How Democrats Could Shrink Their $3.5 Trillion Budget Bill

WASHINGTON — As Democratic leaders struggle to unite their caucus behind a sprawling domestic policy package, it is increasingly clear the $3.5 trillion in spending and tax increases will have to be pared back, possibly by a lot, to make it to President Biden’s desk.

That will involve difficult choices for a party fractured by mistrust and competing priorities. But in a package that is intended to shape every facet of American life, including public education, health care and the environment, there is room for agreement, even in a thinly divided Congress.

Here are three possible scenarios for how to structure a final deal.

A slightly scaled-back plan that uses budget tricks to hold down the cost.

Senator Bernie Sanders, the Vermont independent and chairman of the Senate Budget Committee, initially urged his colleagues to embrace spending as much as $6 trillion over 10 years as they began drafting the bill.

To narrow the scope to its current price tag of $3.5 trillion over 10 years, aides said, Mr. Sanders and his colleagues employed budget gimmicks like setting earlier end dates on programs or narrowing their proposed size to lower their cost.

In essence, rather than sacrificing entire programs, Democrats opted to shave down the amount of money devoted to some of them. It is a tactic they could use again to further scale back the package.

Democrats have said they want to extend the refundable child tax credit, which was expanded as part of the $1.9 trillion pandemic aid bill enacted in March and now provides benefits to more than 93 percent of children — 69 million — by sending monthly checks of up to $300 per child to families. They could lower the overall cost of the package by extending it until 2024 instead of 2025.

Similarly, a proposed expansion of Medicare benefits to cover dental, vision and hearing provisions could be phased in more slowly, reducing its cost in the bill’s official 10-year time frame.

House Democrats have proposed giving seniors access to vision benefits immediately, hearing benefits in 2023 and a dental program in 2028. Some top Senate Democrats say they want to see the dental benefit established sooner. While rolling it out slower would be cheaper, Democrats would most likely fail to reap an immediate political benefit.

A lowest-common-denominator $900 billion package that extends existing health and child care benefits.

The easiest fallback for Democrats might be to extend the generous tax credits and other benefits created for a single year in the $1.9 trillion pandemic relief law, known as the American Rescue Plan. According to the Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group, that skinny option would total $900 billion, still more than President Barack Obama’s 2009 stimulus plan, which, when it passed, was considered huge.

The expansion of the child tax credit has already been hailed as a sea change in anti-poverty policy. Right now, the House is planning to extend it through 2025 at a cost to the Treasury of around $500 billion.

The law also greatly expanded subsidies for the purchase of health insurance through the Affordable Care Act, and extended those subsidies further into the middle class through 2022. Extending them for 10 years would cost $210 billion.

For workers without children, the pandemic relief law raised the maximum earned-income tax credit, which supplements the income of the working poor, from about $540 to about $1,500 and raised the income cap to qualify from about $16,000 to about $21,000, while letting adults as young as 19 access the program for the first time. Extending that would cost $135 billion. Another popular but temporary provision — a much larger child and dependent care tax credit — could be extended by a decade for $95 billion.

Politically, this skinny option should not be a heavy lift, since the House and Senate have already passed both programs. Extending the child tax credit out a full decade would push the price tag to $1.5 trillion.

The cost of such a plan could be covered by proposals drafted by the House Ways and Means Committee to raise taxes on the wealthy and increase the corporate income tax rate.

A middle-ground $1.5 trillion bill that invests huge resources in programs to combat climate change.

Progressive Democrats have indicated that they will not vote for the $1 trillion infrastructure bill that has already passed the Senate and would fund new roads, bridges and tunnels without ensuring passage of the climate change and social welfare bill, which would push the country’s fleet of cars, trucks and buses more toward electric power, supported by electric utilities fortified to handle all those vehicles and fueled by solar, wind and other renewable sources. To pass the former without the latter could actually make global warming worse, they argue.

To answer those concerns, Democrats could include the social welfare components of the lowest-common-denominator option — extending the temporary benefits of the American Rescue Plan — while going big on climate change. Those climate provisions would cost $585 billion over 10 years, according to the Committee for a Responsible Federal Budget.

They would push utilities away from coal and natural gas-fired power plants with a $150 billion Clean Electricity Performance Program, fund renewable energy deployment with tax credits worth more than $100 billion and offer $42 billion worth of tax credits for the purchase of electric cars, trucks and buses, while also pumping billions into home and commercial energy efficiency.

Those efforts, with a full, 10-year extension of the child credit, would push the total to $2.1 trillion.

Adding the remainder of the international corporate and business tax changes drafted by the House Ways and Means Committee to the higher corporate tax rate and increased taxes on the rich would just about pay for this option.

Back to top button