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November 19, 2021 at 10:09 AM
What You Need to Know
- The Build Back Better proposal would spend $1.64 trillion over 10 years, according to the CBO’s analysis.
- The CBO finding that it would increase the deficit by $367 billion of a decade proved acceptable to enough holdouts for the bill to pass.
- The Senate is not fully on board with a provision lifting the $10,000 cap on federal deductions of state and local taxes to $80,000.
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.
The 220-213 vote, followed months of intra-party squabbling. It came only after the nonpartisan Congressional Budget Office delivered a cost estimate for the bill, which moderates had demanded before casting their votes.
The CBO finding that it would increase the deficit by $367 billion of a decade proved acceptable to enough holdouts for the bill to pass. Maine Representative Jared Golden was the only Democrat to vote no, along with all Republicans.
The House action is an incremental political victory for Biden — his agenda is still far from the finish line. Democratic senators are expected to make extensive changes before voting on it, potentially in December.
Passage in that chamber will require unanimous support from the Democratic caucus, and two pivotal members, Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, have yet to give their full public support. Republicans are united in opposition.
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.”
Proposal Details
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. When tax credits are factored in, the investment in the economy is more than $2 trillion, however.
The spending increases and tax cuts add up to $2.4 trillion according to an analysis by the watchdog group Committee for a Responsible Federal Budget.
It would provide universal pre-K, childcare subsidies, four weeks of subsidized paid family leave, subsidized Obamacare premiums and an alternative to Medicaid in some states, and would allow Medicare to negotiate prescription drug prices for the first time while capping out-of-pocket costs for seniors. Medicare would cover hearing benefits for the first time.
The legislation aims to fight climate change by imposing a fee on methane and providing a slew of tax credits for renewable energy and electric vehicle purchases, and it would provide relief from deportation for millions of undocumented immigrants.
On the tax side, the bill would extend expanded child tax credits and make them permanently refundable to those without sufficient income-tax liability to get the full benefit. It would also increase the cap on federal deductions for state and local taxes, a provision that will benefit wealthy taxpayers and which has sparked some push-back from progressives.
To raise revenue, it would impose a new 15% corporate minimum tax and a 5% surtax on individual incomes over $10 million, with an additional 3% tax above income of $25 million. There are also taxes on large individual retirement accounts, stock buybacks and nicotine.
Republican Opposition
Republicans point to data showing the biggest jump in year-over-year inflation in 30 years in arguing 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 lawmakers also say it provides disincentives to work, by de-linking the child tax credit from employment requirements.
White House economic adviser Brian Deese has said the bill would reduce inflation by lowering healthcare, childcare and drug costs and encouraging more workers to enter the workforce.
