House Passes Biden’s Economic Plan, With Senate Fate Uncertain -Breaking
(Bloomberg) — President Joe Biden’s signature plan to expand the social safety net, address climate change and rewrite tax policies passed the House Friday morning as Speaker Nancy Pelosi united fractious Democrats to send the legislation to the Senate, where its fate remains uncertain.
After months of internal party squabbling, the 220-213 vote was finally achieved. The bill was approved after the nonpartisan Congressional Budget Office provided a cost estimate, something that moderates demanded prior to casting their ballots. CBO’s conclusion that the bill would raise the deficit by $367billion over a decade was acceptable enough to allow the bill to be passed. Jared Golden (Maine Representative) was the only Democrat not to vote along with all Republicans.
Biden’s incremental victory in the House is a political victory, but his goals are still far away from being achieved. The Senate Democratic Caucus is expected to propose significant changes, possibly in December. The Democratic caucus must support the motion unanimously. Two pivotal members of that group, Joe Manchin from West Virginia and Kyrsten Silenza of Arizona have not yet given their support. Republicans support each other.
Pelosi’s plan to pass the legislation on Thursday was delayed by House GOP leader Kevin McCarthy, who spoke for more than eight hours on the House floor to criticize the bill as the “single most reckless and irresponsible spending bill in our nation’s history.”
The Build Back Better proposal, as Biden’s plan is known, would spend $1.64 trillion over ten years, according to the CBO’s analysis. The investment in the economy, after taking into account tax credits, is over $2 trillion. According to an analysis done by Committee for a Responsible Federal Budget, the spending increase and tax cut add up to $2.4 trillion.
The program would cover universal pre-K and childcare subsidies. It also provides four weeks of paid, subsidized family leave. Medicare would be able to negotiate the prices for prescription drugs for the first-time while limiting out-of pocket costs for seniors. Medicare would provide hearing services for the first-time.
It aims to combat climate change through imposing a methane fee and offering a variety of tax credits for electric vehicle purchases. Additionally, it will provide deportation relief for millions undocumented immigrants.
The tax bill will extend the child tax credit and permanently make the refundable permanent to anyone who has not enough income tax liability. A provision which will help wealthy taxpayers but also benefit them, the bill would raise the Federal Deduction Limit for State and Local Taxes.
The new minimum 15% tax for corporations and surtaxes of 5% on individuals earning more than $10 million would be imposed to raise revenues. An additional 3% tax will apply above $25 million. You will also be subject to taxes on stock buybacks, nicotine and large individual retirement accounts.
Republicans point out data that shows the largest increase in inflation year-over-year in thirty years to argue against the bill. They contend the Democrats’ plan would stoke inflation by pumping more money into the economy at a time of supply-chain bottlenecks and worker shortages. GOP legislators also claim it disincentives workers to work by removing the link between child tax credit and employment requirements.
Brian Deese, White House economist, stated that the bill will lower inflation through lower healthcare and childcare costs as well as drug prices. It also encourages more people to join the workforce.
According to the White House, the bill will reduce the deficit by $112.5 trillion over 10 years. This is when it includes its estimation of increased tax revenue due to tax enforcement.
“I have confidence in that estimate,” said moderate Democratic holdout Stephanie Murphy of Florida. “I feel that this bill is in good fiscal discipline standing”
Overall, it’s a smaller package than Biden and some Democrats initially envisioned. After initially requesting a $6 trillion bill, progressives settled for a $3.5 billion top-line. Then they agreed to further reduce their ambitions. Manchin and Sinema resisted proposals for free community college, Medicare vision and dental benefits and other plans such as expanding the child credit and expansion of the tax credit to children were reduced to only a year.
A compromise was struck this month to add in elements of House Democrats’ drug-price legislation. The proposal provides for limited negotiation on a number of drugs. In addition, it offers rebates for seniors who have their prices increase faster than inflation. And caps out-of–pocket expenses. The provisions don’t feature a tax penalty on drug companies that fail to lower prices for private insurance, however.
There may be more cuts to this bill in the near future. The Senate’s top rules official over next week’s Thanksgiving recess will review the package and determine whether any provisions, such as a new policy addressing immigration, break the chamber’s rules for the special budget process that Democrats are using to ram the bill through without any Republican support. This would require Democrats to abandon the proposed legislation in order for them to keep using the filibuster-proof buget tool to pass it.
Sinema and Manchin will decide whether or not the Senate passes the Biden bill by the deadline of 2022. Manchin objected the House bill’s four weeks guaranteed family leave and an immigration proposal that granted deportation relief to some undocumented immigrant, along with a Medicare hearing aid benefit.
Also, the Senate has not fully endorsed a provision that would lift the $10,000 limit on federal deductions for state and local taxes up to $80,000. New Jersey Senators Bob Menendez and Bernie Sanders, both from Vermont, have suggested an alternative to the $10,000 cap on federal deductions for state and local taxes. They propose means testing to determine if income exceeds $500,000 to increase the cap. Colorado Senator Michael Bennet also opposes any attempts to raise the SALT limit.
Majority leader Chuck Schumer will be responsible for resolving these conflicts and navigate the Senate floor amendments to the bill. He stated this week that he hopes to get it done before Congress recess to celebrate the Dec. 25th Christmas holiday. The House would then be able to vote on Senate-amended versions.
Some of the House-passed bills appear to have at least 50 votes. These include the major tax increases for the wealthy and small businesses. Biden, who last month had months-long backroom discussions with senators about these issues, stated that they can get enough votes for passage.
The majority of the consensus reached has been on the provision that the child credit will be permanently refundable to low-income families without any income tax liabilities and increase the payments by up to $3,600 for each child for a year. Same applies to subsidies for Obamacare’s insurance premiums, and to provide coverage to those who live in states with limited Medicaid eligibility.
Additionally, tax incentives are provided for the purchase and use of renewable energy, electric vehicles, biofuels, storage energy, and other climate-related issues. The bill is likely to be passed. More vulnerable to being cut are a first-time fee on the emission of methane — a potent greenhouse gas — from the oil and gas sector while barring oil drilling in oil drilling in most U.S. waters and Alaska’s Arctic National Wildlife Refuge, due to Manchin opposition.
Democrats hope that progress on the economic bill, paired with enactment earlier in the month of the largest infrastructure investment in decades, will boost Biden’s flagging popularity and the chances of the party bucking historical trends in order to keep its congressional majorities in the 2022 midterm elections. Biden’s job approval sank to 36% in a a national survey conducted by the Quinnipiac University Poll and released Thursday.
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