Democrats could shrink their $3.5 trillion spending plan

Free community college. Universal pre-K. Dental benefits for senior citizens. Paid family leave. Which ones will survive?

President Joe Biden and congressional Democrats now face the daunting task of paring their $3.5 trillion budget reconciliation plan, which contains all these measures and more, to appease the moderate wing of their party.

Just how deep the cuts will have to be isn’t known. Sen. Joe Manchin of West Virginia has said $1.5 trillion is his limit, though he acknowledged Tuesday that he wouldn’t rule out going as high as $1.9 trillion to $2.2 trillion. Biden is now aiming for that range.

But that’s still too low for House Progressive Caucus Chair Pramila Jayapal of Washington State, who wants a price tag in the range of $2.5 trillion to $2.9 trillion.

Whatever the top-line figure ends up being, there are three main ways that Democrats can reduce the cost of the package: Remove items from their massive wish list, delay the start date of measures or end them after only a few years, or narrow the eligibility or generosity of the programs.

“I don’t think it’s viable to pick any one of these options,” said Marc Goldwein, senior policy director for the nonprofit Committee for a Responsible Federal Budget, who argues the true cost of the package is closer to $6 trillion. “They’ll have to do all of these options.”

Jettisoning provisions

One way to bring down the cost of the package is to drop some of the provisions entirely — but that won’t be easy to accomplish since most, if not all, of them have long been on Democrats’ to-do lists.

While the Congressional Budget Office has yet to release its evaluation of the House bill, the White House included many similar measures in its American Families Plan proposal that it released in April.

In it, the President called for $200 billion for universal pre-K and $109 billion for two years of free community college. Biden wants to invest $225 billion in child care and the same amount in a national paid family and medical leave program — though some experts say paid leave could wind up costing twice that.

The House bill also contains a bevy of tax breaks that would help advance the Democrats’ equity, health care and climate agendas.

It would extend the enhanced child tax credit through 2025 and make it permanently refundable at an estimated cost of $556 billion, according to the Committee for a Responsible Federal Budget.

The climate-related tax breaks, aimed in large part at renewable energy, add up to $273 billion, the watchdog group says.

Meanwhile, making the enhanced Affordable Care Act premium subsidies permanent would cost $200 billion, according to the White House.

When it comes to deciding what to cast aside, lawmakers may want to consider what programs are more feasible to implement and administer and which ones have some bipartisan support so they could survive a change in administration, said Jason Fichtner, chief economist at the Bipartisan Policy Center.

Adjusting the timing

Another method lawmakers use to reduce the size of legislation is to make measures temporary, that’s why all the individual tax cuts in the Republicans’ 2017 act expire after 2025, for instance.

The Democrats can use the same trick in the budget reconciliation bill, which they did last spring in the $1.9 trillion American Rescue Plan that beefed up the child tax credit for one year and the Affordable Care Act premium subsidies for two years.

Already, in the budget reconciliation package, lawmakers are extending the enhanced child tax credit only through 2025, even though many would like to make it permanent.

The hope is that the temporary provisions would become so popular that it would be hard not to eventually extend them, said Don Schneider, an economist at Cornerstone Macro, an investment research firm, and former chief economist at the House Ways and Means Committee when Republicans controlled Congress.

This is Jayapal’s preferred method. She said on a call with members Tuesday that if the top-line figure needs to be cut, lawmakers should look at reducing the years of funding for some programs instead of cutting entire policies or basing eligibility on income, according to a source familiar with the call.

WASHINGTON, DC – JULY 14: Children from the KU Kids Deanwood Childcare Center complete activities at an event celebrating the launch of the Child Tax Credit on July 14, 2021 at the KU Kids Deanwood Childcare Center in Washington, DC. (Photo by Jemal Countess/Getty Images for Community Change)

Congress can also shrink the price tag by delaying the start of benefits. Under the House bill, for instance, dental benefits would not be added to Medicare until 2028, to minimize the financial impact of the provision. Vision coverage would start next October and hearing services a year later.

The Congressional Budget Office estimated in 2019 that dental coverage would cost $238 billion over 10 years, compared with $89 billion for hearing services and $30 billion for vision.

Narrowing the scope

Part of the reason the reconciliation bill is so costly is that it would expand the nation’s safety net to a much wider swath of Americans. Some moderates don’t want it to be quite that generous.

Manchin, for instance, is pushing to base eligibility for certain programs on income. He has discussed lowering the thresholds for the enhanced child tax credit but also requiring that parents work and earn income to qualify.

Sen. Angus King, an independent from Maine who caucuses with the Democrats, told CNN that he supports the child tax credit but has “some reservations about what the income levels are and who it goes to.”

Manchin and other moderate Democrats have also floated limiting the new Medicare benefits to those below a certain income threshold, which would be the first time coverage in the program would be tied to income.

The White House has not ruled out narrowing eligibility.

“Some programs in the Build Back Better plan have income limits, as you know, for eligibility, such as the child tax credit and child care,” deputy press secretary Karine Jean-Pierre said Tuesday. “We are open to targeting other programs as well.”

The benefit amounts could also be trimmed or other types of restrictions added. For instance, Democrats could provide a child tax credit of up to $1,800 for kids under age 6, instead of continuing the $3,600 credit in place for this year.

They could scale back the maximum monthly paid leave benefit to be more in line with Social Security.

Also, Medicare could charge a premium for its new coverage, which would reduce the annual cost to $63 billion from $81 billion, according to the Committee for a Responsible Federal Budget.

“The bottom line is they are going to ditch stuff, they are going to have to means-test policies, they are going to have to find ways to do things cheaper, and they’re still probably not going to be satisfied with their number,” Goldwein said.

 

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