WASHINGTON – The $ 3.5 trillion draft budget that Democrats unveiled in the Senate this week promises to reshape the government’s role in the economy in ways that President Biden and his party consider essential to rebuilding the American middle class, lifting the people out of poverty, and addressing the threat of climate change.
Its passage in Congress is far from assured, with a number of hurdles in the coming months, including working out important details on taxes and spending and maintaining a fragile democratic coalition. But if the central pieces of the plan were to become law, that would be the end point the Democrats had promised when they won two Senate elections in January to gain narrow control of Congress – and come with a reach that was beyond their cost could.
The proposal could pave the way for legislation that will fundamentally rewrite Americans’ relationship with work, school, and federal government. It would implement much of Mr Biden’s vision to add years of guaranteed public education to tackle inequality, get more women into work with subsidized childcare and paid leave, and send monthly checks to parents to alleviate poverty – a provision which Mr Biden campaigned in the White House on Thursday.
It would expand Medicare in ways beyond Mr Biden’s own health care proposals this year to include dental and visual aids, and it would impose heavy taxes on businesses, high earners and the greenhouse gas emissions that drive climate change.
And all of these changes could quickly fade – or never make it on Mr Biden’s desk – if the Democrats’ political calculations are wrong and they don’t get the 50 votes they need in the Senate, or even a handful of defectors from fiscally moderate parties suffer the house.
The draft reflects a conscious decision by the president and his party to press ahead with as many new spending programs and tax cuts as possible, but also to phase out some of them in a few years to meet the limited tax and spending hunger of moderate senators. whose voters tend to be wary of large budget deficits. The hope – and the gamble – is that the programs will be so popular that a future Congress will keep them alive.
The benefits and risks of this strategy were demonstrated at the White House on Thursday, where Mr Biden and Vice President Kamala Harris welcomed several families to celebrate the first round of monthly payments to parents under the extended child tax credit signed by Mr Biden in a separate relief bill $ 1.9 trillion in force to help people and businesses stay afloat during the pandemic.
The loan offers payments of up to $ 300 per month for children under 6 years of age and $ 250 per month for children ages 6-17 for families with annual incomes of up to $ 150,000. The White House has promised the payments will cut child poverty in half, although the Treasury Department is struggling to reach some of the country’s low-income families with the money they can get as they often don’t earn enough to pay taxes on their income and don’t file a tax return with the Internal Revenue Service.
Referring to this as a legacy defining step, Mr Biden said that “our aim is to take another big step towards ending child poverty in America” and “one of the things the Vice President and I will be most proud of” when our conditions are met ”. are up. “
However, the extended loan is expected to expire after this year. The Democrats have been aggressively showing off their perks to voters this week, not only in hopes of gaining points for future elections, but also as a kind of offer to make credit an integral part of tax legislation. The draft budget would move this forward – it includes extending the extended tax credit indefinitely.
Given that the benefit costs more than $ 100 billion a year, it seems unlikely that the Democrats will make it permanent. A fact sheet distributed by Senate leaders this week states that the term of the loan, along with many other tax breaks and spending programs, will be determined based on its budgetary impact and the prioritization among the Democrats, who are most of theirs centrist members. This could result in an extension of just a few years if that were left to the future members of Congress to decide whether to retain the benefit.
“I hope this is when we decide we are going to make it permanent,” said Senator Michael Bennet, Democrat of Colorado and an early expansion sponsor, in an interview. “If not, I think we have a long overtime and then we have a chance to do it later.”
However, he admitted that there was a risk that it could shrink to just a year in a definitive package. “I’m worried about this,” said Mr. Bennet.
July 15, 2021, 5:07 p.m. ET
The balancing act is a direct product of Mr. Biden’s close influence on the Congress and his approach to advancing its economic vision.
Mr Biden is trying to get parts of his $ 4 trillion economic agenda through Congress. He has reached an agreement with center senators, including several Republicans, to spend nearly $ 600 billion on upgrading roads, bridges, water pipes, broadband, and other physical infrastructure. At the same time, he and the Democratic leaders are working on a larger bill that includes as many of his remaining priorities as possible that would result in a party line vote through a process called reconciliation that bypasses a Senate filibuster.
The budget is the first step towards this broader legislation. It includes new spending programs and tax incentives, although it doesn’t give any details yet. These include an expansion of Medicaid coverage to provide health coverage to some low-income residents in states that have refused to participate in the program’s expansion, and an expansion of Medicare coverage to include dental, vision, and hearing protection . It is also full of efforts to reduce greenhouse gas emissions, including the creation of a government-appointed “civilian climate corps”. The draft provides for four additional years of guaranteed public education and a variety of benefits for workers, including paid leave and subsidized childcare.
In almost all of these cases, the Democratic leaders in a background document for reporters this week stated that “the length of time each program will be in place will be determined based on the evaluation and input of the committee.”
In other words, lawmakers say they want it, but they’re not sure how long to fund it.
Any final legislation will be a math game with some sort of Tetris twist: how many programs and tax cuts can Mr Biden’s team and Democratic leaders cram into a spending box no bigger and perhaps much less than $ 3.5 trillion will be?
Republicans have already begun attacking the plan, calling the spending exorbitant and warning that the tax hikes Mr Biden plans to pay on some of the programs will stifle economic recovery.
Moderate Democrats, at least in public, have said relatively little about the scope of the budget’s spending ambitions. West Virginia Senator Joe Manchin III has raised concerns about some climate change-related issues and others have said they need more detail, but party leaders have not seen large-scale revolts against entire spending proposals. Progressive lawmakers and outside groups have hailed the blueprint, a key to keeping the democratic coalition intact.
There is far less agreement on how the programs should be paid for – and to what extent they should be funded. Mr Manchin said the entire $ 3.5 trillion should be offset by increased sales or cost savings. The draft budget includes calls for unspecified tax increases for businesses, high earners and greenhouse gas emissions (in part by taxing imports from high-polluting countries, probably including China) and for savings in government spending on prescription drugs. She also suggests “paying” for some expenses through projections of increased economic growth – like the extra production of women who can work more hours when their childcare is more affordable.
There is still no party consensus on what these sources of income might look like. Mr. Manchin and other centrists have opposed some of Mr. Biden’s proposed increases, such as raising the corporate tax rate from 21 percent to 28 percent. Possible compromises threaten: Some centrists have stated that they would, for example, accept a corporate tax rate of 25 percent.
Top Democrats hope they can push through tax hikes by appealing to voters who, in many polls, are in favor of higher taxes for businesses and the rich. “I always watch the president approach these tax discussions,” said Senator Ron Wyden, Democrat of Oregon and chairman of the finance committee, in an interview. “He is very aware that Americans with very large majorities feel that everyone has to pay their fair share.”
The scope of democratic economic law will depend on Mr. Biden’s ability to win this argument and stave off protests from Republicans and business leaders while retaining the support of any senator who works with his party. The more persuasive it is, the more extensive it can be to fund child support, paid vacation, and the rest of the programs, and the longer those programs could last.