The White House is reportedly considering revamping President Biden’s Build Back Better economic plan and making it more of a deficit-reduction package in an effort to win the support of Sen. Joe Manchin (D-WV), the centrist who has cited debt and inflation concerns in scuttling a previous version of the bill passed by the House.
“A lot of people in the White House are spending time looking at what they can do to make deficit reduction central to Build Back Better, with a strategy of appealing to an audience of one,” one source reported to be in touch with senior administration officials told The Washington Post’s Jeff Stein. “More so than at any other time in this administration, deficit concerns are driving a lot of policy and rhetoric inside the building.”
Any such effort would require further scaling back spending proposals that have already been cut from an initial $3.5 trillion to $1.75 trillion. “The precise ideas on the table are not clear, and the people familiar with the discussions cautioned they are preliminary and that no written plan has emerged,” Stein reports, adding that “White House officials have circulated internally a column by the liberal commentator Matt Yglesias suggesting the party could approve $500 billion in climate programs and $400 billion in health-care initiatives — and still unify behind enough tax hikes that the legislation would curb the deficit over 10 years by $800 billion.”
Manchin has made clear that he would favor a tax reform bill that partially reverses the 2017 Republican tax cuts and significantly cuts the deficit. He has also indicated he’s open to the $555 billion in climate change provisions in the House bill and to measures expanding health care coverage and lowering prescription drug costs.
That kind of overhaul of the Build Back Better plan would leave some progressive priorities by the wayside — and probably exclude the expanded child tax credit that Biden has touted a drastically cutting child poverty. The increased deductibility of state and local taxes, which some Democrats have said must be in the bill to secure their votes, may also have to be dropped.
How we got here: Biden and other administration officials have insisted that the $1.75 trillion, House-passed version of their plan was fully paid for and would not increase deficits. But the Congressional Budget Office said that version of the bill would raise deficits by about $160 billion over 10 years.
The Biden administration disputed that figure, arguing that stepped up Internal Revenue Service enforcement would raise more revenue than CBO projected, but their arguments fell flat with Manchin, who decried the use of budget gimmicks to limit the official price tag of the legislation. Democrats, trying to pack most of their priorities into the bill, had limited the duration of some programs even as they hoped to extend them in the future and insisted that any extensions would be paid for when enacted.
What’s next: Manchin’s priorities are getting plenty of consideration as Democrats look to salvage their economic agenda, but as we said yesterday, changing the plan to suit Manchin is sure to raise some other Democrats’ hackles. “There could be significant difficulties in selling the package to progressive in the House,” Bloomberg’s Jennifer Epstein, Erik Wasson and Laura Davison report, citing a senior House Democrat. “Spending $800 billion would be a 75% cut from last year’s goal of a $3.5 trillion package. Trimming it down to primarily the climate change initiative would leave just one or two other programs, leaving many member priorities on the cutting room floor, the Democrat said.”
The bottom line: We started the week by telling you about a debate around Modern Monetary Theory, a school of economic thought that sanctions aggressive deficit spending and says resource constraints rather than fiscal constraints should underpin spending decisions. Did that line of thinking win in the pandemic response, or has it failed? We’re ending the week with an indication of just how much the political and policy winds around deficits have shifted in the last year or two.