Maybe progressives should throw in the towel on reconciliation after all. First, half their agenda has gotten the axe over Joe Manchin’s opposition to vast government expansion of already-broke social programs. Now, according to the Wall Street Journal, they’re about to lose all the punitive taxation that their activists demand for their class warfare.
So what’s left? Actual infrastructure? Heaven forfend:
Senate Democrats are considering abandoning central tax elements of their social policy and climate package, as a key senator continues to oppose any increase in marginal rates for businesses, high-income individuals or capital gains, according to people familiar with the matter.
Sen. Kyrsten Sinema (D., Ariz.) has previously told lobbyists that she is opposed to any increase in those rates, according to a person familiar with her remarks, but her stance is now pushing Democrats to plan more seriously for a bill that doesn’t include those major revenue increases. …
Losing the rate increases would punch a significant hole in the Democrats’ plans for funding the package, now expected to cost around $2 trillion over a decade. The House’s corporate tax rate increase was projected to raise $540 billion over a decade, while the tax rate increases on ordinary income and capital gains would raise nearly $300 billion.
That would eliminate a pathetically dishonest White House talking point. Even up to yesterday’s Joe Biden speech in Scranton, the administration has continued to flog its claim that the bill would have “zero cost,” thanks to all the revenue from the taxes it raises. That’s a laughable sleight-of-hand in trying to use their deficit-neutral score of the bill as a replacement for costs, which are two very different things. And even the bill’s deficit neutrality is comprised of smoke and mirrors:
The Congressional Budget Office has said it is “unclear when” it will provide official estimates for the entire proposal written by the House last month. So we’ve turned to what several budget experts say are the best available estimates of the cost of everything in the bill, compiled by Don Schneider, an economist at Cornerstone Macro. The figures, detailed in the tables below, show that lawmakers’ starting point is far higher than the $3.5 trillion number they had used to describe the package initially. …
Democrats have vowed that the bill will be fully financed, a promise that suggests they will offset all their new spending and tax cuts with new taxes and government revenues or cuts elsewhere in the budget. But the language of the budget would allow them to pass a bill that increases the federal deficit by as much as $1.75 trillion under official estimates.
If Biden has tossed out the punitive tax hikes progressives have wanted for years, that drops revenue increases from $2.98 trillion in the original $3.5T plan to something around … $800 billion. Sinema might allow some of the lesser taxes to remain, such as increases in tobacco/nicotine and oil taxes, and maybe the carried interest tax. That would add another $150 billion over the ten-year scoring for the bill, but that still would only add up to less than $1 trillion, meaning that this bill doesn’t come close to paying for itself, even in its shaved-down form.
The White House claims it has other options, but those aren’t going to be nearly as satisfying to the woke class warriors in the progressive caucuses:
The White House conceded Wednesday that raising taxes on corporations, the wealthy and capital gains may be off the table for the massive social spending bill, as Sen. Kyrsten Sinema (D-Ariz.) came out against raising rates — sending Democrats scrambling to find new ways to pay for their massive social spending plan.
“There is an expansive menu of options for how to finance the president’s plan to ensure our economy delivers for hardworking families, and none of them are off the table,” White House spokesperson Andrew Bates said.
And that’s not all that’s getting trimmed:
At a meeting with progressive House members at the White House Tuesday, Biden reportedly suggested the overall figure could be between $1.75 trillion and $1.9 trillion — down from the $1.9 trillion to $2.2 trillion he had quoted weeks earlier.
It’s a Half-Off Sale at the Oval Office! Get it while you can! That topline is probably still a moving target as the White House figures out what revenue they can still raise and qualify for reconciliation.
At any rate, the issue now becomes whether progressives want to pass what’s left at all. They have been complaining for months about the idea of any compromise, but this is looking like much less than half a loaf for their purposes without the tax hikes on corporations and the wealthy:
However, it’s unclear whether a social spending bill that does not raise tax rates would win enough Democratic votes to pass the House, where Speaker Nancy Pelosi (D-Calif.) can only afford to have three members of her conference vote against any legislation before it fails.
That’s if they vote on the bipartisan infrastructure bill first, too. Sinema has made it clear that she will shoot down the reconciliation bill if the House doesn’t first pass the BIF regardless of the concessions she gets on the former. If progressives have to lose their precious tax hikes, the BIF is likely going to go down in flames … and Biden’s agenda with it.