Negotiations Continue on Democrats’ Spending Package

Sen. Joe Manchin wants the bill to cost no more than $1.5 trillion.

By Haley Byrd Wilt, Harvest Prude and Ryan Brown

Oct 26, 2021

Good morning. Your Uphill team (okay, really just Haley) wanted to spend yesterday seeing Dune in IMAX again, but alas—the newsletters must flow.

Democrats are aiming to reach an agreement this week on President Joe Biden’s social investments and climate change package. Even as the central players have shared optimism they can strike a deal soon, key disagreements remain about the scope and substance of the legislation.

Sen. Joe Manchin, a West Virginia Democrat, told reporters Monday he still wants the bill to cost no more than $1.5 trillion, far less than Democratic leaders’ initial $3.5 trillion proposal. Much of the maneuvering in recent weeks has centered around Manchin’s number and how to whittle down the sweeping policy items Democratic leaders had hoped to advance.

Manchin said Monday that he thinks a deal could come this week.

“Having it finished with all the t’s and i’s and everything crossed and and dotted—that will be difficult from the Senate side because we have an awful lot of text to go through,” Manchin told reporters. “But as far as conceptually, we should. I really believe it.”

His comments came after meeting with President Joe Biden in Delaware over the weekend. Manchin also expressed support for Democrats’ new potential funding mechanism: An annual tax on billionaires’ unrealized capital gains. Democratic leaders hope the tax can also win support from Arizona Sen. Kyrsten Sinema, who has opposed hikes for corporations. With an evenly split Senate, the party has to be completely unified in that chamber to approve the reconciliation bill over GOP opposition.

As Wall Street Journal tax expert Richard Rubin writes, the tax change would alter the way income is defined, including increases in asset value. This change would affect only the extremely wealthy, though—fewer than 1,000 people are estimated to face such a tax. Rubin explains:

The tax would be calculated on the difference between an asset’s value at the beginning of the year and at the end of the year.
For example, someone who owned $2 billion of stock on Jan. 1 and saw it grow to $2.5 billion on Dec. 31, would owe capital-gains taxes on the $500 million gain, even if they didn’t sell any of the stock. The current top tax rate on capital gains is 23.8%, plus state taxes.

Senate Finance Committee Chair Ron Wyden, who is behind the plan, said Monday that his team will complete the legislative text of the tax changes in the next two days.

“This is not a wealth tax,” Wyden told reporters. “It is a billionaire’s income tax. It is being written so that when nurses and firefighters pay taxes with every paycheck, billionaires who have figured out how to not pay taxes because they don’t take a wage, they’re going to have to pay their fair share each year.”

Some House Democrats have been skeptical of Wyden’s plan, calling instead for their bill’s more clearly defined rate hikes on wealthy Americans. Ways and Means Committee Chair Richard Neal said Monday that the billionaire’s tax will be difficult to implement as a reliable source of revenue.

“Do I like the politics of it? Yeah,” he said. “I think it’s sensible. I think the implementation of the plan is a bit more challenging.”

The plan is also likely to face legal challenges if passed.

How to pay for the bill isn’t the only outstanding question. Here’s a look at a few key items and where they stand (for now, at least).

Child tax credit: One of the most popular provisions facing cuts is the expanded child tax credit, which passed in March as part of Democrats’ COVID-19 relief legislation. Since payments began over the summer, tens of millions of Americans have received up to $300 per child each month. Democrats, looking to scale back their bill to win over moderates, may extend the program for one year instead of four years.

Manchin has also called for the legislation to add work requirements and to include a lower income cap to determine which families receive the credit. Families making up to $400,000 are currently eligible for the full amount.

Paid leave: Another component that is expected to be pared down is the plan to create a national paid family and medical leave program. The White House’s initial proposal would gradually offer 12 weeks of paid leave to every U.S. worker per year. The time off would kick in at the birth, adoption, or fostering of a child, in the event of serious illness, and in other circumstances. It was expected to cost $500 billion.

Now, Democrats are considering more modest provisions, Biden said last week: four weeks of leave that would primarily be available to low-income workers. The program would sunset after three to four years, costing closer to $100 billion.

But even the reduced proposal is on tenuous footing. Manchin sounded skeptical when asked about it in the Capitol Monday. “I’m concerned about an awful lot of things,” he told reporters.

Drug prices: In the original House bill, Democrats had a plan to lower the cost of prescription drugs—a promise Democrats commonly make on the campaign trail. The provision would empower the federal government to negotiate with pharmaceutical companies to obtain lower prices for many Medicare drugs. But Pharmaceutical Research and Manufacturers of America (or PhRMA) has loudly opposed the plan, arguing it would take away industry resources for researching new drugs. According to the Washington Post, PhRMA has spent $22.4 million lobbying against it.

Several House members have said they won’t support the idea, as well as key senators, including Sinema of Arizona and Sen. Bob Menendez, a New Jersey Democrat.

Medicare expansion: In the early stages of the reconciliation negotiations, Democrats set out to include dental, vision, and hearing coverage for anyone enrolled in Medicare. Senators Manchin and Sinema are opposed to this expansion, citing cost as the main concern. President Biden acknowledged this in his CNN town hall last week, saying that keeping all three would be a “reach.”

Democratic leaders haven’t given up including some form of coverage in the bill, such as vouchers for dental work.

Tuition-free community college: Biden said last week that the proposal to make two years of community college available without cost—or cost to the students, at any rate—is dead at the moment. “So far, Mr. Manchin and one other person has indicated they will not support free community college,” he said. (The “one other person” is likely a reference to Sinema. And community college would not be “free,” of course, but would be financed by taxpayers and/or additional debt.) Democrats are still considering an expansion of the federal Pell grant to help students from low-income families.

Members also continue to negotiate climate provisions.

Until the reconciliation package is complete, a Senate-passed bipartisan infrastructure bill will remain on standby in the House. Progressives there have refused to support it until they are confident in progress on their other priorities. House Democratic leaders said Monday that they still hope to hold a vote this week on the infrastructure bill, which includes hundreds of billions of dollars for items like roads, bridges, airports, and broadband. But with a slim majority, Democrats have room for only a few members to vote against the package as most Republicans oppose it—and it’s not clear progressives will vote for it until more substantive progress is made on reconciliation, beyond a deal in principle.

“We want the whole bill,” Congressional Progressive Caucus Chair Pramila Jayapal told reporters Monday. “We want to vote on both bills at the same time.”

On the Floor

Democrats are hoping to consider the bipartisan infrastructure bill that has already passed the Senate, as well as the more sweeping Build Back Better plan this week. It is unclear whether a deal will emerge soon enough for that timing, though. Members will also consider legislation to award a congressional gold medal to commemorate the service members who were killed in Afghanistan in August at the Kabul airport. A full list of bills that may be considered is available here.

The Senate will consider several judicial nominees this week.

Key Hearings

The Senate Armed Services Committee will hear from defense officials on security in Afghanistan this morning. Information and livestream here.

Representatives from Snapchat, TikTok, and YouTube will testify before a Senate Commerce subcommittee this morning about protecting children online. Information and livestream here.

Two House Education and Labor subcommittees will hold a hearing today on employer vaccine requirements. Information and livestream here.

Attorney General Merrick Garland will appear before the Senate Judiciary Committee Wednesday morning for an oversight hearing. Information and livestream here.

Executives from ExxonMobil, BP, Chevron, and Shell Oil will testify in a climate change hearing on Thursday at 9 a.m. before the House Oversight and Reform Committee. Information and livestream here.