Now that the drafting of the Democrats’ massive, multifaceted, filibuster-proof “Build Back Better” bill has begun, the party’s moderates are asserting their leverage. They’re hoping to limit the legislation’s size and scope. But complicating matters is a lack of cohesion among the moderates.
Senator Joe Manchin—as a red-stater free to tweak progressives without suffering significant hometown pushback—always attracts the most attention among moderate voices. Last week in a Wall Street Journal op-ed he declared, “I, for one, won’t support a $3.5 trillion bill, or anywhere near that level of additional spending, without greater clarity about why Congress chooses to ignore the serious effects inflation and debt have on existing government programs.”
“For one” jumps out of that sentence. Manchin did not claim to speak for a larger group, nor did he lay out demands for others to rally around. His insistence that “Congress” must provide “clarity” about why it ignores “inflation and debt” is an unserious request. Beyond his own votes for bills that have increased the budget deficit, the “Build Back Better” bill can be written so new spending is offset by new revenue, and wouldn’t contribute to inflation and debt.
Of course, Manchin need not be intellectually coherent to wield power in a 50-50 Senate. Like any senator, he need only breathe. Nor does he need allies. He need only have specific demands and a willingness to hold out for them. Axiosreports that Manchin has “voiced concerns about Biden’s plan to spend $400 billion for home caregivers” and suggested paring Democratic plans for free community college and universal preschool and means-testing the expanded child tax credit due to expire this year. But do these musings amount to nonnegotiable demands by Manchin? We don’t know.
While Manchin is looking to curtail the child tax credit, another group of moderates is pushing for a major extension. The House’s New Democrat Coalition (its 95 members are often called “New Dems”) announced its priorities for the bill, topping the list with “making permanent or extending for as long as possible the enhanced and expanded child tax credit (CTC), at least through 2025.”
There is a catch to the New Dems’ position. The Democrats aren’t playing with Monopoly money; Senator Kyrsten Sinema has already said flatly she wouldn’t support a bill with a topline of $3.5 trillion over 10 years, and Manchin has indicated the same. (Axios heard that Manchin won’t go above $1.5 trillion, but Manchin has not yet said that on the record.) So in a zero-sum process, the longer the CTC extension, the more money the CTC gobbles up, and the less money available for other ideas.
The New Dems’ statement says the group is “focused on advancing legislation that prioritizes doing a few things well for longer, over many things for short periods with near-term cliffs or significant delays.” This conflicts with the progressives’ intention of packing into the bill as many new initiatives as possible. If the temporarily expanded CTC is to be extended beyond this year, and is not means tested, the cost is about $100 billion a year. The New Dems want an extension of at least four years. Nominally holding down an extension to just two years—even though it could well get extended in perpetuity—would free up $200 billion for other priorities in the Build Back Better bill.
When I spoke with New Dems chair Suzan DelBene, she refrained from specifying any proposal for exclusion from the bill, but warned that enacting a long list of programs for short periods of time risks causing budget problems down the road: “If you assume that you’re going to do something short term just to make it look like it’s going to fit in a particular budget window, for a particular piece of legislation, but you assume it’s going to be renewed later, then you aren’t really being honest about what your long-term budget goals are.”
Scattered pockets of moderates are raising red flags in other areas. Biden wants to augment the capital gains tax so heirs pay the tax at the point of death, but at least 13 “farm district” House Democrats are resisting, arguing that the proposal hurts humble family farmers. Progressives believe that these representatives are using farmers as a shield, and the real intention is to protect the interests of wealthy donors. But whatever their intention, in this narrowly divided Congress 13 holdouts can derail a vote.
Another Biden tax proposal that may be in trouble is participation in a global corporate minimum tax system of 15 percent, in an attempt to clamp down on international tax shelters. The New York Times reports that “some Democratic lawmakers have expressed concern that U.S. companies would still be at a competitive disadvantage if other countries enacted minimum tax rates as low as 15 percent and the United States had a higher rate.” (America currently has a 21 percent corporate tax rate. Biden has proposed raising it to 28 percent, but Manchin has said he won’t go over 25 percent and Biden has indicated that he would accept that.) The Times says unnamed “lobbyists expect the proposal to make heirs pay immediate taxes on inheritances based on asset purchase prices to fall out of the plan. They also see a straight, 15 percent minimum tax on overseas income as imperiled.”
CNN’s Lauren Fox reports that “members in New Jersey have already begun pitching a fight against” proposals to lower prescription drug prices, which would provide “$600 and $700 billion in pay-fors, which is A LOT to leave on the table.”
Politico reported last week that Democrats are divided over whether to expand Medicare with new dental, vision, and hearing benefits, or focus on extending enhanced subsidies to pay for coverage through the Affordable Care Act. Bernie Sanders is leading the charge to expand Medicare, while Nancy Pelosi is reportedly trying to put the ACA first. The New Dems statement also prioritizes making permanent the ACA subsidies that were increased for this year under the American Rescue Plan.
The first draft by the House Ways and Means Committee, led by the moderate Democrat Richard Neal, tries to split the difference, creating a Medicare vision benefit for 2022, a hearing benefit for 2023, and a dental benefit—the most expensive of the three, at about $24 billion per year—for 2028. Sanders’s initial reaction was dissatisfaction about the slow implementation.
Another point of contention is the state and local tax deduction, or SALT. Republicans capped the deduction in the Trump-era tax reform bill, with low-key approval by some progressives who didn’t mind seeing wealthy taxpayers forced to pony up more. Yet there is a 33-member bipartisan (but mostly Democratic) SALT caucus, led by Democratic Representatives Josh Gottheimer and Tom Suozzi. Caucus members generally represent high-tax blue states like New York, New Jersey, and California, and they insist on at least raising the cap in exchange for their support of the Build Back Better bill. However, raising the cap costs money, creating less room for progressive priorities. (The budget resolution that preceded the drafting of the Build Back Better bill included a line for “SALT cap relief,” but exactly how much relief will be in the final bill is yet to be determined.)
Finally, the battle over the bill’s climate provisions has yet to be fully joined. The New Dems statement looks kindly on a robust climate section, urging Democrats to “go big on climate and maximize emissions reductions by leveraging every decarbonization tool available and prioritizing policies with the greatest and most immediate results.” (In my interview with DelBene, she specified support for the GREEN Act, which would expand renewable energy tax credits.)
Also of note, two House moderates, Stephanie Murphy and Henry Cuellar, sent a letter to Pelosi last week insisting that the bill’s provisions should not increase the budget deficit “with the possible exception of measures to combat climate change, in light of the fact that cost estimates prepared by the Congressional Budget Office and the Joint Committee on Taxation do not adequately account for the future costs associated with inaction on the climate crisis.” (Emphasis in original.)
But we can’t overlook the fact that a coal-state senator named Joe Manchin chairs the Senate’s energy committee, which has some responsibility for drafting climate-related portions of the bill—in particular the “clean energy standard” that would, according to E&E Daily, “set up direct payments to utilities to meet goals for delivering clean energy to consumers.” Last month E&E Daily noted that Manchin “has not ruled out supporting a clean energy standard, although he has been emphatic in saying he would fight any aimed at eliminating fossil fuels.”
Needless to say, this is a lot of policy conflict for Democrats to resolve.
The fact that moderates are not in lockstep gives Democratic leaders and progressives the ability to try to satisfy individual holdouts. But at the same time, the congressional margins are so narrow, any individual member of Congress or small group of holdouts can cause trouble without having to form a broad coalition.
We just saw a breakaway faction of 10 House moderates led by Gottheimer complicate Pelosi’s attempt to pass the budget resolution, a necessary procedural step before embarking on the filibuster-proof budget reconciliation process that Democrats will use for the Build Back Better bill. After initially refusing to support the resolution before the Senate-passed bipartisan infrastructure bill also passed the House and was signed into law, 10 moderates settled for a compromise in which the bipartisan infrastructure bill receives a vote on that bill for September 27, separate from the Build Back Better bill. From their perspective, the moderates succeeded in unlinking the two bills, preventing progressives from taking the bipartisan bill hostage and gaining outsized leverage over the Build Back Better bill.
That outcome happened even though the larger New Democrat Coalition neglected to back up Gottheimer’s rump group, and instead pushed for a speedy budget resolution vote irrespective of what happened to the bipartisan infrastructure bill. The moderate group Third Way publicly sided with the New Dems, further indicating that the 10 renegades were not speaking for the entirety of the party’s moderate faction. Third Way Executive Vice President Jim Kessler told me they had a tactical disagreement with Gottheimer’s group: “Anything that had the possibility of upsetting that plan—to get both bills to the president’s desk—we were concerned about.”
In Kessler’s view, what the Moderate 10 did was unnecessary: “The bipartisan infrastructure bill is very good from a moderate perspective. And then the reconciliation bill—I mean, you can just see how moderates already have very good leverage on this bill. And we’re pretty comfortable that by the time this gets done, that it’s going to look like a Biden bill and not a Bernie bill.”
Democratic moderates may be in disarray. But even in disarray, they hold sway.