The Build Back Better Act (BBBA) is now on the back burner. Can it be salvaged? The answer may come down to whether Democrats want to enact something that is transformational, as they say they want, or merely temporary, which is what they produced in the House.
One thing is clear: Sen. Joe Manchin’s (D-W.Va.) blunt declaration that he would not support the BBBA as written ended any chance that the bill could pass the Senate in the same form as it passed the House.
And, it’s not just a matter of Manchin’s objections. The Senate Parliamentarian has determined that the immigration provisions in the House-passed bill do not qualify for reconciliation protection. There is also an unresolved dispute in the Senate over raising the cap on the deductibility of state and local taxes (SALT).
Manchin’s objections, however, will be the most difficult to resolve since they broadly apply to the BBBA’s overall cost, its many expiring provisions that obscure its effect on future deficits, and its possible effect on inflation. With no prospect of Republican support for the bill, Manchin’s vote will be needed to enable Vice President Harris to break a 50-50 tie, and that means that major changes must be made for the BBBA to have any future.
Despite the obstacles, President Biden and congressional Democratic leaders have said they will not walk away from negotiations. They have too much at stake.
Much of the attention since Manchin’s announcement has focused on what’s in and what’s out. Those decisions will be difficult, but regardless of the specific policy compromises that will be necessary to get the bill over the finish line, Manchin laid down one overall marker that should serve as the guiding principle for rebuilding the BBBA: ensure that its provisions are fully and transparently funded over the long-term.
That is not the case with the version that passed in the House. In an effort to enact as many new or expanded programs as possible while keeping the official 10-year cost to about $2 trillion without increasing 10-year budget deficits, House Democrats chose to simply end (sunset) several key provisions after a few years while offsetting them with permanent revenue increases.
Democrats are not alone in using this budgetary sleight of hand. Republicans used the same timing gimmick to pass tax cuts in 2017 (and without any pretense of offsetting those costs). The problem Democrats created for themselves, however, is that they continued to tout the BBBA as “transformational,” and “fully paid for” even as they gave up on trying to make several policies permanent. It’s hard to argue that temporary policies are transformational. You can’t build a skyscraper by funding only the first few floors.
This dilemma was laid bare when the nonpartisan Congressional Budget Office (CBO) published an analysis, requested by Republican leaders of the House and Senate Budget Committees, showing that if certain provisions of the House-passed BBBA were made permanent, rather than allowed to sunset on schedule, the total cost of the bill would increase future budget deficits by $2.8 trillion more than the official score of the bill (i.e., assuming the sunsets take effect).
Most of the added cost was attributable to the extension of the expanded Child Tax Credit, which would balloon from $185 billion for a one-year extension to nearly $1.6 trillion over the 10-year budget window with the sunset removed. Other temporary proposals in the BBBA include funding for universal pre-k, child care subsidies, and expanded premium tax credits to help low-income Medicaid-ineligible households purchase private health insurance.
Democrats pushed back against the CBO report, noting that they have pledged to pay for any future extensions of expiring programs. That’s a responsible pledge, but it’s not a sufficient answer because it leaves unsaid where the additional funding of almost $3 trillion would come from. The only reason Democrats resorted to sunset gimmicks in the first place is that they couldn’t agree on a package of offsets large enough to pay for these programs on a permanent basis. What payfors will be available in the future that aren’t available now? And can this promise mutually coexist with another — the president’s promise not to raise taxes on households earning less than $400,000?
Another vital question left unanswered is what happens to these programs — and the people who have come to rely on them — if Democrats no longer have unified control of government when the expiration dates arrive? One sure bet: The list of mutually agreeable offsets will get much, much shorter if Republicans claim control of the House, Senate, or White House.
In this context, CBO’s assessment sets up a tough choice: higher deficits, larger offsets, or a bunch of expired programs. This choice must be made clear, now, before the BBBA becomes law. Rather than denying the obvious, Democrats would be better served by using the CBO report as a roadmap for retooling BBBA. Focus on doing a few high-priority things well, pay for those and jettison the rest.
President Biden and his Democratic colleagues deserve praise for sticking to the idea that new policies should be paid for, but a one-year extension of the child tax credit is not transformational and that’s all they’ve paid for in the House version of the BBBA.
As negotiations resume following a cooling-off period during the holiday break, Democrats should be mindful that whatever they come up with, Americans need to know what they’re getting with BBBA — and what they’re not.
Robert L. Bixby is executive director of The Concord Coalition.