Congressional Update: Budget Discussions Continue; Concessions On Energy?
President Joe Biden and Congressional Democrats are continuing negotiations to trim their once-$3.5 trillion signature domestic policy package (the Build Back Better Act) to a topline figure between $1.5 and $2.3 trillion.
Paring down topline spending means lawmakers will not need as many “pay-fors” to cover the cost of social programs (i.e., tax increases), though progressives and moderates remain divided over which priorities and pay-fors should be included.
In a letter to Democrats on October 11, Speaker Nancy Pelosi (D-CA) hinted the final Build Back Better Act will cut certain programs, stating that she received guidance from Members “to do fewer things well.”
With that said, though there was a flurry of movement over the past weeks, legislative action remains elusive as progressives and moderates in the Democratic party struggle to unite behind a two-track approach to pass “hard” infrastructure (roads, bridges, surface transportation, etc.) along with the Build Back Better Act’s climate and social spending programs.
In terms of which legislative priorities survive the paring down process, some of the “big ticket” items in Build Back Better may be cut from the bill entirely while other provisions may be amended to expire after a few years or trimmed to benefit only lower-income taxpayers.
With a lower topline number, Democrats may be more open to removing controversial proposals offered in recent months, such as taxing stock buybacks by corporations, treating billionaires’ unrealized capital gains as taxable income, and/or targeting high-income earners’ retirement accounts.
President Biden has emphasized that trimming the package to approximately $2 trillion will be necessary to win support from two centrist Democrats — Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) – who are necessary to pass a reconciliation measure with a 50-vote requirement in the Senate.
In fact, Sen. Manchin publicized what he wants in terms of changes to the tax code, including a corporate rate of 25 percent (note that the Ways and Means Committee approved a 26 percent corporate rate).
Both Sen. Manchin and Ways and Means, however, agreed on raising the top capital gains rate to 25 percent and restoring the top marginal income tax rate to 39.6 percent.
Sen. Manchin also called for spending on families and health care to be “needs based with means testing guardrails/formulas on new spending” – which could align with the President’s willingness to keep certain programs in the bill while limiting the universe of recipients.
Concessions On Energy?
Significantly, it was reported last week that White House concessions to Sen. Manchin (D-WV) could include making it easier for coal and natural gas power plants to access financial incentives for clean energy.
Under this proposed change to the Clean Electricity Performance Program, which incentives power producers to transition to cleaner energy, coal and gas plants would qualify for incentives as long as they are equipped with technology to capture their greenhouse gas emissions.
However, these changes would certainly anger progressive House Democrats, and could further entrench negotiations.
Broadly speaking, after the House tabled a vote on the Senate-passed Infrastructure Investment and Jobs Act, House leaders called for a deal by October 31, the new expiration date for certain surface transportation programs.
While some Democrats are expressing optimism that progressives and moderates could come together on the two bills by the end of October, December seems like a more realistic timeframe given the important deadlines approaching year’s end.