Biden Slashes Cost of Infrastructure Plan in New Offer to GOP

Biden Slashes Cost of Infrastructure Plan in New Offer to GOP

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Plus, Biden’s budget won’t include some health care promises: report
Friday, May 21, 2021

Biden Slashes Cost of His Infrastructure Plan in New Offer to Republicans

The Biden administration has reduced the size of its infrastructure proposal by more than half a trillion dollars, the White House announced Friday.

Speaking to reporters, Press Secretary Jen Psaki said that as part of ongoing negotiations with Republican lawmakers, the proposal has been cut to $1.7 trillion, down from the initial $2.25 offer released at the end of March. The new offer was presented to Republican negotiators via teleconference on Friday afternoon.

“This proposal exhibits a willingness to come down in size, giving on some areas that are important to the president — otherwise they wouldn’t have been in the proposal — while also staying firm in areas that are most vital to rebuilding our infrastructure and industries of the future, making our workforce and our country more competitive with China,” Psaki said. She the latest White House proposal “a reasonable counter-offer” to the significantly smaller Republican plan totaling $568 billion, including existing spending.

The cuts to the White House proposal touch on many areas, Psaki said, and include the elimination of investments in research and development, manufacturing and small business, leaving those issues to be targeted in separate legislation. The proposed spending on broadband has been reduced from $100 billion to $65 billion, the same level as in the GOP offer, and funding for roads and bridges has been cut from $159 billion to $120 billion to get closer to the $48 billion level discussed by Republicans.

At the same time, Psaki emphasized that the White House is sticking with plans to use the bill to invest areas that Republicans say are beyond the scope of infrastructure, including green energy, workforce training and extreme weather resilience, areas that Biden sees as crucial for maintaining competitiveness with China.

The White House also said that the president wants to fund his plan through higher taxes on big business, with the corporate income tax rising from 21% to somewhere between 25% and 28%, and is not interested in the Republican proposal to raise revenues through user fees such as highway tolls.

Hopes for a deal fade: Biden’s self-imposed deadline of Memorial Day for showing progress in the talks is rapidly approaching, but Republican negotiators said they were unimpressed by the size and scope of the new offer, and are still strongly opposed to using tax hikes to pay for infrastructure investments.

“During today's call, the White House came back with a counteroffer that is well above the range of what can pass Congress with bipartisan support,” the spokesperson for lead Republican negotiator Sen. Shelley Moore Capito (WV) said. “There continue to be vast differences between the White House and Senate Republicans when it comes to the definition of infrastructure, the magnitude of proposed spending, and how to pay for it. Based on today's meeting, the groups seem further apart after two meetings with White House staff than they were after one meeting with President Biden” last week.

Talks are expected to continue next week, but Biden has said he is prepared to move ahead without Republican support if necessary.

Biden’s Budget Won’t Include Some Health Care Promises: Report

President Biden is set to unveil his first comprehensive budget blueprint on May 28, providing more insight into the White House’s priorities, proposed program changes and how or whether the administration wants to pay for the spending increases it has proposed beyond the roughly $4 trillion in new infrastructure and social welfare plans.

What won’t be in the budget, according to The Washington Post: key Biden campaign promises for reforming the health care system, including a public option for health insurance and a plan to lower prescription drug costs.

“The White House jettisoned months of planning from agency staff as their initial plan could fuel criticisms that the administration is pushing new spending programs too aggressively,” the Post’s Jeff Stein and Tyler Pager report, citing four people briefed on the issue. “Other ambitious Biden campaign pledges — from raising the estate tax to forgiving significant amounts of student debt — are also expected to be left out of the new budget plan, the people said.”

The White House budget office confirmed to the Post that the administration is focused on advancing the major proposals it has already unveiled. “The President’s budget will focus on advancing the historic legislative agenda he’s already put forward for this year," said Rob Friedlander, spokesman for the White House budget office. "The budget won’t propose other new initiatives but will put together the full picture of how these proposals would advance economic growth and shared prosperity while also putting our country on a sound fiscal course.”

The Biden administration last month released an outline of its discretionary spending request for 2022 and said that its forthcoming full budget blueprint “will present a unified, comprehensive plan to address the overlapping crises we face in a fiscally and economically responsible way.”

Biden is proposing $769 billion in non-defense spending and $753 billion for all defense programs.

The White House does not yet have a permanent budget director after Biden’s nominee for the position, Neera Tanden, withdrew in the face of opposition from senators. Shalanda Young was confirmed as deputy director in March and has been serving as acting director. Tanden joined the White House this week as a senior adviser.

Why it matters:
Biden’s full fiscal year 2022 budget request — reportedly the latest by any administration in at least a century — will likely be just the beginning of months of budget-related battles between Democrats and Republicans. Top Senate Republicans this week introduced an amendment requiring parity in defense and non-defense spending increases, while Biden has proposed a 16% increase in non-defense spending and a 1.7% increase for defense. But Biden’s decision to leave out health care pledges and other proposals could also widen rifts among Democrats, some of whom have pressed for action on health care.

Cost of Biden’s Covid Rescue Plan Revised Up to $2.1 Trillion

The Covid-19 rescue package enacted in March will cost $2.1 trillion over the next decade, or some $200 billion more than initially estimated, according to new projections from the Congressional Budget Office.

In response to a request from Sen. Lindsey Graham (R-SC), the top Republican on the Senate Budget Committee, CBO Director Phillip Swagel said that the American Rescue Plan Act will add $1.8 trillion to deficits and debt held by the public from 2021 to 2031. That’s in line with the cost estimate CBO issued in March. But interest payments on the additional debt will add another $208 billion in costs over that time, so that deficits and debt by 2031 will be nearly $2.1 trillion higher than CBO had projected in February, before the law was passed. Debt held by the public would grow to 113% of gross domestic product by 2031, compared with 107% as of the February projections.

The revised estimates, Swagel noted, do not factor in any economic benefits from the new law — and, as The Hill’s Niv Elis notes, a larger economy boosted by the rescue plan “would likely lead to higher tax revenues, as well as lower spending on safety net programs and lower borrowing costs.”

CBO also looked at a couple of other scenarios as requested by Graham. It said that raising non-defense discretionary spending in 2022 by about 16% as President Joe Biden has requested (and having that spending increase at the rate of inflation thereafter) would add another $665 billion to deficits by 2031, including $618 billion in new spending and $47 billion more in interest costs. The debt held by the public would reach 115% of GDP in 2031 under this scenario.

CBO also estimated that, without new revenue to pay for them, Biden’s infrastructure and social welfare plans would add $4.4 trillion to the deficit over the next 10 years. Combined, the Covid rescue law, Biden’s proposed non-defense spending increases and his infrastructure and families plans would add $7.6 trillion to deficits by 2031 and lift debt to 130% of GDP if none of the costs were offset, CBO estimated.

Biden has proposed raising taxes on corporations and the wealthy to cover the costs of his new spending plans and has said that he’s “not willing to deficit spend.” Republicans have rejected the idea of tax increases.

Quote of the Day

"There is nothing we can do. … Taking away their lifeline isn't going to help anything."

– An unnamed Biden administration official, as quoted by CNN, on the administration’s conclusion that it has no way to continue paying $300 a week in supplemental federal unemployment benefits to jobless workers in the 22 Republican-led states that are ending those benefits early.

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