress, the credit would revert to $2,000 next year. It begins phasing out for single parents making more than $112,500 and married couples making more than $150,000.
House Ways and Means Chairman Richard Neal on Tuesday released a plan calling for a permanent extension of the child tax credit. Biden told members of Congress last week he prefers a permanent extension but will only propose a temporary one due to cost. The Tax Foundation estimates that a permanent expansion could cost $1.6 trillion over a decade.
“I want to see permanent,” Dick Durbin, the No. 2 Senate Democrat, said. “I want to go big and bold. We don’t have a lot of time.”
Separately, Democratic Senator Elizabeth Warren of Massachusetts and New York Representative Mondaire Jones are calling on Biden to put $700 billion over a decade into setting up federally subsidized childcare centers. ”If this pandemic has shown us nothing else it has shown us the critical importance of parents having access to dependable childcare,” Warren said at a news conference Tuesday.
4. Tax Code
Democrats from high-tax states like New York, New Jersey, Minnesota and California have made a clear demand: restore the full state and local tax deduction or they will block any other bill changing the tax code. The formation of the “SALT caucus” was met with criticism from some factions of the party, including New York Representative Alexandria Ocasio-Cortez, a progressive who argued that removing the $10,000 cap on the deduction benefits the wealthy.
While moderate Democrats have not yet weighed in on the individual tax increases Biden is proposing, they have said there isn’t much appetite for tax increases. The bipartisan Problem Solvers Caucus has prioritized trying to find ways to pay for Biden’s initiatives that Republicans can also agree to. Some Democrats are contemplating ways to blunt the impact of some of Biden’s tax increases on politically sympathetic groups, such as family farms that have been around for generations.
Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat, is meanwhile urging the White House to consider his plan to require wealthy individuals to pay taxes on unrealized gains of stocks, bonds and other assets annually, instead of when they are sold. The idea would mean that investors and other wealthy individuals pay taxes more regularly, but has been criticized for being difficult to administer.
Manchin told reporters Tuesday he wants to look at increasing tax enforcement before discussing any tax increases beyond hiking the corporate tax rate from to 25% from the 21% rate Republicans cut it to in the 2017 tax reform.
5. Unemployment Insurance
Wyden and Colorado Democrat Micheal Bennet have been leading an effort to have the administration include an expansion of UI in his plan. Their proposal would raise base jobless payments, create a permanent benefit for self-employed workers and tie extended weeks of help to economic conditions.
“The Covid-19 pandemic has revealed many cracks in our country’s unemployment insurance (UI) system. The problems go far beyond the administrative and technological challenges states have faced in paying out benefits. The system also fails to respond to economic downturns, to reach enough workers, or to provide adequate benefits,” 39 Senate Democrats wrote in a letter to Biden on Monday.
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