Democrats’ Last Chance to Save Their Economic Agenda

Democrats’ Last Chance to Save Their Economic Agenda

Stefani Reynolds/Pool via Reuters

Congress is out this week and next for the July 4 holiday — technically, the House has a two-week stretch of district and committee work while the Senate has a “state work period.” When lawmakers return, Democrats will be racing to finalize a scaled-back economic spending package that salvages portions of the $2 trillion budget reconciliation plan that failed in December.

The Washington Post’s Tony Romm provides an overview of where the new package stands — and yet another reminder that the fate of the effort largely rests with Sen. Joe Manchin, the centrist West Virginia Democrat who scuttled the previous version of the legislation and has been negotiating a new agreement with Senate Majority Leader Chuck Schumer (D-NY). Democrats, Romm says, “have about three months to broker the sort of compromise that has eluded them for more than a year; otherwise, they may lose the ability to adopt the bill under a special legislative tactic that allows them to bypass a GOP filibuster in the Senate.”

What might be in the package: The new bill will be far narrower than the Build Back Better plan passed by House Democrats last year. It’s likely to center around measures to lower prescription drug prices and combat climate change while also including other “energy security” programs sought by Manchin. It’s also likely to include some tax increases that will be used to pay for the new programs and reduce the deficit.

What might not make it: As Democrats have sought to appease Manchin and resolve internal divisions, a slew of proposals that might have provided some relief from rising prices have already fallen by the wayside. Democrats’ expanded Child Tax Credit, which expired at the end of last year, appears unlikely to be renewed, and the party’s earlier plan to improve housing affordability has also been dropped from discussions. The final bill, Romm notes, will also leave out other Democratic plans that had been considered earlier — “no free prekindergarten, no rebates for child care, no aid for elder care, no paid family and medical leave.” Now, Romm reports, “a broadly supported attempt to lower the price of health insurance by extending subsidies under the Affordable Care Act remains at risk of falling out of the package entirely.” Manchin’s cost concerns reportedly remain an obstacle to keeping those enhanced subsidies, meaning that some 13 million people could face significant premium increases for 2023.

A factor for the Fed: Economist Jason Furman, who led the Council of Economic Advisers under President Obama, tells Romm that whatever Democrats do or don’t do with this bill will affect the Federal Reserve as it looks to rein in inflation. “Anything that Congress does that adds to inflation will lead to more interest rate increases,” Furman said. “Anything Congress does to take the pressure off inflation will consequently lead the Fed not to raise interest rates as much. This is much more of an interaction between fiscal and monetary policy than one would have expected a year ago.”

The bottom line: Discussions over the coming weeks may determine whether Democrats can resurrect elements of their economic agenda as they try to demonstrate to voters that they can deliver on some of their promises.