Manchin’s inflation spurt prompts White House to consider deficit reduction

Hoping to resuscitate the legislation, White House officials have in recent days discussed structuring the package to meet Manchin’s demands to cut the deficit without the measures he sees as gimmicks, a a step that would require removing many key domestic policy priorities from the legislation. .

The government already has between $23 trillion and $30 trillion in debt, depending on the measure. Without any change, the annual deficit — or the gap between spending and revenue — is projected to be around $1.8 trillion in 2022, then drop in 2023 as pandemic-related spending fades.

“A lot of people in the White House are spending time researching what they can do to put deficit reduction at the center of Build Back Better, with a strategy of attracting an audience of one,” one person said. in close communication with senior government officials. . “More than at any other time in this administration, deficit issues fuel a lot of politics and rhetoric inside the building.”

The precise ideas on the table are unclear, and people familiar with the talks have warned they are preliminary and no written plan has emerged. White House officials internally circulated a column by liberal commentator Matt Yglesias suggesting the party could approve $500 billion in climate programs and $400 billion in health care initiatives — and still unite behind it enough tax increases for the legislation to reduce the deficit more than 10 years of 800 billion dollars. This type of bill would likely exclude Biden’s expanded child tax credit, a key priority for tackling child poverty, but many Democrats believe it would be better than the current alternative of passing nothing. The people spoke on condition of anonymity to reflect the administration’s conversations.

Manchin included tax measures, climate programs and some health care initiatives in his $1.8 trillion counter-offer to the administration in the fall, but later clarified that offer was not an option. .

Manchin reiterated to WV MetroNews on Thursday that he thinks Democrats should prioritize getting the nation’s “financial house in order…Let’s get a tax bill that really puts us on the path to financial solvency.” Manchin again signaled his support for higher taxes on the wealthy and corporations, calling for the 2017 GOP tax law to be overturned. Manchin also told reporters on Thursday that he wanted “nothing at all” to do with the child care.

Senate Finance Chairman Ron Wyden (D-Ore.) said in an interview Thursday that there was growing interest in a package centered on an expansion of the Affordable Care Act, drug reform prescription, climate change and tax measures that would reduce the deficit. .

“I think there’s a growing interest in this,” Wyden said. “I know [Manchin] has been very interested in deficit reduction… We are in a position, if the Senate Democrats go that route, to have a list of items that can pay for a number of initiatives and also get the deficit reduction that he spoke today.

Even if Democrats can craft a tax bill that has Manchin’s support, the hurdles to passing it remain significant. Senator Kyrsten Sinema (D-Arizona) has repeatedly opposed raising corporate and high net worth tax rates, though she has signaled her support for other tax increases that would affect these groups. Democrats must also figure out how to resolve a standoff over the state and local tax deduction.

The administration has maintained that its initial plans were fiscally responsible, with Biden making it a condition of his plan early in the process. While Manchin was uncomfortable with Build Back Better’s structuring so many of its programs would only last a few years, this type of policy design has long been commonplace in Washington. Republicans in 2017, for example, made their corporate tax cut permanent, but timed many of their income tax cuts for individual taxpayers to expire in 2025 — a move that, to like the efforts of the Democrats, was aimed at reducing its initial cost. Democrats also said any programs they extend in the future will be paid for then with new tax hikes.

Still, some Washington budget groups argued to Manchin that the plans were fiscally irresponsible. R Street, a center-right think tank, produced an analysis that found the original Build Back Better would “make Biden’s first 14 months more expensive than Obama’s entire presidency.” R Street staff speak to Manchin’s office regularly, two people familiar with the interactions said.

“I think the only way for Manchin to see this as a real deficit reduction bill is to cut deficits every year, not play games like the latest version,” said Ben Ritz, director from the Center for Funding America’s Future at the Progressive Policy Institute. . “It’s certainly a good pivot, but it actually needs a deficit reduction bill to make it work.”

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