Senate Democrats Pass $3.5 Trillion Budget Plan

President Joe Biden’s economic agenda took a major step forward Wednesday with Senate passage of a $3.5 trillion budget framework, but the bill that opens the way for the biggest expansion of federal social spending immediately exposed division among Democrats.

The outline passed the Senate over unified Republican opposition. Translating it into law will require Biden and Democratic congressional leaders keeping their party’s moderate and progressive wings marching together.

Just hours after Democrats passed the budget blueprint on a party-line 50-49 vote, Senator Joe Manchin of West Virginia said he couldn’t support a social spending bill with a $3.5 trillion price tag. Senator Kyrsten Sinema, an Arizona Democrat, has said the same. One Democrat’s objection is all it would take to scuttle the package in the Senate.

Manchin said he had “grave concerns” that another multi-trillion–dollar spending bill could cause prices to rise, harming middle-income households. These concerns echo the arguments of many Republicans that continued fiscal support from Washington will trigger inflation and undermine the economy. Labor Department data Wednesday showed the consumer price index in July increased 0.5 percent from June and 5.4 percent from a year ago, adding fuel to those concerns.

Neither Manchin nor Sinema has said how big of a package they would support. But progressives in the House say $3.5 trillion is the minimum needed for healthcare, climate, and other programs. They are threatening that unless their priorities are met, they will withhold support for separate infrastructure legislation with $550 billion in new spending passed on a bi-partisan basis in the Senate Tuesday.

“There are some in my caucus who believe it’s too much. There are some who think it’s too little,” Senate Majority Leader Chuck Schumer said at a news conference Wednesday. “We’re going to all come together to meet that goal” of passing Biden’s agenda.

Democrats are pitching tax cuts in the plan as the largest in history for the middle class, including an extension of the temporary pandemic child tax credit. Part of the cost would be paid by rolling back the tax cuts for corporations and wealthy households that were former President Donald Trump’s signature legislative achievement. The reductions for households, which are politically popular, make it easier for moderate Democrats who are wary of Biden’s proposed tax hikes to support the budget plan.

The Democratic plan includes calls for universal pre-K for 3- and 4-year-olds; paid family leave; two years of tuition-free community college; and new dental, vision and hearing benefits for Medicare beneficiaries.

The resolution also calls for a series of measures to combat climate change. Among them are a “polluter fee” on imports for products’ greenhouse gas emissions, plans to electrify the federal vehicle fleet, and incentives for electricity suppliers to achieve Biden’s goal of 80 percent clean power by 2030, up from approximately 40 percent currently.

Senate Budget Chairman Bernie Sanders said the package would address “the long-neglected needs of working families and not just the 1 percent and wealthy campaign contributors.” That, he said, will ”restore the faith of the American people in the belief that we can have a government that works for all of us and not just a few.”

Mitch McConnell, the Senate’s Republican leader, said the GOP wouldn’t assist the Democrats in playing “Russian roulette” with the economy. “If this historically reckless taxing and spending spree is how the modern Democratic Party wants to define itself, if they want inflation and tax hikes to be their legacy, then Republicans do not currently have the votes to spare the American families this nightmare,” the Kentucky Republican said.

The details still must be filled in through actual legislation. Senate committees are supposed to complete the bill as soon as September 15, though negotiating the mammoth package and passing it in both chambers could take much longer as the Democratic Party’s factions wrangle over the size of the plan and how to handle hot-button issues like taxes, climate, and immigration.

Tax Measures

Even as the Democratic budget outline calls for tax increases on households earning more than $400,000 per year, it instructs committees to cut taxes for those making less.

Among the provisions is an extension of the child tax credit, which gives parents up to $300 per child per month. That tax break is currently scheduled to be scaled back at the end of the year.

The cuts for middle-class families would be offset by large increases on corporations, including raising the corporate tax rate and imposing a minimum tax on offshore business profits. Biden has proposed raising the corporate tax rate from 21 percent to 28 percent, though some moderate Democrats, including Manchin, say they don’t support an increase that big.

The resolution also specifically references expanding the state and local tax (SALT) deduction, a key priority for lawmakers representing high-tax areas, including New York and New Jersey. Increasing the $10,000 cap on the SALT deduction is of particular importance in the House, where more than 20 Democrats have said they would sink Biden’s economic agenda unless the tax break, which was limited under Trump, is made more generous.

Infrastructure Win

The budget win followed another major victory for Biden in the Senate, a bi-partisan 69-30 vote on Tuesday approving legislation with $550 billion in new infrastructure spending. It was a breakthrough compromise that had eluded Congress and multiple presidents for years, even though both parties deemed infrastructure a high priority.

Nineteen Republicans voted in favor of the infrastructure package, including McConnell, who under Barack Obama bestowed on himself the nickname “Grim Reaper” for his record of obstructing Democratic presidential priorities.

Yet that legislation, too, is enmeshed in political jockeying, with some House progressives threatening to vote against the infrastructure bill unless the Senate first sends over a measure delivering on the budget framework’s promises. House Speaker Nancy Pelosi, who cannot afford to lose more than three Democrats on a party-line vote, said she would delay consideration of the infrastructure package until the Senate passes legislation following through on the budget.

The House will interrupt its summer recess on August 23 to vote on the budget resolution, Majority Leader Steny Hoyer announced Tuesday, and approval in the Democrat-controlled chamber is expected. House members weren’t scheduled to return to Washington until September 20.

The budget plan also sets up a potentially disruptive political sideshow sometime in the fall. The blueprint doesn’t include an increase or suspension in the statutory debt ceiling, which is needed to avert a U.S. default later this year.

That means action on the debt limit has to follow normal Senate procedure, under which it can be blocked unless 10 Republicans join Democrats in limiting debate. GOP leaders say the party won’t support an increase.

—With assistance from MacKenzie Hawkins, Daniel Flatley & Jarrell Dillard.

 

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