Biden’s economic plan at risk of delays as Democrats squabble

Laura Litvan, Erik Wasson and Billy House
Bloomberg

President Joe Biden’s economic agenda risks getting delayed by weeks or months in Congress with tax, health care and other issues still unresolved and continued squabbling between the Democratic Party’s progressive and moderate wings.

House committees on Wednesday wrapped up work on significant portions of the package, including $2.1 trillion in tax increases to help pay for the biggest expansion of social welfare programs in decades. That technically meets the Democrats’ self-imposed deadline, but the action belies the obstacles still ahead that threaten to diminish Biden’s ambitious proposals and put off votes on them in the House and Senate.

“Some folks have issues on climate change, some people have issues on tax and some people have issues on health care,” said Senator Chris Murphy, a Connecticut Democrat, adding that he thinks Democrats ultimately will agree on a package.

President Joe Biden delivers remarks on the economy in the East Room of the White House, Thursday, Sept. 16, 2021, in Washington.

Democratic Senator Ben Cardin of Maryland said that the Senate would likely take whatever passes the House, change it and send it back to the House. He said he doesn’t see that happening this month.

“It’s going to take some time,” Cardin said, adding that “as you put out one area, another one crops up.”

The expansive $3.5 trillion package entails much of Biden’s first-year agenda and includes a mix of tax increases on the wealthy and corporations, as well as greater spending in areas including child care, health care and climate change.

With Republicans unified in opposition, Democrats are pushing it through the Senate using a process called reconciliation that lets them skirt a GOP filibuster. But with the slimmest of majorities in both chambers, Democrats will have to be unified in support.

The differences among Democrats manifested themselves as the House panels finished their work. The Ways and Means Committee deferred action on raising the limit on the state and local tax deductions, or SALT, and a sweeping proposal to regulate drug prices failed to win approval in the Energy and Commerce Committee. It will be up to party leaders to decide whether those provisions can be inserted later in the process and still muster the votes needed to pass the final bill.

The biggest issue remains the size of the $3.5 trillion package. Democratic Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, whose votes are pivotal to passage, are balking at the cost. Manchin also has called for a “strategic pause” in action amid soaring debt and rising inflation. But progressive Democrats in the House, whose votes also are necessary for passage, view the $3.5 trillion as the minimum necessary for their priorities.

Biden waded in Wednesday, meeting separately with Sinema and Manchin at the White House. Neither the senators nor the White House provided much detail about the talks. Sinema’s office released a statement calling the discussion “productive.” White House Press Secretary Jen Psaki said there would be “ongoing discussions.”

A delay creates a dilemma for House Speaker Nancy Pelosi, who has promised moderates a vote on a separate $550 billion infrastructure plan by Sept. 27. New York Representative Alexandria Ocasio-Cortez and other progressives have warned they won’t support that bill unless the economic package of social programs has been agreed to by the House and the Senate first.

Some top Democrats insist that the broad measure could still come together quickly. Senate Budget Chair Bernie Sanders said a reconciliation package still could be ready to move by the end of the month, a goal set by Majority Leader Chuck Schumer.

“It’s hard to operate unless you have a time frame,” Sanders said. “Schumer has laid out a time frame and people are really working quite hard to make sure we meet that goal.”

Still, there are significant schisms over fundamental issues, including tax policy.

Senate Finance Chairman Ron Wyden has indicated he is not satisfied with the level of taxation on the wealthy in a House draft, which leaves large inheritances largely untouched. He also said he wants energy tax credits tied to actual levels of carbon emissions reduction and has proposed a host of ways to raise more revenue, including levies on stock buybacks and partnerships.

On the state and local income tax deduction, House Democrats have yet to agree among themselves on a matter key to lawmakers from states with high property taxes like New York, New Jersey and California. House Democrats are weighing raising the cap from $10,000 or suspending it for two years, although it may not gain support from progressives wary of helping affluent homeowners.

“Obviously, before we come to final passage on anything we are going to have to address that issue,” said Ways and Means Chair Richard Neal, adding that it’s “hard to say” how long it might take to resolve “because it involves a lot of strong feelings.”

Also left for later is a dispute over drug price regulation. Three Democrats on the House Energy and Commerce Committee on Tuesday left the health portion of the economic package in jeopardy when they voted against a proposal empowering the government to demand lower prices for medicines while limiting future drug price increases based on inflation. The savings to the government derived from the plan are slated to help pay for a large portion of the economic package. Without them, the measure would be as much as $600 billion short.

The drug-pricing proposal is embraced by party progressives. But the three moderates – Kurt Schrader of Oregon, Scott Peters of California and Kathleen Rice of New York – instead want their party to consider a narrower drug price proposal they drafted.

“We have to lower out-of-pocket costs for patients and preserve the American system of private investment in innovation,” Peters said.

Andrew Bates, a White House spokesman, said in a statement on Wednesday night that “The president agrees with Speaker Pelosi that it in order to build an economy that delivers for the middle class and working families – not just those at the top – it is critical we empower Medicare to directly negotiate for lower drug prices.”

Pelosi is bracing House Democrats for the prospect that swaths of their bill may not survive in the Senate. That includes climate-related initiatives and a proposal addressing the legal status of some undocumented immigrants that include migrant farm workers, “Dreamers” brought to the U.S. as children, “essential” workers and those with temporary protected status. The Senate parliamentarian has yet to determine whether it meets the chamber’s strict requirements for using the reconciliation process.

In a Monday letter to all House Democrats, Pelosi reminded lawmakers “there are certain limitations in terms of Senate rules.”

At separate press events last week, Pelosi and Schumer did not rule out that the final package would be below $3.5 trillion.

“In reconciliation we’re going to all come together to get something big done and it will be our intention to have every part of the Biden plan in a big and robust way,” Schumer told reporters. “We’re going to work very hard to have unity, because without unity we’re not going to get anything.”