Build Back Better can come back better than ever

Matthew Yglesias
Bloomberg Opinion (TNS)
President Joe Biden delivers remarks on his Build Back Better agenda during a visit to the International Union Of Operating Engineers Local 324 on Tuesday in Howell, Michigan.

President Joe Biden’s signature economic legislation isn’t dead. In fact, if Democratic Party leaders could only bring themselves to make a few hard choices, Build Back Better could even get better.

Momentum for the nearly $2 trillion bill has seemingly collapsed, with talks between Sen. Joe Manchin and the White House breaking down and Senate Majority Leader Chuck Schumer’s self-imposed Christmas deadline looking impossible. But it’s never a good idea to take congressional deadlines seriously. And Democrats should realize that Manchin’s red lines leave them plenty of room to enact a major piece of legislation that all factions of the party can be proud of.

To see how to fix the bill, though, it’s necessary to understand how the current mess came to pass.

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It all starts with the arcana of Senate procedure, in particular the budget reconciliation process. Most bills need 60 votes to pass, due to another bit of Senate arcana, but a budget reconciliation bill needs only 50 — which is exactly the size of the Senate Democratic caucus. (The bill would pass when the vice president breaks the tie.) So any Democrat who wants their legislative proposal to have a chance will try to include it in the reconciliation bill.

That helps explain why Build Back Better has always been a grab bag of progressive ideas rather than a thematically coherent piece of legislation. Democrats basically have one shot to legislate. So they started out with a giant $3.5 trillion bill that doled out goodies to every element of the party’s coalition. They paid for it all with increased taxes on the wealthy, but moderates revolted at some of the revenue proposals, so the whole thing got cut down to $1.75 trillion.

Wrench in the works: That’s still a lot of money. But Democratic leaders didn’t want to disappoint anyone in their coalition by telling them “no.” So the legislation they passed in the House is full of weird phase-ins and mid-decade expirations in order to limit the total cost.

When this deal reached the Senate, Manchin threw a wrench in the works. He regards these provisions as budget gimmicks, since his House colleagues clearly intend for the programs to be made permanent.

On the facts, I think Manchin is wrong: It’s unlikely that the expiring programs would be extended. But that only underscores the foolishness of the House’s bonanza of expiring provisions. The $1.75 trillion headline number is a large sum of money — substantially bigger than the 2010 Affordable Care Act — and Democrats ought to be able to accomplish a lot of good with it. To spend $273 billion on a subsidized child-care program that only lasts for a few years, for example, would be a wasted opportunity when the money could be used on a smaller but permanent and durable program.

The problem here is simple to describe, if not solve: Nobody in the party wants to make tough choices and tell some groups that they aren’t going to get what they want.

Since Manchin and Sen. Kyrsten Sinema were responsible for cutting the bill’s overall price tag, the White House and congressional leadership would like them to break the bad news to individual members and interest groups about which programs are getting killed. So far they have been unwilling to play that role. The result is a pointless and frustrating exercise for everyone — but it shouldn’t be hard to come up with a good bill here.

Here's an example: Start with child poverty. The Tax Cut and Jobs Act of 2017 increased the child tax credit from $1,000 to $2,000 per year and made some of its benefits available to the lowest income families — but also scheduled these enhancements to expire in 2025. Then this year’s American Rescue Plan boosted the credit (for one year) to $3,600 for children under 6 and $3,000 for kids between 7 and 17. It also made the tax credit fully refundable, so even families with no income could get the full benefit.

Progressives want to make this bigger child tax credit permanent, which it should be. But that would cost about $1.6 trillion. So advocates like Senator Michael Bennet have been trying to sell Manchin on a one-year extension, and Manchin is saying no.

Here’s a more viable idea: The Jain Family Institute says that about half of the poverty-fighting impact of the enhanced tax credit comes from full refundability rather than making the credit larger. The Tax Foundation says that change plus making 2017’s enhancement permanent would cost $580 billion.

Then there’s the part of the legislation dealing with climate. In many ways the emotional and intellectual core of the bill is the $500 billion worth of investments in clean energy production and other climate-related issues. This is an issue Democrats care passionately about — and, remarkably, even Manchin is on board.

Adding this to the changes to the child tax credit, that leaves about $700 billion for Democrats to spend. They need to make some hard choices. Like I said, there are a lot of ideas in the mix, and people will disagree over priorities, but here are mine:

•$166 billion for increasing the supply of affordable housing

•$135 billion for a permanent increase in the generosity of the EITC

•$37 billion so Medicare can cover seniors’ hearing needs

•$31 billion for investments in Pell grants

•$30 billion to fund the administration’s proposed Apollo Program for Biodefense

•$25 billion to provide summer nutrition assistance to poor kids who rely on the school lunch program

•$7 billion to cap out-of-pocket insulin costs

That adds up to $1.5 trillion in spending. And leaves Democrats with one last choice.

Moderate House members pushed for the inclusion of an expanded state and local tax deduction that, if made permanent, would cost $245 billion and soak up the remaining budgetary room. Manchin is seen to be skeptical of this idea, knowing that its benefits flow overwhelmingly to the wealthy. And this is the one issue on which Manchin is going to have to make a tough call of his own. Does he want to stand in solidarity with the moderates of the other chamber, or does he force them to accept a smaller SALT expansion?

The crucial thing about this deduction is it’s a pure question of dollars and cents. It’d be easy to write an expansion that would cost $122.5 billion, or whatever amount they can agree on. The amount they save could go to deficit reduction, which moderates also like and which polls well.

Still a big deal: Yes, a bill structured this way would be bitter pill for early childhood education advocates to swallow. They had really hoped this could be their chance to get federal funding for child care, paid leave and preschool. But those ideas are very expensive, they are not that popular, and there are questions about the details of their design.

And leaving this stuff out creates the possibility for permanent investments that would be a worthy legacy for any president or member of Congress: a historic reduction in child poverty, an unprecedented investment in climate and ecological sustainability, a couple of popular health investments, an urgently needed program to avert the next pandemic, and a little help around the edges to fill some gaps in education funding.

Eleven and half years ago, then-Vice President Biden memorably called the ACA “a big deal” (he inserted a present participle adjective). Now Democrats are arguing over a bill that would spend almost twice as much over the next decade as Obamacare did over the last one. There’s no question that even a Manchin-sized version of Build Back Better would also be a pretty big deal.

— Matthew Yglesias is a columnist for Bloomberg Opinion and writes the Slow Boring blog and newsletter. A co-founder and former columnist for Vox, he is also the author, most recently, of "One Billion Americans."