Update 562 — 1, 2, 3, What’re We Fighting For?
Democrats’ BBB Message Mixed or Missing?
With the ticking time bomb that is (still) the debt limit to be reset for December 3, the conversation on the Hill returns to reconciliation negotiations. President Joe Biden spoke in Michigan this week, campaigning for the reconciliation and infrastructure bills being drafted by Congress. The President said “these bills are not about left versus right, or moderate versus progressive [but] about competitiveness versus complacency. They’re about opportunity versus decay.” Delay is ok, though, so leadership has set an October 31 deadline for final passage.
In the meantime, Democrats have the challenge of retrofitting their proposals into a smaller budget. This update will examine the hard choices Democrats face in the coming month and options for how best to craft bills that will make good on the policy and political promise and secure the votes for final passage.
Last week, House leadership took a strategic pause and set a new deadline for the end of this month for final passage of the Senate’s bipartisan infrastructure bill, since the reconciliation package negotiations are ongoing. The prospects of preserving all of President Biden’s $3.5 trillion Build Back Better Act seems to have run up against the harsh reality of a 50-50 Senate.
The parameters of the debate seem to have shrunk to a topline range of $1.9-2.3 trillion. While still inadequate to tackle the economic, social, and climate crises our nation faces, this is hardly pocket change. The onus is on the Democrats to make sure that messaging is clear to the American people. It is now up to Democrats to structure a reconciliation bill that provides the biggest bang for the buck, in policy and political terms.
Dialing for Dollars Across the Board…
Democrats can preserve provisions in the reconciliation package — for which no GOP votes are needed— by including as many of Biden’s priorities as possible but structuring them to reduce the topline price tag. Spending on critical provisions, like climate and the care economy, could be trimmed down in a variety of ways:
- Late Phase-Ins: New social spending proposals such as universal childcare, free pre-k, paid family leave, and Medicare expansion could be given more runway before full implementation in order to keep the programs permanent outside of the budget window. This was done in the Affordable Care Act for Medicaid expansion, which was not phased in until 2014.
- Early Phase-Outs: Rather than making some policies permanent, program sunsets can reduce the price tag. This option is pertinent to tax expenditures such as the child tax credit, the earned income tax credit, and the renewable energy credits. For instance, accelerating the sunset for the CTC from 2025 to 2022 would save more than $400 billion while leaving the door open for extensions.
- Means-Testing: A perennial cost-saving option, would limit the number of people who can access certain programs, either setting income caps to prevent the upper-middle class from benefiting or implementing minimum work requirements to obstruct the supposedly undeserving from new social spending. While some means-testing at the top end is inevitable, work requirements often create a bureaucratic mess and risk negating a lot of the potential economic impact.
This strategic approach has its pros and cons. On the one hand, a broad but shallow approach will allow parts of the President’s agenda to be front-loaded for economic benefit and good messaging for Democrats. As. Sen. Tim Kaine put it: “You could take pieces out, or you could start a piece in year 2, rather than year 1. Or you do some for five years, not 10, and count on it being so popular that when you come back in year six, well of course we’ll want to do it.”
But late phase-ins degrade the immediate benefit of social programs which could take years before being felt by everyday voters. This applies similarly to means-testing. In some cases, dialing down might give Republicans the opportunity to dismantle programs before the full benefit sinks in with the electorate.
… Or Seeking Signature Investments
Some Democrats are calling for the White House and Congress to focus on doing fewer programs better. The premise is that narrowing down the array of policies would allow those programs to receive more adequate resources and attention, thus delivering more stable benefits to tens of millions of Americans. These programs would likely be felt to a greater degree than a frenzy of small, short-lived programs granting them strong protection by way of public approval. Washington Post columnist Catherine Rampell writes cogently about the strategic choice ahead in her memo to the Democrats.
Assuming the topline spending figure drops to roughly two trillion dollars, Democrats would only be able to fit in a handful of Biden’s priorities into the bill. There are a couple of different paths for this type of reconciliation bill:
- Green Investments: Democrats could pursue investments to mitigate climate change and the disparate impacts facing marginalized communities. Tax credits for renewable energy investments and the Civilian Climate Corps would be two of the most impactful climate provisions here. In addition, a massive expansion of public housing and universal Section 8 vouchers would aid in providing affordable housing to all communities.
- Human Infrastructure: More similar to the core of Biden’s American Families Plan, Congress could create a national paid family leave program, extend the enhanced Child Tax Credit, establish universal Pre-Kindergarten, and make community college free. Direct investments in human infrastructure would aid in future economic growth and ensure millions of families have better job security and access to education.
Choosing what to leave on the chopping block between the two options above is a tough discussion for anybody. While either of these would dramatically improve quality of life and expand social programs, it would leave plenty of Biden’s campaign promises out in the wilderness. Not securing campaign priorities risks leaving some constituency groups unmotivated to support Democrats in the midterm elections. However, pursuing fewer programs better would ensure certain policies can get funded at the scale they need to actually be effective.
Navigating the Politics
The manner in which Democrats structure the final reconciliation bill will have significant political consequences. Both parties believe the bill, if passed, will be a central campaign issue in next years’ midterms: Democrats seek to energize their base by campaigning on a major legislative achievement, Republicans seek to win over swing and suburban voters with tired tropes on tax-and-spend and the debt and deficit (though the bill won’t add to the deficit). How those arguments play out will depend in part on which of the aforementioned routes Democrats use to trim the package.
If Congress chooses the first approach of funding as many new programs as possible with shorter time horizons, that would set up a potent campaign issue in future elections. While there is a risk that future Republican Congresses would simply refuse to extend programs, this would be a key selling point for Democrats to convince voters to keep them in power. A campaign message centered on “protecting” popular economic programs that provide direct benefits to voters would be effective for both progressive and moderate Democrats up for reelection.
For this reason, the clear political downside of choosing the approach of fewer, fully funded programs is that Democrats would have fewer programs on which to campaign. That said, if we assume this method would ensure such programs would be more efficacious, then there is less risk of Republicans using startup problems with the new programs as a political cudgel to say that big government doesn’t work. The rocky rollout of Obamacare in 2014 boosted Republicans’ attacks on the program, demonstrating the political risk of having to defend policies the public perceives as inept.
One key advantage to the first approach is that despite all of the rhetoric, Republicans will find it very difficult to not renew these programs when they regain power. This is a repeated theme of history: Republicans bashing a popular new economic program but then not having the guts to kill it later on, whether it be Social Security or Obamacare. This will especially be the case for the tax credits; failure to extend these would constitute a tax increase for millions of families, something the GOP may be loath to do. Yet for either approach, Democrats can lean on the strong political support for these programs and let Republicans try to argue deficit and debt about a bill that pays for itself.
Americans should know more concretely, no infrastructure week pun intended, what we are fighting for and structure the contents with a view to prompt, tangible results.