President Joe Biden says he has struck a deal with the most conservative members of the Senate to move forward with a $1.75 trillion spending and tax bill — a legislative package meant to reflect the biggest pillars of his agenda.
When Biden says he wants to Build Back Better, this is the bill he’s talking about.
But what the White House is now proposing isn’t what Biden wanted. Over the course of the last month, the White House whittled down its dreams of a $3.5 trillion spending bill over 10 years to appease two key Democratic votes: Sens. Joe Manchin (W.Va.) and Kyrsten Sinema (Ariz.).
What they’ve come up with is about half the size of what the majority of congressional Democratic lawmakers had hoped for. That meant leaving out a lot of key ― and extremely popular — proposals, like instituting the nation’s first paid family and medical leave program, or lowering pharmaceutical drug prices.
That said, there’s still a lot of policy packed into this proposal. The proposal’s biggest investments are in climate policies ($555 billion), child care and universal pre-kindergarten ($400 billion) and a temporary extension of the expanded child tax credit ($200 billion), which has already gone a long way toward cutting down child poverty in the United States. It increases taxes on the wealthy and corporations.
Biden spent Thursday morning on Capitol Hill trying to convince Democrats to support this compromise. But nothing is for certain; a lot of lawmakers saw their policy priorities cut down, or even cut out all together, because of Manchin and Sinema.
“I need you to help me,” Biden told House Democrats Thursday. “I need your votes.”
Here’s what the White House negotiated.
Democrats appear to be following through on their pledge to make pre-kindergarten universally available across the country. The policy is proposed to remain in place for six years, which is a long time compared to some other stuff in the bill.
It’s set up as a federal-state partnership; states submit plans to set up free pre-K systems and, for the first three years, the federal government foots the bill. After three years, the states have to cover 40% of the costs.
The White House summary of the Build Back Better framework says it would expand access to “free high-quality preschool for more than 6 million children.”
The deal includes the largest-ever investment in child care, through a program that would limit expenses for most families to 7% of household income and offer free access to many lower-income Americans.
In some ways, this plan is set up similarly to the pre-K proposal, but it is financed differently and has more restrictions. Most parents would have to prove eligibility through either employment, education status or health, among other categories, in order to get these child care subsidies. How much parents pay into child care is also on a sliding scale depending on income, and capped to those that make up to 250% of their state’s median income.
For a family of four in Alabama, that works out to about $210,000 a year. For a family of four in Massachusetts, it would be about $340,000. In other words, it would cover the vast majority of families, leaving out only those in the highest income brackets.
The program also includes mechanisms to improve the quality of child care, primarily by raising the wages of care workers. The program requires states to opt in to the program, and some might not. But even with only partial participation, millions of working parents would get significant, much-needed help with child care.
Extension Of The Child Tax Credit
Democrats would continue the monthly child allowance payments of up to $300 per child for one year, with no new restrictions on access for people with low incomes.
But it’s not clear if the new proposal would exclude households with higher incomes. Democrats had originally wanted to extend the benefits through 2025, but recent opposition to the program from Manchin forced Biden to agree to just a one-year extension.
Clean Energy And Climate Investments
Biden initially proposed $500 billion in climate spending in March. But the White House’s deal has actually proposed $555 billion for clean energy and climate investments.
That includes about $320 billion for tax credits for companies that buy and build solar, wind and nuclear power, and for drivers who purchase electric vehicles. The program would last 10 years ― twice as long as previous clean energy tax credits. Another $105 billion would go to investments to fortify the country against extreme weather, clean up disease-causing chemicals in historically polluted communities, and set up a Civilian Climate Corps modeled on the New Deal-era Civilian Conservation Corps, which planted billions of trees and provided jobs during the Great Depression.
The administration said it won $110 billion in targeted incentives to boost domestic manufacturing of clean energy products and baseline industrial goods such as cement and steel, which have struggled to compete with cheaper and often more polluting rivals overseas. The budget includes $20 billion for the government itself to buy more green technologies, including small-modular nuclear reactors, which could have a knock-on effect of spurring on technologies that have had trouble finding private buyers.
Democrats are still raising taxes on the wealthy and corporations to pay for the legislation ― just not in the ways they originally anticipated, and not as much as they originally anticipated. A planned hike in the corporate tax rate, which Republicans slashed from 35% to just 21% during the administration of Donald Trump, isn’t happening because of opposition from Sinema. Instead, Democrats are backing a corporate minimum tax, designed to limit the use of tax deductions and credits by large corporations.
The outline also omits a new proposal to tax the unrealized capital gains on stocks and other assets owned by billionaires, after many Democrats complained about a tricky implementation.
Instead, Democrats would go for a “surcharge” on the richest 0.02% of households, plus a 1% tax on corporate stock buybacks, which surged as a result of the 2017 Republican tax cut and often do little but enrich executives.
A huge chunk of tax revenue would come not from new taxes, but instead from giving the IRS tens of billions in new funding to enforce existing law and close the “tax gap,” the difference between what people owe and what they voluntarily pay. Most of the gap results from business income earned by wealthy households.
The White House says this collection of tax hikes means the bill would be fully paid for and won’t add to the deficit, but the Congressional Budget Office may disagree.
At one point, Democrats feared housing provisions could get cut from the legislation entirely. And while funding for housing did decline from the $327 billion Biden originally requested, more than $150 billion would still go to helping the poorest families afford homes and rent.
The White House says this would pay for the construction or rehabilitation of more than 1 million homes, expand the Section 8 voucher program and would provide financial incentives for state and local governments to change zoning laws to encourage new housing construction.
Care Services For The Elderly And People With Disabilities
The bill would include an unprecedented investment in what’s known as home- and community-based services, or HCBS. These are programs for elderly and disabled Americans that allow them to live outside of large institutions, frequently in their own homes, by offering them help with some of the functions of everyday life.
The services can include everything from home care aides to help with cooking and hygiene, to employment programs that help people with disabilities find and keep jobs. Advocates for the initiative had initially proposed an investment of $400 billion over 10 years. The provision in the bill is just $150 billion. That would still represent the single-biggest increase in these sorts of programs, according to experts.
As with the child care proposal, a major goal of the initiative is to raise the wages of caregivers, whose notoriously low pay leaves many in poverty ― and, especially following the pandemic, has created shortages. And as with the child care proposal, a major caveat is that it requires states to participate. Some may not.
Health Care Coverage Expansions
The bill takes two significant, if time-limited, steps toward universal coverage ― in both cases by building on the Affordable Care Act, aka “Obamacare.”
First, it takes some temporary increases in private insurance subsidies through the Affordable Care Act and extends them through 2025. This increases, in place because of the pandemic relief act in the spring, reduce premiums (and allow access to more generous coverage) for millions, including some who were not eligible for assistance before.
Second, the bill offers an insurance option to low-income people in states where Republican officials have declined to expand Medicaid eligibility, as the Affordable Care Act originally envisioned. It would do so by allowing these people to get effectively free coverage through HealthCare.gov.
If these steps take effect, nearly all American citizens would have access to insurance, experts have said.
The bill also adds a hearing benefit to Medicare, but not vision and dental. The latter, in particular, had been a major goal for progressives, citing the large number of seniors who can’t afford and don’t get dental care now.
Prescription Drug Pricing Reform
The most conspicuously missing piece on the White House framework is a proposal to make prescription drugs more affordable. There’s no proposal at all, despite months of trying to reach an agreement on a plan that would give the federal government some regulatory power over drug prices, just like the governments of other economically advanced countries have.
The hope was to reduce drug prices mainly in two ways: by giving the government power to negotiate prices directly with manufacturers, and by limiting how much the companies could raise prices every year. The proposal also envisioned new investments in basic scientific research, to promote the development of breakthrough cures, and to redesign the drug benefit in Medicare so that it offered seniors more coverage.
It would be a big deal as politics. Democrats have been promising action on drugs since the early 2000s. And it would be a big deal as policy. Because of America’s high drug prices, drug costs are an extra burden for employers and taxpayers, as well as a real hardship for millions, especially elderly Americans whose health problems require multiple medications.
The idea of regulating drug prices is extremely popular, even among conservative voters. And it has support of nearly the entire Democratic caucus, including relatively conservative members in swing districts. But a small handful of Democrats with ties to ― and campaign support from ― the drug industry have objected to more aggressive schemes, citing concerns that limiting drug company revenue would hurt innovation.
Biden and Democratic leaders hoped to broker some kind of compromise, by, for example, limiting the number of drugs subject to negotiation. The Democratic holdouts, including Rep. Scott Peters of California and Sinema of Arizona, wanted a version so limited that supporters felt it would do little good.
Champions of aggressive regulation, including Sen. Bernie Sanders (I-Vt.) and House Energy and Commerce Chairman Frank Pallone (D-N.J.), on Thursday vowed to keep fighting to get a drug package into the final legislation.
So there’s still a chance this could come back in some form. Maybe.
Biden originally proposed giving workers 12 weeks of paid family and medical leave. The mandate would ensure that people could take time off for a new child, recovery from an illness, caring for a seriously ill family member or issues arising from a loved one’s military deployment.
But thanks to Manchin, the United States will continue to be the only industrialized nation with no universal paid leave mandate. Manchin was concerned about the cost, as well as the potential for fraud. Democrats tried to come up with a compromise ― shortening the length to four weeks, and eliminating sick leave, but they failed to convince the senator.
Just 23% of private sector workers currently have access to paid family leave provided by their employer and 42% have access to medical leave.
Big Action On Climate Change
The regulatory program meant to serve as the centerpiece of Biden’s climate strategy was eliminated. The proposed Clean Electricity Performance Program would have given the Department of Energy $150 billion to pay utilities who increase their output of zero-carbon power by 4% each year ― and fine those that failed to hit that target. It was projected by independent modelers to get the U.S. one-third of the way to its goal of cutting emissions in half by the end of this decade.
Democrats managed to redistribute that funding to other programs, delivering a much bigger tax credit suite than previously planned. And the administration has vowed to compensate for the loss of the program by enacting new regulations at the Environmental Protection Agency, restoring the federal government’s stick.
A new analysis by the Rhodium Group, a consultancy, found that the mix of funding and executive branch actions could, technically, deliver the 50% emissions cuts Biden promised.
But the implementation of the climate plan comes with big ifs. Regulations will take years to come into force, and will likely face hefty legal challenges. And if Biden, already the oldest person to assume the presidency, is defeated in 2024, the next administration could reverse the regulatory and executive actions almost as easily as the current White House enacted them.
GOP Corporate Tax Cuts Stay Put
Democrats have campaigned since 2018 on reversing Republican tax cuts, especially their reductions to the corporate and top individual rates. But Democrats are offsetting their spending with revenue from novel tax policies while they leave the Republican tax cuts untouched.
The framework is also silent on whether Democrats will restore a property tax deduction used mostly by high income households in populous blue states, though lawmakers said Thursday morning it would be included in the end.
Offering free community college was an issue close to the White House, since First Lady Jill Biden has taught at community colleges for the past 30 years. It would give everyone access to higher education, regardless of ability to pay.
But this proposal was quickly cut as it became clear that the overall price tag would have to shrink. Lobbyists for four-year colleges also opposed the proposal because they were worried it would hurt their bottom line. They argued that states would redirect money away from them, or students would opt to attend community college instead of a four-year institution.
Alexander Kaufman and Kevin Robillard contributed reporting.