economy

What’s in and what’s out of Democrats’ $2 trillion budget reconciliation plan

What’s in and what’s out of Democrats’ $2 trillion budget reconciliation plan

Democrats are working to finalize a framework on a roughly $2 trillion education, healthcare and climate plan they hope to approve this fall without Republican support. Here are details on where the proposal stands. What do Democrats expect to include in the emerging package? The legislation, as initially conceived, was expected to include paid family and medical leave, subsidized child care, an extension of an expanded child tax credit, universal prekindergarten for 3- and 4-year-olds and two years of tuition-free community college. It would also extend expanded Affordable Care Act subsidies approved earlier this year in the Covid-19 aid package, likely for three years. Democrats also sought to broaden Medicare benefits to cover dental, vision and hearing—and would aim to reduce the cost of prescription drugs by allowing Medicare to negotiate prices, among other steps. Democrats want to dedicate funding to expanding access to affordable housing and in-home care for elderly and disabled Americans. As Democrats move to narrow the bill from its initial $3.5 trillion price tag, certain programs are set to drop out. President Biden has said community college is likely off the table, as well as the full Medicare benefits expansion, although he noted lawmakers were discussing an $800 dental voucher. Paid leave benefits for parents will likely last four weeks, down from the 12 weeks initially proposed. Lawmakers also plan to allow people in certain states that didn’t expand Medicaid coverage to be eligible for ACA subsidies, potentially for five years. And they expected to include a provision to extend Medicaid’s postpartum coverage to a year, up from 60 days. Also expected to survive the cuts are a universal pre-kindergarten program and subsidies for childcare. How does the plan try to address climate change? Democrats proposed ideas including tax credits for clean-energy investments and a clean-electricity performance program for utilities, aimed at reducing carbon emissions in the electricity sector by 80% and economywide by 50% by 2030. Democrats are also proposing polluter import fees. Such fees could help lower emissions globally while generating revenue for the U.S., effectively acting as an emissions-based tariff. Democrats in the House have also proposed funding for research and developing new carbon-free technology and rebates on energy costs. They are also seeking to create a Civilian Climate Corps to work on conservation efforts across the country. In the face of opposition from Sen. Joe Manchin (D., W.Va.), Democrats are narrowing their climate plan, dropping the program aimed at pushing utilities to draw more power from clean-energy sources. They are trying to reallocate the $150 billion earmarked for the program to other projects, such as grants to states and for transmission lines to connect renewable power to the grid. How do Democrats plan to pay for the new spending? Democrats hope to raise taxes on corporations and high-income households to fund the plan. House Democrats have proposed raising the corporate rate to 26.5% from 21%, tightening the net on U.S. companies’ foreign earnings and raising the top capital-gains tax rate to 25% from 20%. But amid objections from Sen. Kyrsten Sinema (D., Ariz.), those planned rate increases are likely to be scratched. Ideas previously not part of Democrats’ tax plans such as a corporate alternative minimum tax and an excise tax on stock buybacks have gained ground. Democrats are also hoping for other cost-saving measures, such as allowing Medicare to negotiate drug prices. A Congressional Budget Office analysis of a bill that passed the House in late 2019 estimated that the price-negotiation provisions would lower spending by about $456 billion over 10 years. But the drug-pricing plan faces opposition from centrists as well, increasing the odds of a narrower set of drugs eligible for negotiations. Lawmakers said they expected the proposal would include a cap on out-of-pocket drug costs for seniors. What happens next? While Democrat-led committees in the House have prepared their segments of the bill, that version of the legislation is on hold. Centrists in the House and Senate have raised concerns about the size of the House bill and the details of its proposed programs, and top Democrats and the White House have spent weeks renegotiating the legislation with centrists. House Speaker Nancy Pelosi (D., Calif.) has said Democrats are working on how to best slim down the bill.. Why are Sens. Sinema and Manchin so important to the talks? The talks have largely revolved around the two critical centrists who have raised concerns about the overall size and elements of the plan. Because Democrats have very narrow control of the Senate, which is tied 50-50, they need every single Democrat’s vote for the legislation to pass, using a process called budget reconciliation that requires just a simple majority, rather than the 60 votes usually needed. Democratic leaders face similar difficulty in the House, where the party can’t afford more than three defections. Republicans have lined up unanimously against the bill, attacking its proposed tax increases in particular. This package is different from the infrastructure plan, right? Yes, though there is a lot of confusion around this point, and the two packages’ fates have been yoked together by party leaders. The infrastructure package that passed the Senate, known as the Bipartisan Infrastructure Framework, includes funding for projects such as roads, bridges, water and broadband. The Democrat-only package, focused on the safety net and climate, has been branded by Democrats as Build Back Better, though it is also called simply the “reconciliation bill, referring to the mechanism for passing it. (You can see a guide to BIF and other terms here.) The two packages have become intertwined as Democratic leadership tries to manage the centrist and progressive factions of the party. Progressive Democrats have repeatedly threatened to block the infrastructure bill if it comes up for a vote in the House before Congress passes the social-policy and climate bill. Progressives fear that centrists could walk away from the social-policy and climate bill, effectively killing it, and so they have used their threat to block the infrastructure bill as a way to pressure centrists to come on board with the social-policy and climate package. Centrists have demanded a vote on an infrastructure bill, only to have it repeatedly delayed as negotiations on the social-policy and climate bill continue. The latest showdown took place at the end of September, when Congress faced a deadline for passing the infrastructure bill. But Democrats punted the deadline to the end of October, creating a new scramble to reach an agreement on the social-policy and climate bill and unlock the necessary progressive votes for the infrastructure bill. How could the legislation change? To reach a new agreement on the social-policy and climate measures, Democrats are considering a variety of methods for reducing the price tag of the bill. One approach favored by progressives is to cut back the duration of the financing for the programs, leaving their fate in the hands of future lawmakers to keep funding. Centrists have said Democrats should focus funding on a smaller number of programs for longer periods. Some lawmakers, including Mr. Manchin, have also said the programs should be targeted to benefit only low-income Americans. The final details of the tax increases will likely continue to evolve, as well, as some Senate Democrats push for more robust tax increases and others push to reduce them. Download.

economy 2021-10-23 Livemint