Any hope that Democrats might pass the Build Back Better Act before Christmas appeared to disintegrate on Wednesday after talks between West Virginia Sen. Joe Manchin and President Joe Biden ended with the two sides still at odds on both the size and basic shape of the climate and social spending package.
Manchin and the rest of his party have yet to agree on a basic top-line number for the bill. The version passed by the House last month includes about $2.1 trillion in new spending over 10 years. Manchin wants to cap it at $1.75 trillion. But perhaps more importantly, Manchin also disagrees with his colleagues on the very structure of the bill—something that should have been evident for months now to anybody paying a semblance of attention.
In order to make room for as many priorities as possible, the House version of BBB reduces the official cost of its programs by setting their funding to expire after a few years. Its child care and pre-K funding, for instance, lasts for just six years. The current child tax credit expansion only lasts for one year. The bill’s fixes to Obamacare would sunset after 2025. Manchin sees all of this temporary spending as a budget gimmick meant to hide the bill’s true long-term cost (since Democrats are counting on the programs being renewed). Instead, he wants each program that’s included to be funded for a full 10 years—which would require passing fewer initiatives, but would likely allow them to be permanent. “If you’re gonna do something, let’s do it, let’s commit to it,“ he told CNN reporter Manu Raju last night.
When it comes to the overall size of the legislation, I hope that Manchin is willing to budge a bit on his number. In the scheme of a $23 trillion economy, there simply isn’t much economic difference between a bill that costs $175 billion per year and one that costs $210 billion. The senator has said he is deeply concerned that BBB could exacerbate inflation, but even inflation hawks like former Treasury Secretary Larry Summers have argued that’s unlikely, because the spending is relatively modest compared with our GDP and paid for with new taxes.
When it comes to the structure of the package, however, it’s Biden and the rest of the Democrats who ought to cave. It’s not just that Manchin seems unlikely to back down from his position; he’s also largely right on the political and policy merits. The current version of Build Back Better is a hodgepodge of temporary spending that could very well disappear in a few years when Republicans inevitably regain power in Washington; prioritizing fewer items but making them permanent is a much more reasonable way to go about reforming the safety net for the long term.
Manchin has been making it clear for months now that he disagreed with the party’s strategy of passing a larger number of temporary programs, which was favored by House progressives. In October, Axios reported that he wanted his colleagues to choose one of their three big family policy items—subsidized child care, paid leave, and the child tax credit—and was “aligning himself with Democratic centrists in the House, who want to trim the number of programs in any final package but fund them for longer.” In early November, he publicly accused his colleagues of playing budget “shell games” by making programs expire early, and did it again this month onstage at an event held by the Wall Street Journal. “Do they not intend for these programs to last the full 10 years?” he said. “Well, if they intend for that to happen, then what’s the real cost?” It’s hard to imagine how Manchin could have stated his position more explicitly, yet only now do Democrats seem to have taken off their earmuffs and started listening. From a negotiating perspective, it’s all frankly a bit bizarre. It would be one thing if there was any evidence that he might crumple on these demands, but Manchin has made it clear all along that he is comfortable allowing these negotiations to fail if the final product isn’t to his liking. He can make that threat credibly, because his entire brand back home in West Virginia depends on his willingness to buck his own party. Democrats don’t have much leverage here other than the power of persuasion. It may be cosmically unfair that one former coal broker from West Virginia somehow ended up with all that power, but that’s what happens when you only win 50 seats in the U.S. Senate.
Beyond the fact that Manchin is clearly holding the steering wheel in these negotiations, he also happens to be correct on this particular issue. As much as they’ve tried to pretend otherwise, Democrats are obviously playing shell games by setting funding to sunset early with the hope that, down the line, these programs will be re-upped. But more than that, it’s a dangerous shell game. Democrats are gambling that their new programs will be so popular that Republicans will have no choice but to continue them when they come up for renewal, much as they had no choice but to let the Affordable Care Act live on under Donald Trump. The big difference is that Obamacare was in place permanently; Republicans needed a majority in the Senate to repeal it, which meant a handful of moderates could scuttle their efforts. As a matter of pure vote counting, it’s much easier to simply let programs lapse. The GOP may also face less political pressure back home to keep the planks of BBB in place than progressives expect, because states have to opt in to many of its programs, such as its child care and pre-K reforms, and many Republican governors are already signaling they won’t participate.
Passing legislation on a temporary basis isn’t just risky; it also makes for worse policy in this case. After all, even some blue or purple states may choose not to participate in these programs if they can’t count on permanent funding, which will reduce their reach. That in turn could further weaken the political support that’s supposed to keep them alive.
There’s a common misconception about this debate, which tends to pop up a lot on Twitter, that both sides want to fund BBB’s programs temporarily, and that Manchin just wants to do it for a little longer. As a result, you’ll find a lot of people asking what the big deal is if a program has just six years of funding instead of 10, in terms of its long-term durability. But that is, in fact, not the question being argued over here. Under the rules of the budget reconciliation process that Democrats are relying on to pass their legislation, programs can be made permanent as long as they don’t raise the deficit after their initial 10 years. Though there are some nuances, the bottom line is that if Democrats fully fund all of their programs in the first decade, there will likely be more than enough revenue to keep them in place indefinitely. It’s not a debate between one year, six years, or 10 years, but rather temporary versus permanent.
What’s more, Democrats could still pass an extremely expansive agenda while funding programs permanently. The entire climate change, environmental, and infrastructure section of the bill costs approximately $555 billion. According to a recent Congressional Budget Office report, permanent versions of the child care and pre-K programs would cost $752 billion, while making its much-needed improvements to Obamacare would cost $400 billion. Democrats could also allow the child tax credit to shrink back to its Trump-era size, but permanently make families eligible for it regardless of whether they have income from work, at a cost of about $170 billion, according to the Jain Family Institute’s estimates. That reform would make for a major reduction in child poverty while saving budget room. Combined, those four priorities would cost about $1.88 trillion. It’s a bit above Manchin’s target, and some Democrats might prefer to include different priorities, like home care for the elderly and disabled, which costs about $209 billion. But it gives you a sense of what’s possible.
I don’t want to leave the impression that Joe Manchin has been an overall force for good or sanity in the BBB negotiations. He’s weakened the bill’s climate provisions (though they remain very strong regardless). And his insistence on capping the size of the legislation is a major part of the reason Democrats have resorted to budget gimmicks like temporary funding in the first place. I would also argue that it doesn’t make sense for Democrats to fully pay for the cost of spending that is meant to be temporary, such as green energy tax credits designed to transition the grid off of fossil fuels; mainstream public finance theory suggests that kind of spending can be safely deficit-financed.
But if you accept Manchin’s demand to keep the bill’s total around $2 trillion—and at this point, Democrats have—then it also makes sense to design the legislation his way, with fewer programs set to last long-term. Caving to Manchin’s demands will require Democrats to sacrifice some worthy parts of their agenda. But it’s time for them to buck up and do it, lest they end up with nothing at all.
