Around noon today, the Washington Post editorial board wrote that Manchin is wrong on inflation and Build Back Better. The editors point out that of all Manchin's problems with BBB, his professed concern about making inflation worse "is probably the most deeply flawed. What happens to inflation in the coming months will be driven largely by the coronavirus and the Federal Reserve’s actions. If Build Back Better-- or some version of it-- passes soon, the bill would be a rounding error in inflation calculations. The main reason inflation is at its highest level since 1982 right now is the pandemic. Demand for goods-- everything from couches to washing machines to fancy decks-- has soared as people continue to spend a lot of time at home. Meanwhile, supplies for these items are low as factories have struggled to reopen and staff up; supply chains were not capable of handling this surge. The result of high demand and low supply was easy to predict: Prices went up."
The $1.9 trillion American Rescue Plan that Democrats (including Mr. Manchin) passed this year likely contributed to inflation as well. It was designed to give most Americans money. What was spent on groceries, rent and other items helped push demand higher.
But Build Back Better is a very different bill. It does increase government spending, which traditionally boosts growth and inflation, but it also raises taxes on the wealthy and large businesses, which traditionally decreases them. The legislation is also (mostly) paid for, at least in the near term.
The Congressional Budget Office estimates the bill would add about $160 billion to the deficit over the next decade. That’s not zero, but it’s small in the context of a $23 trillion economy.
Inflation is most problematic for Americans who live paycheck-to-paycheck. Build Back Better would help reduce the costs of medicines, health insurance and child care for many low-income Americans. The current version of the bill also extends the enhanced child tax credit to give families with children extra money in 2022 to help pay for basic needs.
Some economists have pointed out that the bulk of the spending in Build Back Better comes in the first few years while the tax increases and other revenue largely occur later on. This could-- and should-- be tweaked in the final version of the bill. But even in its current form, the inflation impact is modest, according to many independent forecasters. Moody’s Analytics, for example, estimates inflation would be about 0.2 percentage points higher next year if the current bill passes. A harsh winter could have a similar impact by driving up energy demand.
Build Back Better is about investing in the long-term future of the United States. Voting yes or no on this bill should not be based on the short-term inflation outlook.
The primary consideration-- for Mr. Manchin and every other lawmaker-- should be whether these investments in child care, climate change and lifting people out of poverty are worth doing to benefit society for years to come.
And the Democrats in Congress? Conservatives are happy to see the bill scaled back, ostensibly to satisfy Manchin and get him on board... but probably to satisfy wealthy taxpayers/donors. Writing for The Hill this morning, Naomi Jagoda reported that "Democratic lawmakers, lobbyists and experts at think tanks believe Manchin might be won over if the bill is revised to include fewer for a longer period of time. 'That is the way forward here,' said Ben Ritz, director of the Center for Funding America’s Future at the Progressive Policy Institute, who has advocated for a bill with fewer items... Most of the party is starting to come around to that,' Ritz added." Despite the name, the so-called Progressive Policy Institute is a conservative mainstay of the Republican wing of the Democratic Party, so yeah... they would rather not burden the rich with paying their fair of taxes, despite what the overwhelming majority of the public-- let alone Democrats think.
Progressives initially championed a $10 trillion initiate, went down to $6 trillion pretty fast-- at a time when Manchin was saying he was open to $4 trillion-- and eventually surrendered to a $3.5 trillion plan which was then chipped away to a $1.75 trillion plan-- which was then rejected by the corrupt Manchin (and just as corrupt Sinema)-- their biggest donors-- anyway. The House was passed it anyway and was then tricked into allowing Manchin's and Sinema's hard infrastructure bill when Biden and Pelosi guaranteed progressives that Manchin and Sinema in the Senate and the Blue Dogs in the House would back the social spending bill. Everyone points their finger at everyone else about who was lying but it was almost certainly a combination of Manchin (with Sinema along for the ride) and Biden.
None of the conservatives want to extend the increased child tax credit for example, but are loathe to say so publicly. Republican lobbyist Tucker Shumack told Jagoda that "To get someone like Manchin, a Democrat representing a conservative state, to a point where they can support something, [Democrats] started off on the wrong foot about letting the bill get too big about too many things."
In his recent comments, Manchin said he couldn’t explain voting for Build Back Better in West Virginia, a state former President Trump won twice by double digits.
Jorge Castro, co-lead of the tax-policy practice at Miller & Chevalier and a former aide to former West Virginia Democratic Sen. Jay Rockefeller (D), said that a more focused bill could help Democrats counter Republican attacks that the bill is a grab-bag of spending.
“I think it definitely helps from a messaging perspective,” he said.
Some moderate Democrats have long called for the Build Back Better Act to include fewer items for a longer time period, and are emphasizing this idea in the wake of Manchin’s recent comments.
“At the start of these negotiations many months ago, we called for prioritizing doing a few things well for longer, and we believe that adopting such an approach could open a potential path forward for this legislation,” [Wall Street whore] Suzan DelBene (D-WA) chair of the [extremely corrupt right-wing] New Democrat Coalition, said in a statement Sunday.
White House Chief of Staff Ronald Klain tweeted a link to DelBene’s statement, saying the administration appreciates “all that @RepDelBene and the House New Dem Coalition has done to move forward on Build Back Better and the President's agenda!”
Progressive lawmakers have been leading supporters of including more items in the bill, even if that means some programs are temporary. But they are acknowledging that some items may need to be removed from the package in subsequent negotiations.
In a statement on Wednesday, Congressional Progressive Caucus Chair Pramila Jayapal (D-WA) said that cuts should be as minimal as possible.
“In Congress, we will continue to prioritize a legislative path for Build Back Better, focused on taking the current text of the legislation passed by the House, keeping as much of it as possible-- but no less than the elements contained in the framework negotiated by the President and committed to by Senators Manchin and Sinema some months ago,” Jayapal said.
It’s not certain exactly which items from the House-passed bill would end up in a narrower bill, and exactly which would be left out.
The New Democrat Coalition in their statement mentioned as top priorities the expanded child tax credit, building on ObamaCare and addressing climate change. Senate Finance Committee Chairman Ron Wyden (D-OR) also made reference to those items in a statement on Sunday.
Manchin has raised concerns about including Medicare expansion and paid family leave in the spending package, suggesting that those items might not make it into a package with fewer content areas.
The expanded child tax credit could prove to be challenging to include in a compromise with Manchin. The West Virginia senator has expressed a desire for the income limits for the credit to be lowered and for there to be work requirements associated with the credit.
The Washington Post on Monday reported that Manchin had provided the White House last week with a $1.8 trillion proposal that included universal preschool for 10 years, ObamaCare expansion and climate spending, but not the expanded child tax credit. Neither Manchin’s office nor the White House have publicly confirmed the report.
Ritz said it’s possible that Manchin and other Democrats could reach a compromise on the child tax credit, such as by targeting the child tax credit expansion more toward younger children or lowering the income level where the expanded credit starts to phase out.
He also said that even if a bill didn’t include an extension of the expanded child tax credit, a package that included other items such as universal preschool, ObamaCare expansion, climate funding and affordable housing investments would still be transformative.
“You put that together with the bipartisan infrastructure law, and that makes Biden the most transformative president since LBJ,” he said.
Let's continue this discussion tomorrow morning... with Marianne Williamson. Meet you here at 5AM (PT).