US economy

Biden’s $3.5tn spending plan: ‘There are choices to be made’

After weeks of infighting, most Democrats in Washington acknowledge that Joe Biden’s ambitious $3.5tn “Build Back Better” spending plan will have to shrink in order to get through Congress.

But there is little agreement on how to perform what both the White House and many Democratic lawmakers see as a brutal culling exercise to bring the overall cost of the spending measures closer to $2tn.

“We have to make some difficult decisions, of course, because we have less, fewer, resources,” Nancy Pelosi, the Democratic Speaker of the House of Representatives, told reporters this week. “The fact is, is that if there . . . are fewer dollars to spend, there are choices to be made.”

The compromise will have to satisfy both the demands of the Democratic party’s progressives in the House of Representatives, as well as two conservative Democratic senators, Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, who have both rejected a $3.5tn price tag and demanded a more limited bill.

Pelosi is aiming to strike a deal on a sweeping spending bill by the end of the month. But momentum towards a compromise has already faded, raising fears that the stand-off could drag on for weeks, damaging both the White House and Democrats on Capitol Hill.

What is in Biden’s $3.5tn Build Back Better Plan?

The White House’s budget package, if signed into law, would make unprecedented investments in America’s social safety net over the next decade.

The $3.5tn plan would introduce universal pre-kindergarten schooling for three- and four-year-olds, cap the costs of childcare for children under the age of five at 7 per cent of most families’ incomes, and extend the monthly direct payments to families with children that were originally introduced in July.

The package would also provide funding for two years of tuition-free community college, increase government tuition grants for lower-income college students and invest in historically black colleges and universities.

Biden’s proposals would expand the government health insurance scheme for the elderly beyond basic medical care to also cover dental, hearing and vision services, and introduce 12 weeks of paid family and medical leave.

The final pillar includes hundreds of billions of dollars for federal programmes intended to combat climate change, including a scheme that would pay utility companies to increase their renewable energy supplies, as well as tax credits for individuals who buy electric vehicles.

What are Democrats’ options for cutting the costs?

Democrats are essentially considering three different ways to slash the package — each politically thorny and with its own drawbacks.

The first is to pick and choose the highest priority spending measures and leave the rest on the cutting room floor. But this is also the most brutal way to chop, and is bound to leave many important Democratic constituencies unhappy.

For instance, is it more important to fund dental coverage for the elderly or free community college? Is it more important to tackle the climate crisis or help families with child care? Every lawmaker would have to take a position and explain why it was chosen over another.

Earlier this week Pelosi sent a memo to fellow House Democrats saying the caucus would need to “do fewer things well so that we can still have a transformative impact”.

Many in Washington saw her comments as an indication that Pelosi was prepared to cut specific programmes, but the backlash to that idea was swift, so the speaker later suggested a second option: to change the timescale of the plan.

“What would be the first to go? . . . The timing would be reduced in many cases to make the cost lower,” Pelosi told reporters.

Currently, the $3.5tn in spending under the plan is spread over a decade. But some lawmakers are proposing to sunset Biden’s economic agenda in 2025, having the main provisions expire after the next presidential election.

The benefit of that idea is that most of the measures could be preserved — and Democrats could campaign on keeping the most popular ones in the future. However, the drawback for progressives is that the changes to the social safety net would only be temporary, weakening their impact on society and the economy.

A third option being weighed in Washington would involve cutting the cost of the package by “means testing”, or linking many of its components to household incomes, thereby favouring programmes to benefit only the poorest Americans.

While the White House has indicated it is open to means testing, several Democratic lawmakers have voiced their objections. Some are opposed to means-testing because they represent wealthy districts, and others are uncomfortable with the idea because it makes the measures less universal and therefore more politically vulnerable.

Why is this so difficult?

Republicans in the House of Representatives and the Senate have rejected Biden’s Build Back Better proposals, so Democrats need to pass the legislation with tiny majorities in both chambers of Congress. That means Pelosi and Chuck Schumer, the Senate majority leader, need almost universal support from within their ranks.

While progressive lawmakers have acknowledged the package will need to be slimmed down, they have also made clear that they do not intend to bend to every whim of Sinema and Manchin in particular.

Earlier this month progressives in the House scuppered a vote on Biden’s separate $1.2tn infrastructure bill, saying they could not vote for infrastructure without assurances on the social safety net package.

“The challenge here is that every Democratic member has pet priorities, and with razor-thin majorities nearly every Democrat holds theoretical leverage,” said Ben Koltun, an analyst at Beacon Policy Research in Washington.

He added that the looming spectre of next year’s midterm elections mean many Democratic lawmakers are willing to dig their heels in.

“Knowing it’s now or never . . . no one’s really ready to cut bait with their prized policies,” Koltun added.

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