Republicans Draw a ‘Red Line’ on Biden’s Infrastructure Plan

By Yuval Rosenberg

Republicans Tell Biden That Tax Hikes Are Their 'Red Line' on
Infrastructure Plan

President Joe Biden hosted the top four congressional leaders at
the White House Wednesday for a meeting on infrastructure that
yielded little progress and showed just how far apart the two sides
remain, with Republicans insisting that they won’t support tax
increases to pay for new spending.

Wednesday’s meeting was Biden’s first as president with the “Big
Four” congressional leaders: Senate Minority Leader Mitch McConnell
of Kentucky and House Minority Leader Kevin McCarthy of California
on the Republican side and Senate Majority Leader Chuck Schumer of
New York and House Speaker Nancy Pelosi of California for the
Democrats. Vice President Kamala Harris also attended the Oval
Office meeting.

Following the talks, McConnell told reporters that there is “a
bipartisan desire to get an outcome” on infrastructure but that the
two sides had yet to even agree on the definition of
infrastructure. Republicans have objected to Biden’s use of the
term for a broader range of programs, such as those related to home
health care and an expansion of electric vehicle charging stations.
“We first have to start with a definition of what is
infrastructure,” McCarthy
said. “That’s not home health. That’s roads,
bridges, highways, airports, broadband.”

Biden has proposed more than $4 trillion in spending across two
packages, one focused on infrastructure, including transportation,
water projects and broadband internet expansion and the other
centered on education and caregivers, including an expanded child
tax credit and paid family leave, free community college and
universal prekindergarten.

Republicans have countered Biden’s infrastructure plan, which
would spend nearly $2.3 trillion over eight years, with a
five-year, $568 billion plan more focused on physical
infrastructure such as roads and bridges. McConnell has said that a
package costing between $600 billion and $800 billion would be
acceptable to his party. And while Biden has proposed tax increases
on corporations and the wealthy, Republicans have suggested
lawmakers should look to user fees to cover infrastructure
spending.

Republicans draw a red line on taxes: McConnell and
McCarthy said they had made clear to Biden that they oppose
revisiting the GOP’s 2017 tax cuts and won’t support tax hikes to
pay for an infrastructure plan. “We’re not interested in re-opening
the 2017 tax bill. We both made that clear with the president.
That’s our red line,” McConnell said. McCarthy added that raising
taxes would be “the worst thing you can do in this economy," citing
rising gasoline prices.

The New York Times
reports that McCarthy sent a campaign text to
supporters shortly after the meeting that said, “I just met with
Corrupt Joe Biden and he’s STILL planning to push his radical
Socialist agenda onto the American people.”

Biden says he’s ‘encouraged’: Despite the lingering
differences, the White House called the meeting “productive” and
said the leaders “agreed there was a need for investment.”

“I’m encouraged that there is room to have a compromise on a
bipartisan bill that’s solid and significant,” Biden later told
reporters.

In a statement, Pelosi called the meeting “a good early step.”
She told reporters that she felt “more optimistic” that lawmakers
would be able to address infrastructure in a bipartisan way. "We
have a different set of values. But what we did agree in the
meeting is: Let's agree on what we're trying to achieve. And then
we can talk about how we pay for it. Let's not lead with a
disagreement. We'll find a way because the public knows that this
is necessary," Pelosi
told reporters.

Between the lines: Liberal Washington Post columnists
Paul Waldman and Greg Sargent
suggest that for all the talk of bipartisanship
and dealmaking, the White House strategy may be targeted at another
endgame:

“The best way to understand these discussions with Republicans
is that they’re really about someone who isn’t in the room: Sen.
Joe Manchin III (D-W. Va.), the 50th Senate vote for any Democratic
bill and the person who needs to be convinced to give Biden the
victory he’s after.
“Above all, Manchin must be able to say that a serious effort
to win over Republicans was made, both by the White House and by
Senate Democrats. Then it will be easier for him to agree to pass
the final package by the simple-majority reconciliation process.
…
“The only way Manchin will be part of a purely party-line vote
for infrastructure is at the end of an extended process in which
Biden makes repeated attempts to bring Republicans in, attempts
that are clearly rejected by McConnell.”

The bottom line: Democrats have made clear that, while
they’ll give Biden room to reach out to Republicans, they aren’t
going to wait long to see if a bipartisan deal is possible and are
already preparing to move ahead without GOP support — though that
would likely
still prove challenging.

Biden is scheduled to meet with six senators who serve as
the ranking members on committees related to infrastructure on
Thursday.

Inflation Surge Could Be Bad News for Biden’s Spending
Plans

Consumer prices rose faster than expected in April, the Labor
Department reported
Wednesday, sparking new worries about inflation in the U.S.
economy.

The consumer price index (CPI) increased 0.8% in April relative
to March, the largest monthly increase since 2009. Core CPI, which
strips out volatile food and energy prices, rose by 0.9%, the
largest increase since 1982. Over the last 12 months, consumer
prices have increased 4.2% – the largest annual increase since
2008. Core CPI increased 3% on annual basis.

The results came in well above Wall Street expectations.
Analysts knew the numbers would be big, since the economy is
reopening rapidly and the annual comparisons would include the weak
economy from a year ago, but the overshoot was substantial, about
twice as high as expected.

Temporary pressure? Many economists expect inflation to
rise in the short run as the recovery gathers strength, with supply
and demand eventually shifting back to a more normal relationship.
“Readings on inflation have increased and are likely to rise
somewhat further before moderating,” Federal Reserve Chair Jerome
Powell
told reporters in late April. The Fed expects the
inflation rate to climb above 2% over the next year, driven by a
rebound in energy prices and consumer demand. “However, these
one-time increases in prices are likely to have only transitory
effects on inflation,” Powell said.

Or something more serious? Economists and investors were
surprised by the price data, fueling concerns that inflation may be
becoming a more serious and persistent problem. “How transitory is
transitory?” Quincy Krosby, chief market strategist at Prudential
Financial, asked at
CNBC. In some ways the price increases are a good
thing, Krosby said, since they are the product of a rebounding
economy. However, the Fed has said it wants higher inflation, but
it’s not clear that the central bank can control it now that it has
arrived. “Be careful of what you wish for,” he warned.

Either way, a political problem: The inflation report
could undermine President Biden’s argument that the economy needs
trillions more in federal spending, while giving Republicans
another weapon in their fight against his ambitious proposals.
Bloomberg’s Nancy Cook
summed up the situation:

“Biden’s Republican opponents have seized on rising prices,
the slower-than-expected pace of hiring and even growing fuel
shortages from a computer hack of Colonial Pipeline Co. to compare
his administration with the ‘stagflation’ era of former President
Jimmy Carter. The specter of hours-long waits in lines to fill up
with gas has only enhanced the parallel.”

Even before today’s inflation numbers, Republicans have cited
inflation worries as a reason to oppose Biden’s agenda. “There’s so
much money out there in the economy that the demand is high, and
it’s outpacing supply and it’s starting to push prices up,”
Republican Senator John Thune of South Dakota said before the
report was released. “We need to be a little more cautious and
restrained.”

Still, it’s not just Republicans who are concerned about the
threat of inflation. Former Obama administration economist Jason
Furman told Bloomberg that the report “bears some caution and
should change the way people are thinking about the economy.”

“Your best guess has to be that it isn’t entirely transitory,”
Furman said. “This is the type of thing that’s going to start to
move those inflation expectations.”

Democrats May Not Back Another Extension of Unemployment
Benefits

Following the disappointing jobs report for April, Republicans
have been increasingly critical of the $300 weekly supplement the
federal government is providing for the unemployed, arguing that
the payments are slowing the recovery by allowing workers to stay
home. Now, some Democrats are indicating that they think the
program should be allowed to expire when it runs out on September
6.

“I'll never vote for another extension as long as I know that
with the vaccines, there's not an excuse for no one to be
vaccinated,” Democratic Sen. Joe Manchin of West Virginia said
Tuesday, according to
Politico. “I understand there's millions of jobs
in America that we can't fill right now. So we need people back to
work. There's more and more people understanding they're in
trouble.”

Asked if Democrats in the House had enough votes to extend the
benefit, one House Democrats told
Politico, “God, I hope not.”

Sen. Jeanne Shaheen (D-NH) hinted that she would probably not
support extending the benefit if the economy continues to improve.
Noting that the unemployment rate in her state has fallen, she said
“if that continues it probably should not be extended.”

Other lawmakers said they would make a decision on the issue
later, based on the economic data. Sen. Angus King of Maine, an
independent who caucuses with Democrats, said he would prefer to
take a “conditions-based, not calendar-based” approach on the
issue, with lawmakers responding to the economic conditions on the
ground when it comes time to consider an extension.

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