Last week, President Biden intervened to use his prestige as the leader of his party and his decades of experience as a congressional dealmaker to force frustrated Democrat progressives to accept the severe reductions that Democrat moderates Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have demanded in Biden’s social welfare spending bill.
The two were in a strong bargaining position, because without their votes, the measure could not pass in the 50-50 divided Senate, even with the help of Vice President Kamala Harris’ potentially tie-breaking vote. As a result, since the beginning of October, Democrats have been struggling to agree upon and then find a way to retain the most essential features of the vast Biden social welfare spending proposal.
Since the current session of Congress began in January, Manchin has made maximum use of his position as the key 50th Democrat vote in the Senate to demand modifications to a wide range of radical liberal and progressive policy proposals which Biden has been pushing since he took office. Because Manchin has also opposed any significant change in the Senate’s filibuster rule, which is the basis of his current political power in Washington, Democrats have been forced to use the clumsy reconciliation process to pass their partisan liberal proposals over the united opposition of the 50 Republicans in the Senate.
MODERATE DEMANDS FOR CHANGE
With respect to Biden’s $3.5 trillion Build Back Better proposal, Manchin has stood firm on his original demands that its cost be scaled back to no more than $1.5 trillion. More recently, he added a few new demands.
One was the elimination from the proposal of a $150 billion Clean Energy Performance Program to boost the generation of clean energy, because it would cripple America’s fossil fuel industry and impact West Virginia’s coal-mining-based economy. President Biden quickly accepted that demand, to the dismay of Democrats concerned about climate change.
Manchin is also opposed to the imposition of a carbon tax, and has said that the welfare entitlement benefits the bill would create should be restricted to lower income individuals and families by imposing a means test for eligibility.
Until last week, Senator Sinema had been less specific in her public comments regarding her objections to the original $3.5 trillion proposal, other than stating her objections to $100 billion in what she considered to be excess spending in its anti-climate change provisions. But she has now made it clear to her fellow Democrats that she would vote against the proposal if they did not drop its provisions which would roll back key features of President Trump’s 2017 tax cut, as well as its proposed major changes to the capital gains tax, which would make it more difficult for families to bequeath their accumulated wealth to their children.
Progressive activists have become so frustrated with Sinema’s covert campaign against some of the provisions of Biden’s bill that they began to harass her in recent weeks by invading her privacy. They also have accused her of hypocrisy for having voted against the Trump corporate tax cuts as a congresswoman in 2017, while working to preserve them today.
Sinema also did not disclose until last week the initiatives in Biden’s original proposals that she supported. However, in a private 30-minute conversation with Richard Neal, the Democrat chairman of the House Ways and Means Committee, he said she told him that she had three top priorities — the tax credit for renewable energy programs, the child tax credit, and the paid leave program. Neal added that she also told him she strongly agreed that the Biden bill, in some form, has to pass Congress and be signed into law.
Taken together, the drastic changes demanded in the original Biden proposal by Sinema and Manchin have forced the other Democrats to make painful choices among the progressive initiatives in the original bill. Some have been dropped or drastically reduced to meet Manchin’s spending cap, while others, as of this writing, remained in legislative limbo. Democrats have also had to find new ways to pay for what’s left of Biden’s bill that do not cross Sinema’s red lines.
President Joe Biden and House Speaker Nancy Pelosi have already missed the first September 30 deadline they had announced for obtaining agreements to compromises between moderates and progressives that are necessary to get the Biden social policy bill passed by the Senate and signed into law. Now they are facing the possibility of missing the second deadline of November 1 that they have set for reaching such an agreement, which would be yet another blow to Biden’s already tarnished prestige as president and the leader of his party.
Even if the Democrats do forge such an agreement by the time President Biden leaves to attend a G20 economic summit meeting in Rome and the Glasgow Climate Summit in Scotland, it will still be seen as a hollow victory, because so many of the original bill’s liberal initiatives will have been dropped or severely cut back.
Until recently, Biden had been reluctant to describe the details of what he and his administration call the “Build Back Better” plan. But during a CNN town hall in Baltimore last week, Biden was eager to discuss some of its specifics to win the support of the national television audience. He said that while his goal was to “build the middle class and the working class,” he was also prepared to make the necessary series of concessions to complete the deal. That was why, Biden said, among many other concessions, he had agreed reduce his proposal to provide 12 weeks of paid leave for new parents and caregivers to four weeks.
The president said his original proposal to expand Medicare to include coverage for dental, vision, and hearing was now out of “reach” because of the need to cut costs. Manchin had objected to that proposal, because he was concerned it would further deplete the Medicare trust fund.
However, Biden did float a replacement proposal to provide an $800 annual voucher to cover dental work for Medicare recipients. In response, Manchin said this week that he was still concerned that Biden’s more modest proposed expansion of Medicare would still put too much pressure on the program’s finances. “You’ve got to stabilize that first before you look at … expansion. So if we’re not being fiscally responsible, that’s really concerning,” the West Virginia senator insisted.
Biden also said he hoped to increase the Pell grant payments to college students in lieu of the free community college proposal he was forced to drop due to a lack of sufficient public support. He also confirmed during the town hall that he had dropped his proposal to cancel the Trump tax cuts for corporations and the wealthy, because of the objections from Senator Sinema.
WHY DEMOCRATS ARE EAGER TO REACH A QUICK AGREEMENT
Although Speaker Pelosi insisted over the weekend that 90% of the agreement between moderates and progressives over which items to cut and how to fund the parts that will remain had been worked out, there was still a great deal of uncertainty over the exact nature of the final compromises. Democrats were eager to resolve their internal disputes over how to downsize the Build Back Better bill by November 1, for a number of reasons.
First, the dispute is holding up passage of the infrastructure bill, which also includes fresh funding for the federal Highway Trust Fund that would otherwise run out by the end of October.
Second, Democrat party leaders are keeping a close eye on the Virginia gubernatorial election on November 2. The Democrat candidate, former Virginia governor Terry McAuliffe, is in a surprisingly close race against a relatively unknown GOP challenger, Glenn Youngkin. The main issue in the campaign has been vigorous parent objections to McAuliffe’s support for the teaching of liberal critical race theory in Virginia’s public schools, compounded by anger at McAuliffe’s statement that parents have no right to protest against what their children are being taught.
BIDEN BECOMES AN ISSUE IN THE VIRGINIA ELECTION
Democrats are so concerned about the possibility of an embarrassing loss in Virginia that they sent former president Barack Obama to there last week to campaign on McAuliffe’s behalf.
But instead of addressing the school issue, Obama tried to change the subject by accusing Youngkin of conspiring with Republican Trump supporters to deny minorities their voting rights and overturn the results of last November’s presidential election. However, a year later, the Democrats’ election integrity issue is getting stale. It is clear that in Virginia and other upcoming elections nationwide, Democrats are in desperately need of a new political message. They are hoping that successful completion of the Build Back Better bill, even in its reduced form, will give it to them.
In a Fox News interview this week, GOP candidate Youngkin responded to the attack from Obama in kind. Ignoring McAuliffe’s faltering campaign for the moment, he compared his own political agenda to the recent performance of Joe Biden. “You can’t help but look at President Biden and recognize what a failed presidency looks like,” Youngkin said. “I mean, you look at Afghanistan, you look at the border, you look at our economy, you look at the fact that everything he’s doing seems to be making America worse — and I’m going to go to work and make Virginia better.”
BIDEN INTERVENES DIRECTLY
Over the past few weeks, as President Biden has gotten deeply involved in trying to work out the differences between Democrat moderates and progressives over the necessary reductions in the original $3.5 trillion measure, he has been speaking frequently with Manchin and Sinema to confirm that the proposed agreements address their objections.
Over the weekend, Biden invited Senator Manchin and Senate Majority Leader Chuck Schumer to his Delaware home in an effort to reach an agreement on which items in the original $3.5 trillion spending proposal would survive in the final version.
Biden has been trying to persuade Manchin to agree to a final cost figure for the revised bill closer to $2 trillion, more than the $1.5 trillion cap the West Virginia senator had said he wanted. Biden had already agreed to drop a measure in the original bill which would have provided free tuition at all of the nation’s two-year community colleges, and to scale back the proposal for 12 weeks of parental leave to four to help meet Manchin’s demands that the total cost of the bill be reduced.
After the meeting in Biden’s home, the White House issued a brief statement describing the encounter as “productive” and saying that the discussions on finalizing the spending bill would continue. However, the next day, Manchin insisted in comments to reporters in Washington that he was still holding firm to his insistence that the cost of the revised bill be capped at $1.5 trillion.
PRIORITIZE OR MAKE CUTS ACROSS-THE-BOARD?
Meanwhile, a basic disagreement arose between Democrat moderates and progressives over the fate of the remaining liberal measures in the original bill. The moderates have argued that the less important measures should be dropped entirely from the current bill so that the more important ones that survive could be fully funded, thereby giving them a better chance to succeed.
But the progressives argued for making proportional across-the-board funding cuts so that all the remaining liberal measures could be initiated, even if there would only be enough money in the bill to keep them running for a short while. Their hope is that once the measures are put in place and have gained public support, even a Republican-dominated Congress would be forced to pass enough additional funding to keep them going after the funds in the current bill have run out.
Moderates claim that such a scenario is unlikely because of current predictions, even by Democrat pollsters, that the Republicans will win back control of the House in next year’s midterm election. Given the current climate of bitter partisan hostility in Washington, a Republican-controlled House would be unlikely to vote for the additional funding to prolong one of the new Democrat programs. No matter how popular it might turn out to be, a Republican-controlled House would prefer to let it die. Therefore, the moderates argue, any new program or benefit created by the current bill would need to include enough funding to keep it going at least until after the 2024 presidential election to have any real hope of long-term survival.
EVEN SUCCESSFUL PROGRAMS ARE LIKELY TO BE KILLED
During a meeting with President Biden last week, Democrat moderates raised this concern. According to Congressman Ami Bera (D-CA), who was present, the moderates told Biden that even though creating the programs in the short term “does give us an opportunity over the next two to three years to actually see which programs have the biggest impact, we are going to have our work cut out for us to extend some of these important programs.”
Senator Chris Murphy (D-CT) expressed the same concern over the decision to cut back the original proposal to make permanent the expansion of Obamacare premium subsidies that was part of the Covid relief package passed in March, and the closure of a “gap” in Medicaid coverage in a dozen states with GOP-controlled governments. To save money, the current version of the proposal would extend the expanded subsidies for only three years. This has prompted Murphy to complain that, “Nobody’s going to notice the [increased Obamacare and Medicaid] subsidies if they only inch up or they expire in a year or two.”
Congressman Ritchie Torres, a progressive Democrat from New York, told CNN, “I am convinced that if the child tax credit only has a one-year extension, then what happens when the Republicans assume control of the House? Then the child tax credit will be left to expire, and millions of children will be plunged into poverty. And our greatest achievement will be undone. So [reducing the extension to just one year] strikes me as a grave miscalculation.”
Other provisions in the original Biden proposal now being cut back include a $400 billion program to provide increased home care for seniors and people with disabilities, and the reduction of a $300 billion increase in federal housing aid by almost half.
DEMOCRATS WORRY THEY WON’T GET THE CREDIT
Democrat progressives and moderates alike now fear that even if the downsized spending plan does pass Congress and get signed into law, they won’t get the political credit they deserve for it because it will be much less impressive than the original $3.5 trillion proposal which had initially seemed to be unstoppable.
It has also become increasingly likely that Biden’s Build Back Better bill, in whatever form it emerges, will be the only major piece of legislation the White House will be able to pass before next year’s midterm election. That is why some Democrats fear they made a mistake by including the $3.5 trillion original version of the bill in a budget resolution before they had lined up the support it would need from the two moderate Democrats in the Senate who are now holding it up.
Democrat Congressman Scott Peters explained that the passage of the budget resolution, which was necessary to conform with the Senate’s reconciliation rules, gave the public the mistaken impression that Democrats already had approval of the $3.5 trillion measure. In fact, Peters points out, “We never had those numbers. … It’s given the impression that that’s what we have and that we’re cutting back from it. … What we [actually] have is zero. Anything we add is literally a plus and is a success.”
BEHIND GROWING DEMOCRAT DISAPPOINTMENT
But the disappointment of many Democrats with the current bill is undeniable.
The bill is certain to be far smaller and far less ambitious than Biden and his fellow Democrats had expected. It is also likely to become better known for the Democrat promises it will break than for the ones it will try to keep. It won’t provide free tuition for community colleges. It won’t add free dental, hearing, and vision coverage to Medicare. It won’t force an accelerated transition of American electrical power plants to green energy sources. It will not be paid for by rolling back the Trump tax cuts. And those benefits in the original proposal that will likely survive — such as an extension of more generous child care tax credits, and universal free Pre-K education — will be limited to one year instead of four, and will almost certainly not be continued after Republicans regain control of Congress.
Biden tried to shrug off those failures during his town hall last week by telling his increasingly disappointed supporters, “Look — hey, look, it’s all about compromise.” But that kind of answer is unlikely to satisfy many of them.
The political problem facing the Democrats is compounded by the rapid collapse of Biden’s job approval rating with the American public, falling by more than 20 points since June. In the past, whenever faced with serious political challenges, Biden could always fall back on his reputation for personal affability and long record of accomplishment as a senator and vice president. Now those reserves of good will and credibility have been all but exhausted.
BIDEN IS RUNNING OUT OF OPTIONS
While Biden and the Democrats may win passage of the Build Back Better plan, it is hard to see where their next legislative achievement will come from. Since becoming president, Biden’s go-it-alone legislative approach has burned bridges with most Republicans in Washington, and trying to make another bipartisan deal with them is no longer viable.
Unless Biden can convince Manchin and other moderate Democrat senators that this is an emergency “break the glass” moment that justifies the gutting of the filibuster rule, his only remaining legislative option will be the extremely limiting reconciliation rules. That path will only remain good as long as Democrats can hold on to the 50-50 split in the Senate, and their narrow majority in the House. If the midterm elections result in a Republican sweep, as is widely expected, Biden’s legislative accomplishments will be finished.
THE REPUBLICAN COUNTER-NARRATIVE
Republicans claim that the climate of hostility that pervades Washington today is also largely President Biden’s fault. After the November election, many Republicans in Washington had hoped that Biden had been sincere when he had promised voters he would work to bring an end to the bitter partisanship which characterized Trump’s presidency. Those Republicans were also pleased when Biden invited them to the White House during his first week in office to discuss the next round of emergency Covid stimulus and aid that Congress needed to pass.
However, that feeling didn’t last. Instead of working together to come up with a bipartisan agreement for that stimulus, Biden rejected the Republican stimulus proposals and worked exclusively with Democrats to craft a $1.9 trillion stimulus package filled mostly with wasteful spending on liberal policy goals which Biden knew the Republicans could not support. With that, Biden poisoned the political atmosphere in Washington at the very outset of his presidency, destroying the mutual trust essential to any successful bipartisan initiative.
So far, that $1.9 trillion stimulus bill is Joe Biden’s only significant legislative accomplishment as president — and Republicans today are blaming its excessive spending for the current spike in inflation. Patrick McHenry, the ranking GOP member of the House Financial Services Committee, told Politico, “Because they [Democrats] shoveled out $2 trillion in spending there, it’s overheated segments of the economy, which has made it more difficult for them.”
BIDEN CHOOSES SIDES AGAIN
In trying to settle the internal Democrat dispute over how to modify Biden’s Build Back Better proposal, the president once again sided with progressives against the moderates, just as he did last month in a dispute between the same two factions. In that case, the moderates had been demanding that Speaker Pelosi keep her promise to hold a House vote by September 27 on the bipartisan infrastructure bill Biden had previously negotiated with Senate Republicans. That vote is still being held up by objections from Democrat progressives.
Previously last week, Biden invited a group of Democrat lawmakers to the White House to urge them to reach a consensus and finalize the long-delayed liberal spending bill. After emerging from that meeting, Congressman Torres said Biden had told them it was time to conclude the negotiations. “He has given us ample time to figure out our priorities, but one of the principles is finality,” Torres said. “He conveyed to us a sense of urgency.”
Progressive Democrats are well aware that this bill may be their last chance during Biden’s presidency to pass any of the socialist-inspired items on their legislative wish list. For that reason, they have been increasingly harsh in their public criticism of fellow Democrats Manchin and Sinema, for stubbornly refusing to get out of the way of the bill’s passage.
BACKLASH AGAINST MANCHIN AND SINEMA
Some House Democrats are now publicly urging the Biden administration to be less accommodating to the demands of Manchin and Sinema.
For example, Nevada Congressman Steven Horsford told Politico that he had discussed the problem with Vice President Harris last week during her visit to Las Vegas. Specifically, Horsford said he had asked the White House to resist Manchin’s demand to add a work requirement to the child tax credit extension in the Biden bill and to lower the maximum family income for eligibility.
However, Manchin and Sinema are not the only Democrats who have voiced objections to some of the original proposals in Biden’s bill. For example, Democrats legislators representing the interests of family farmers in Iowa and Montana also objected to the bill’s proposed changes in the capital gains tax, despite the fact that Biden was willing to carve out a $25 million exemption to that tax hike. The main objection was to Biden’s proposal to eliminate the “step up” provision in the capital gains tax. The provision allowed property owners to pass them to their heirs at their death without requiring the heirs to pay a tax on the increase in the value of that property while the original owner was still alive.
Writing in the Wall Street Journal, real estate professionals Dan Palmer and David Williams warned that eliminating the “step up” provision and other changes to the tax code Biden has proposed would threatened to undermine the financial viability of the entire real estate market.
Another eliminated benefit from Biden’s original proposal due to internal opposition from both House and Senate moderate Democrats was a measure that would have empowered Medicare to bargain down the cost of prescription drugs to everyone.
Also left unresolved until the last moment was a demand by Democrats from blue states across the nation, including New York, New Jersey, and California, for full restoration of the so-called SALT itemized tax deduction that had been capped by Republicans at $10,000 to help pay for Trump’s 2017 tax cuts. Democrats have complained that the cap punishes middle income homeowners who can no longer fully deduct their high state and local tax payments in those states, while Republicans have responded that the SALT deduction has mostly served as a tax cut for the same rich luxury homeowners Biden is now targeting for his own tax increases.
Early in the process of drafting the Biden spending bill, a group of nine moderate House Democrats threatened to vote against the measure if it did not lift the SALT cap. Their rallying cry was “No SALT, no deal.” But in the end, they caved to pressure from House Speaker Nancy Pelosi and voted in favor of the early version, even though it did not offer any relief on the issue.
PELOSI KEEPS CLAIMING AN ELUSIVE SUCCESS
Meanwhile, over the weekend, Pelosi began to once again issue assurances, as she did a month ago, that a deal to resolve the moderate-progressive split in her House caucus was almost at hand.
“We’re pretty much there now,” Mrs. Pelosi said on CNN on Sunday. Pelosi confirmed that some of new revenue for the package would come from a new wealth tax proposed by Senator Elizabeth Warren during last year’s Democrat presidential primary campaign, which would only apply to billionaires and those who had declared annual incomes of more than $100 million for three consecutive years. It would require such people to pay a yearly tax on the increase in the total value of their assets before they had even sold them.
In an extensive interview on CNN, Pelosi expressed confidence that the progressives and the moderates would finally reach a detailed agreement this week on what the revised spending bill will contain, even though its final passage by both the House and Senate may take another week or so. Reaching that agreement would also unlock the bipartisan $1.2 trillion infrastructure bill that the Senate passed in August with bipartisan support from Republicans, for which the Democrats will also seek political credit in the campaign leading up to next year’s midterm election.
When asked by whether President Biden will “have a deal in hand” between the progressives and moderates by the time he leaves to Europe, she answered, “We’re almost there. It’s just the language of it [that needs to be finalized].” At another point in the interview, Pelosi said, “We’ve 90% of the bill agreed to and written; we just have some of the last decisions to be made.”
Pelosi also admitted that in its reduced form, the Biden bill would be unlikely to include the addition of dental benefits to Medicare, because “dental is very expensive.” She then said that, “We’ve been told by people who know about these things that it’ll take five or six years in order to implement the dental.”
BIDEN AND PELOSI CAREFULLY POLITE TO MANCHIN AND SINEMA
Nancy Pelosi declined an invitation from the CNN reporter to criticize Manchin and Sinema for holding up passage of the bill. Instead, she took pains to emphasize the still huge scale of the reduced legislation. “It is less than was projected to begin with, but it’s still bigger than anything we’ve ever done in terms of addressing the needs of America’s working families,” Pelosi said.
During his CNN town hall, President Biden was careful to avoid direct criticism of the moderate senators. He said that Sinema was “very supportive” of his agenda but objected to the bill’s original measures that would have raised taxes on corporations or wealthy Americans, “and so that’s where it sort of breaks down.” But Biden also said he had a lot of respect for her opinion. “Look, when you’re in the United States Senate and you’re president of the United States and you have 50 Democrats, every one is a president,” Biden said. “Every single one. So you got to work things out.”
Biden also had nice things to say about Manchin during his town hall. “Joe’s not a bad guy. I mean, he’s a friend,” Biden said, adding, “And he’s always, at the end of the day, come around and voted for it [the Democrat proposal].”
REPLACEMENT DEMOCRAT TAX IDEAS
Speaker Pelosi also expressed confidence that the final version of the Biden proposal would contain “plenty of alternatives” to the tax rate increases which Sinema had demanded be removed from the original measure. Pelosi added: “We were ready to pay for [the original $3.5 trillion measure], so we certainly can pay for half of that.”
Democrats were considering the imposition of a new 15 percent corporate minimum tax, designed to put an end to the practice of accountants and tax lawyers using various loopholes to exempt even large and highly profitable corporations from paying any taxes to the federal government.
However, there was widespread skepticism, even from liberal voices such as the editorial board of the Washington Post, about one item in Biden’s scheme that is supposed to generate one-third of the funding for the plan. It is the highly optimistic assumption that an IRS crackdown on tax cheats could increase tax collections by $700 million over the next 10 years.
REVIVING THE WEALTH TAX
Pelosi suggested that some of the money needed would come from a new wealth tax on billionaires that was being developed by Democrat Ron Wyden, the chairman of the Senate Finance Committee.
Treasury Secretary Janet Yellen also expressed confidence that there would be no trouble finding the additional tax revenues to pay for the measure, but she did object to the name Wyden’s proposal had been given by the media. “I wouldn’t call that a wealth tax, but it would help get at capital gains, which are an extraordinarily large part of the incomes of the wealthiest individuals, and right now escape taxation until they’re realized [by the sale of the asset],” Yellen said.
A key difference between the Wyden proposal to tax “unrealized capital gains” and the original wealth tax that Senator Warren had proposed as a candidate running for president last year is that the new version would apply only to about 700 of the richest people in America. However, once that new wealth tax is in place, there would be nothing to stop Democrat legislators from extending its reach in the future to people who are far less wealthy than the original 700.
However, implementing the tax on unrealized capital gains will likely present some practical problems for the IRS. One issue is that is estimates the annual increase in value for assets for which there is no well-established market price, such as closely held businesses and family heirlooms. The new tax might also be subject to legal challenges over whether it qualifies under the definition of an “income tax” in the 16th Amendment.
A sizable number of super wealthy people live in California’s Silicon Valley, which is represented by Democrat Congressman Ro Khanna. Yet Khanna says he supports the wealth tax proposal and other tax increases on the rich and corporations that Biden had originally proposed.
SINEMA AND MANCHIN IN THE DRIVER’S SEAT
Khanna said in a Fox News interview that while he disagrees with Senator Manchin’s objections to the Biden bill, he still respects him because, “You know exactly where [Manchin] stands… My concern with Senator Sinema is … why doesn’t she explain herself? … I’ve never seen a politician … who just totally ducks answering questions of the media and constituents … She’s not clear about what she believes.”
But while Sinema is known to as something of a lone wolf among her fellow senators, avoiding social events and informal public discussions with her colleagues, she also has developed a reputation for being an effective one-on-one negotiator with senior Biden White House officials, and for consulting with congressional experts on specific issues.
Sinema is known to have talked quietly with Senator Chris Murphy on prescription drug pricing, with Senator Elizabeth Warren on taxing corporations and Warren’s 2020 campaign wealth tax proposal, and with Senator Patty Murray on paid leave and community college tuition.
It is also clear that Sinema, as well as Manchin, are willing to use their effective veto over passage of the Biden bill in the Senate to dictate many of the parameters of the final version of the bill that is now emerging.
While this bill has become too important for Biden and Democrats to allow it to fail, just how long the process will take is a matter of conjecture. It could be days, weeks, or even months from now. But the longer it lingers in the headlines, the more vulnerable it will become to Republican critics, special interest groups which would suffer because of it, and growing public impatience.
As far as Biden and the Democrats are concerned, it has already lingered for far too long.