Manchin’s Hard Line Has Democrats Scrapping to Save Biden Agenda
(Bloomberg) -- President Joe Biden’s economic agenda will face a Hunger Games-like competition in January if Senator Joe Manchin sticks by his demands and forces Democrats to choose between dramatically shrinking the bill’s benefits or jettisoning most of them.
Democratic leaders on Thursday abandoned plans to pass the roughly $2 trillion social spending and climate plan before their Christmas break after it was clear that Manchin wasn’t on board. The West Virginia Democrat’s support is critical in the evenly divided Senate. But months of negotiations with Biden, including talks this week, have only hardened the resolve of the Senate’s most conservative Democrat.
Biden acknowledged that the legislation won’t be done before year’s end, but he expressed confidence it would eventually pass. He also urged patience as discussions with Manchin continue.
“It takes time to finalize these agreements, prepare the legislative changes, and finish all the parliamentary and procedural steps needed to enable a Senate vote,” he said in a statement. “We will advance this work together over the days and weeks ahead.”
Democrats expect Majority Leader Chuck Schumer to try again in January. But structuring the bill to meet Manchin’s latest conditions -- keeping the total cost to $1.75 trillion and extending Biden’s signature expanded child tax credit for a decade if at all -- would leave only a few hundred billion dollars to be squeezed out for the rest of Biden’s agenda.
Manchin wasn’t the only source of delay. Democrats are still negotiating among themselves over expanding the state and local tax deduction, among other provisions. Manchin attributed it to the Senate parliamentarian’s ongoing scrub of the bill to ensure it complies with strict rules for the process Democrats are using to avert a Republican filibuster.
“When the parliamentarian gets their work done we’ll see what they have,” he said.
On Thursday night, Senate Parliamentarian Elizabeth MacDonough dealt Democrats another blow, saying that a provision of the legislation providing temporary deportation protections for some unauthorized immigrants doesn’t comply with budget reconciliation requirements.
But Manchin has been a key player in steering the fate of the legislation. When he and fellow moderate Kyrsten Sinema of Arizona insisted on a far-cheaper package than the $3.5 trillion the White House and other Senate Democrats wanted, Democrats writing the bill mostly retained its sprawling scope. But they delayed some new programs or had them expire early to meet Sinema’s and Manchin’s topline.
Their goal was to assuage not only Manchin and Sinema, but also the many Democratic constituencies with a generation’s-worth of pent-up demands, in the only bill Republicans can’t block with a filibuster.
A White House announcement of a framework that included a one-year expiration of the package’s most expensive item -- Biden’s signature child tax credit boost to as much as $300 a month per kid -- appeared to set the stage for a compromise. But Manchin contends that’s just a veil for the true cost because Congress inevitably will keep extending it. So he wants the program to last for a full decade without expirations, and isn’t budging on a $1.75 trillion topline — less than 3% of the federal budget over the coming decade and less than 1% of GDP.
Extending the child tax credit for 10 years on its own would gobble up the bulk of the bill -- about $1.4 trillion -- leaving little money for other items on the party’s wish list.
Democrats were caught off guard by Manchin’s sudden shift on the child tax credit.
“For this to come up as an issue toward the end was stunning,” Senator Dick Durbin, the No. 2 Democrat in the chamber, said Thursday.
If Manchin holds to that, Democrats will have to answer some vexing questions:
- Do they shrink the child tax credit to find room for other priorities, effectively increasing taxes for tens of millions of families in an election year?
- Do they jettison most of the rest of the bill, and long-sought subsidies for child care, climate, housing, health care and so on?
- Do they preserve the bill’s expanded tax deduction for state and local taxes, which primarily benefit wealthier people, while shrinking benefits for the middle class and the poor?
“The White House needs to make some hard decisions about what it wants and what it has to leave behind,” Jim Lucier, managing director of Capital Alpha Partners, said in a note to clients.
There’s no easy answer to which version of a Manchin-sized bill could pass the 50-50 Senate and the House, where Speaker Nancy Pelosi manages a narrow majority and several restless factions that fought hard for each of the bill’s provisions.
And no issue is more fraught than the child tax credit, which Democrats see as vital both for reducing child poverty and making a political pitch in the midterm elections.
Without a deal, expanded tax credits for 65 million children of up to $1,600 per child would go away. And instead of getting monthly installments in their bank accounts as they have this year, parents would have to wait until tax time in 2023 -- after the midterms -- to get the existing $2,000 tax break set by the 2017 tax law.
A version of this dynamic happened in 2010, after independent Senator Joe Lieberman balked at policies backed by liberal Democrats, including a public health insurance option. House progressives initially vowed to oppose a health care bill shorn of that priority, but ultimately rallied to enact the Affordable Care Act that March.
Faced with getting nothing or getting $1.75 trillion of priorities enacted before the midterms, Democrats still have huge incentives to reach a deal. But getting there is taking far longer than they hoped with no clear path to a resolution.
©2021 Bloomberg L.P.