The Congressional Budget Office published a report Friday measuring the cost of the Build Back Better bill as if all the spending it created were to be made permanent, rather than sunsetted, as much of it will be. The agency found the bill would, under those circumstances, increase the deficit by about $3 trillion.
Democrats are treating this, and the political press is reporting it, as a setback for their efforts. But the CBO report simply confirms an obvious flaw with the bill. Democrats need to stop thinking of this as a communications problem and start thinking of it as a substantive one, and fix it.
The original design of Build Back Better was, in its broad sweep, correct. The Biden administration laid out more than $4 trillion in new domestic spending, and paid for it by patching up the tax code’s criminally lax treatment of the rich. But then centrist Democrats gashed holes in Biden’s plans to tax the wealthy, leaving his measure far short of the revenue he needed to finance it.
At that point, Democrats needed to make some hard choices about which programs to prioritize and which to set aside for the next time they control government. Instead, they … didn’t. That’s why they ended up gaming the timing of their programs, essentially stuffing five pounds of sugar into a two-pound bag.
Manchin’s complaint is that, if the administration intends to make its programs permanent, then it’s hiding the cost by letting them expire automatically. The administration responds that future Congresses can decide how to pay for extensions.
But this explanation is fanciful. The pushback against Biden’s plan by centrist Democrats reveals the limits of the party’s appetite to tax the wealthy. The only way Democrats are going to find more revenue is if they have considerably larger majorities in both chambers of Congress. And the chance that they have that in 2026 — when there won’t be a Republican presidency that drives the kind of Democratic Congressional surge that has been required to produce those majorities — are exceedingly slim.
So Manchin’s expressed fear that the true cost of Build Back Better will simply be funded by borrowing is misplaced. So, too, is his worry that it will aggravate inflation. (Even inflation hawks like Larry Summers say the bill won’t have a detectable impact on prices.) But the concern that the bill’s funding expires is very serious.
What’s more, the temporary nature of the spending serves to further undermine some of its effectiveness. The child-care and pre-k programs depend on states participating — and Obamacare is strong evidence that Republican governors and legislatures are going to be extremely reluctant to voluntarily participate in any new social program created by a Democratic administration.
Worse, they will have a stronger incentive to boycott Biden’s childcare and pre-k programs than they did to boycott Obamacare. While Obamacare was permanently funded, the pre-k and childcare programs phase out after a few years. CBO estimates that 34 percent of children live in states that won’t participate in the pre-k expansion, and 40 percent live in states that won’t accept the child care expansion. Those numbers are political guesses and may well be too low. That means they may cost less than CBO forecasts, but if so, they will also help fewer families.
The political economy of expanding the welfare state is that the size of the bill is constrained by how much new tax revenue Democrats can raise from the wealthy. Every dollar is precious and should fund something permanent. Throwing away some of those dollars to set up programs that automatically self-destruct is an unconscionable waste.
Democrats seem to be facing a different political economy dilemma: Nearly everybody agrees they need to focus their bill on a smaller number of programs, but none of the constituent groups wants their own program to be the one that’s cut. Manchin might actually have a constructive role here by forcing them to come face to face with the possibility that, if they don’t prioritize, none of them will get anything.
Manchin, of course, created many of the Democrats’ problems by opposing the tax increases they needed to fund the bill. But now that fight is over, and the new problem — making tough choices given the funding constraints the centrist wing imposed — is one Manchin can help solve.