Talks Between Biden and Manchin ‘Going Very Poorly’
As Democrats look to pass their roughly $2 trillion plan for social spending and environmental programs, discussions between President Joe Biden and Sen. Joe Manchin (D-WV) are foundering.
The talks “have been going very poorly,” one unnamed source briefed on the conversations told Politico. “They are far apart.” And The Washington Post reports that the talks have “soured” over the size and scope of the legislation, as Manchin continues to press for cuts to the proposed spending. “The gaps between the two sides remain immense,” the Post’s Tony Romm and Seung Min Kim write.
The continuing impasse with Manchin likely means that Democrats will have to delay any Senate vote on the package until next year.
Expanded child tax credit on Manchin’s chopping block? Democrats expanded the child tax credit as part of the American Rescue Plan Act passed in March, boosting the benefit and allowing monthly payments of up to $300 per child under age 6 and $250 per child ages 6 to 17. Those payments, which studies have found help reduce child poverty and hunger, are set to expire at the end of the year but would be extended through 2022 under the Build Back Better Act.
Manchin reportedly has some issues with the tax credit — the Post notes he “has expressed general skepticism about approving aid that sends more checks directly to Americans.” At the very least, he has issues with the way the credit is structured and financed in the Build Back Better Act. “One person familiar with the matter said Wednesday that Manchin essentially seeks to zero-out the program in the bill,” Romm and Kim report. “A second person familiar with his thinking — also speaking on the condition of anonymity — said the senator is not opposed to the child tax credit specifically but rather the fuller measure’s construction and price tag.”
Democrats had scaled back their initial plans to extend the credit through 2025, instead opting to keep it going for one year, at a cost of about $130 billion over 10 years. The House version of the Build Back Better Act would also make the tax credit fully refundable on a permanent basis, at a cost of $55 billion over 10 years.
Manchin has criticized Democrats' use of temporary programs and artificial sunsets to lower the official cost of their plan, reportedly arguing that any program in the package should extend for the full 10 years. But extending the expanded credit for 10 years would cost about $1.4 trillion more — which wouldn’t leave much room for anything else in the bill given that Manchin has insisted on a $1.75 trillion ceiling for the spending in the bill.
Manchin told reporters Wednesday that he is “not opposed” to the child tax credit, and he angrily brushed off one reporter’s questions about whether he wanted the credit out of the bill.
The IRS has told lawmakers that they would need to extend the tax credit by December 28 to ensure that the monthly payments don’t lapse, and some Democrats are pressing to ensure the payments aren’t interrupted. “We would not tolerate an interruption of a Social Security payment for vulnerable elderly people,” said Sen. Ron Wyden (D-OR).
Manchin reportedly suggested extending the credit outside the Build Back Better bill, but any such plan would be unlikely to pass the Senate, where it would need at least 10 Republican votes. House Speaker Nancy Pelosi (D-CA) shot down the idea of extending the credit separately, telling reporters that it provides “really important leverage” for passing the full Build Back Better bill.
The bottom line: Manchin has long called for a “pause” on Democrats’ tax-and-spending plan. Now it appears he’s forcing that pause — though he is not the only holdup, as Democrats still need to resolve some other differences on the legislation, finalize the legislative text and have the Senate parliamentarian complete a review of the bill.
Frustrations with Manchin are reportedly running high, but his continued objections don’t mean that the bill is dead. Politico reports that Manchin’s friends in the Senate say he’s not looking to derail Biden’s agenda. And, according to Politico, Rep. James Clyburn (D-SC) insisted that the Build Back Better bill will still pass, eventually: “We’re just not gonna pass it on the time frame that some people would like to see.”
Number of the Day: Annual U.S. Health Spending Tops $4 Trillion
U.S. health care spending rose by nearly 10% last year, reaching $4.1 trillion, according to analysts at the Centers for Medicare and Medicaid Services. Health spending grew at more than double the 4.3% rate seen in 2019, with the government response to the Covid pandemic driving the increase. “The acceleration in 2020 was due to a 36.0 percent increase in federal expenditures for health care that occurred largely in response to the COVID-19 pandemic,” CMS officials wrote in a report published in the journal Health Affairs. “At the same time, gross domestic product declined 2.2 percent, and the share of the economy devoted to health care spending spiked, reaching 19.7 percent.”
Senate Passes $768 Billion Defense Bill
The Senate passed the annual National Defense Authorization Act Wednesday, checking off a major pre-holiday to-do item as it sent it to the White House for President Joe Biden’s signature.
Stalled for months over of a variety of contentious issues, the $768 billion bill provides $740 billion for the Department of Defense – roughly $25 billion more than requested by the White House in its fiscal year 2022 budget plan. As part of the package, the Department of Energy will receive $27.8 billion for defense-related activities.
The NDAA provides a 2.7% increase in pay for members of the military, as well as reforms to the military judicial system related to the treatment of sexual assault cases. Controversial provisions that were ultimately stripped from the bill include an effort to repeal the 1991 and 2002 Iraq War authorizations, a requirement that women register for the draft and sanctions related to the Russian Nord Stream 2 pipeline in Europe.
The Fed Will Move Faster to Fight Inflation
The Federal Reserve will end its pandemic-era stimulus program more quickly as it ramps up its fight against inflation, bank officials said Wednesday. Additionally, the bank signaled that it expects to raise interest rates sooner and more frequently in 2022 than previously forecast.
The Fed announced in November that it would reduce its purchases of Treasury and mortgage-backed securities, tapering the $120 billion per month stimulus program by $15 billion each month until the program wound down in June. Now it says it will double the speed of that reduction, cutting $30 billion on a monthly basis as it brings the program to an end three months earlier, in March.
Taking a more hawkish stance on inflation, Fed officials are now projecting three interest rate hikes next year, with the first increase possibly coming soon after the securities purchasing program ends in the spring. The Federal Open Market Committee said it would keep rates between 0% and 0.25% for now but indicated a more aggressive path for rate hikes as officials aim to reduce inflationary pressures in the economy. In addition to the three rate hikes projected for 2022, Fed officials now project three additional hikes in 2023 and two more in 2024.
A focus on inflation: Fed Chair Jerome Powell made it clear that the central bank is taking the threat of inflation seriously after earlier predicting that it was largely “transitory” and would die out quickly as the economy came back online after the pandemic. “Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation,” Powell said at a press conference. “These problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus.”
The Fed updated its forecast for inflation, projecting a 4.4% core inflation rate for 2021, and 2.7% in 2022. It also said that it expected the unemployment rate to fall to 3.5% next year.
Powell said that the recovery is going so well that the economy can handle a more aggressive stance. “The economy is so much stronger now, so much closer to full employment, inflation is running well above target and growth is well above potential,” he said, adding that there likely won’t “be the need for [a] long delay” in raising rates after the stimulus program ends.
Chart of the Day
In its policy statement released Wednesday, the Fed noted that the “path of the economy continues to depend on the course of the virus.” This chart from Axios showing the official tally of deaths due to Covid-19 is a grim reminder of just how much damage the virus has done – and continues to do – as we approach the two-year mark of its initial spread.
- How U.S. Federal Debt Got So Big – Washington Post
- Democrats’ $2 Trillion Spending Plan in Political Peril as Talks Between Biden, Manchin Appear to Hit Snag – Washington Post
- ‘Going Very Poorly’: Biden Can’t Nail Manchin Down on Dems’ Bill – Politico
- Democratic Talks With Manchin Show Signs of Melting Down – The Hill
- Manchin Seeks Child Tax Credit "We Can Afford" – Axios
- Momentum Grows for Senate to Take Up Voting Bills Ahead of Budget Package – Roll Call
- Senate Passes $768 Billion Defense Bill, Sending It to Biden – New York Times
- Biden Says Feds Will Cover 100% of the Cost to Clean Up From Kentucky Tornado for the First 30 Days of Recovery – CNN
- Fed Eyes 3 Rate Increases in 2022; Slows Stimulus as Prices Rise – New York Times
- Republicans Who Assailed Biden’s Stimulus Bill Are Embracing the Money – New York Times
- Biden’s FDA Pick on Track for Confirmation With GOP Help – Politico
- Fauci Says Omicron-Specific Vaccine Is Not Yet Needed Because Booster Shots Will Protect – Washington Post
- Covid’s Deadly Trade-Offs, by the Numbers: How Each State Has Fared in the Pandemic – Politico
- C.D.C. Virus Tests Were Contaminated and Poorly Designed, Agency Says– New York Times
Views and Analysis
- Manchin’s Effort to Kill the Expanded Child Tax Credit Is Getting More Absurd – Greg Sargent, Washington Post
- The Child Tax Credit Is a Huge Win for Democrats. Will Manchin Let It Expire? – Greg Sargent, Washington Post
- The Federal Reserve Just Declared War Against Inflation – Kevin T. Dugan, New York
- Federal Reserve Turns Hawkish Now to Avoid Real Pain Later – Brian Chappatta, Bloomberg
- Worried About Inflation? Here’s What That May Reveal About You. – Eduardo Porter, New York Times
- Our Playbook to Fight Covid-19 Is Outdated. Here Are 10 Updates for 2022. – Joseph G. Allen, Washington Post
- Why Are Democrats Enabling Republican Sabotage? – David Dayen, American Prospect