Like the answer to many tax questions, the answer to this one is an unsatisfying “yes and no.” The $1.7 trillion BBB legislation remains a priority for the Biden administration, but it does not have support in the Senate, i.e., Senator Joe Manchin III from West Virginia is not onboard. For his part, Sen. Manchin has stated repeatedly that he will not support the BBB bill, but he has voiced support for a more limited, trimmed-down bill to focus on climate change and expanded healthcare. It remains to be seen if BBB gets new life in the days and weeks ahead, or if they just rename it, as Speaker Nancy Pelosi suggested last month.
Recently, Sen. Manchin has put forth some proposals that he might support. He said that he prefers a bill that fully pays for fewer items rather than a larger bill that funds many programs for a year or two and then relies on future Congresses to keep the funds flowing. The latter approach, which some call a budget gimmick, reduces the headline number of the bill but causes the government to spend more over time because no politician likes to be seen as ending a government program.
Sen. Manchin also said that he would support deficit reduction, but that’s one of those things that both parties always support but never get around to doing. Seems like spending taxpayer money on new programs is more fun than using it to pay the bill for old ones.
The question we get most is what tax increases will remain in the next bill. Without a crystal ball, that is impossible to answer. If they slim down the next bill, however, then we would expect some of the revenue raisers to be removed. But if they position the next bill as a deficit reducer to garner the support of Sen. Manchin, then theoretically most or all of them could remain. The government could certainly use the funds because the national debt is somewhere between $23 and $30 trillion, depending on how it is measured. One of the latest proposals reported in the press would involve the government spending $500 billion on climate programs, $400 billion on healthcare programs, and the remaining $800 billion would go towards deficit reduction, all over a 10-year time horizon. That would reduce the deficit by about 0.267% per year ($80 billion/year divided by $30 trillion).
Of course, if the Democrats pass that type of bill, then what would become of SALT reform, fighting childhood poverty, and all the other progressive initiatives that were in the BBB bill? Yes, the back and forth of this process is mentally exhausting, which is why little gets done in Washington. The question is whether the Democrats ultimately conclude that doing something is better than doing nothing.