Biden plan gives moderate Democrats sticker shock

“We want to say ‘wait’ to the folks throwing out the $6 trillion–type ideas”

Georgia Rep. Carolyn Bourdeaux is among several moderate Democrats who say the budget resolution needs to show the debt trajectory stabilizing before passing significant spending and tax legislation.  (Tom Williams/CQ Roll Call file photo)
Georgia Rep. Carolyn Bourdeaux is among several moderate Democrats who say the budget resolution needs to show the debt trajectory stabilizing before passing significant spending and tax legislation. (Tom Williams/CQ Roll Call file photo)
Posted June 28, 2021 at 10:30am

ANALYSIS — After the party comes the hangover.

After swallowing $5 trillion in unpaid-for pandemic relief since the March 2020 lockdowns, Democratic leaders are prepping to ram through trillions of dollars more that their members will have to carry on their own, when nearly half the population is vaccinated and the economy is roaring back to life. 

At the same time, Democrats are whittling down the list of acceptable “pay-fors,” and everyone’s mad at each other over the bipartisan deal senators struck with the Biden administration that progressives say isn’t nearly big enough.

Sen. Joe Manchin III, D-W.Va., says budget reconciliation — which Democrats want to use to pass a filibuster-proof fiscal package with everything his bipartisan group left out — is “inevitable.” But he cautions that size matters. And as House Budget Chairman John Yarmuth says, in his chamber with a four-vote margin “we’re all Joe Manchin.”

Maybe it’s the fact that Democrats will need to push the federal debt ceiling past $30 trillion later this year, or that the Federal Reserve’s virtual money-printing topped $8 trillion last week for the first time, nearly doubling since last March. Either way, it’s a problem for Democrats’ fiscal agenda.

“The reconciliation process is completely unwarranted,” says Rep. Kurt Schrader, D-Ore., who plans to vote against the budget resolution needed to kickstart that process. “We spent $5 trillion last year and I’d argue most all that — pretty goddang important to keep America alive. This year, we don’t need it,” Schrader told CQ Roll Call’s Lindsey McPherson. “COVID is getting behind us.”

Schrader says he’s worried about inflation, which under the Fed’s preferred gauge hit its highest reading in nearly 30 years last month. 

He’s on the GOP target list for next year’s midterms after his closest win in a decade last November in Oregon’s 5th District, which includes Salem, southern Portland suburbs and the Willamette Valley. And despite his state gaining a seat after the 2020 census, there’s some concern Oregon’s bipartisan redistricting system could paint Schrader into a less favorable corner.

Say you want a revolution

Another Blue Dog from a swing district is freshman Carolyn Bourdeaux, who won an open seat in Georgia vacated by former GOP Rep. Rob Woodall after he barely held off Bourdeaux two years earlier.

Bourdeaux is a former state budget official who, with Schrader and a few others, penned a letter to House leaders earlier this month warning them the budget blueprint needed to show the debt trajectory stabilizing.

“I just think we want to say ‘wait’ to the folks who are throwing out the $6 trillion–type ideas, you know, hold on,” Bourdeaux says. “We can do things that are revolutionary, but we have to think about it carefully, we have to think about what the needs are, what the cost is, and then how we pay for it.”

Bourdeaux was the only Democrat to pick up a GOP seat, other than in North Carolina after special court-ordered redistricting, in a strong year for House Republicans. 

She and Rep. Lucy McBath, D-Ga., from the neighboring 6th District in the Atlanta suburbs, are on Republicans’ 2022 target list. With the GOP-dominated state government prepping to redraw district lines, one theory is they could pick off Bourdeaux by pushing her district out further into Republican turf and packing McBath’s district with more Democrats. 

Bourdeaux’s willing to consider some deficit spending — if she can justify it. “I have to be able to stand in front of my constituents, though, and say that we made responsible public policy,” she said.

Fifth-term San Diego-area Rep. Scott Peters, D-Calif., cruised to big wins in his past three races, including a 23-point blowout in November. The House Budget Committee member, who’s carved out a niche as a deficit hawk, says it shouldn’t be a surprise that members are pushing back against massive spending proposals such as the $6 trillion outlined by Senate Budget Chairman Bernie Sanders, I-Vt.

When the House adopted its rules in January, Peters points out, the only exemptions from pay-as-you-go budget rules were for pandemic relief or climate change-related spending. Add up Biden’s new climate change-related proposals, and the tab comes to nearly $800 billion. Even that’s a lot of unpaid-for spending for Peters, though he says he’ll consider what Yarmuth puts out.

“We see people asserting in a very conclusory way that inflation is transitory. I’m not convinced that that’s true, and I’m also convinced that the more prudent bet is not treat them like they’re transitory — take these threats seriously. So it should be paid for,” Peters said.

[Peters, onetime backer of drug pricing bill , turns foe]

Peters, a lawyer and former city councilman, lives in La Jolla, a posh coastal community featuring some of the nation’s priciest real estate. One sometime La Jolla resident is Sen. Mitt Romney, R-Utah, who owns beachfront property there. Peters supports the bipartisan compromise that Romney helped broker, calling the $1 trillion figure “historic.”

“Five years ago, we would have never dreamed of numbers like that,” he said. As far as the rest of Biden’s $4 trillion-plus proposals go, “I’m not convinced that with the majority that we have here, an all-Democratic package can be as ambitious as [President Joe Biden] has suggested,” Peters said.

Taxes, drug prices

Of course, Biden has a way to pay for most of his proposals. And there’s nothing like a hefty tax increase to cool down inflation.

Republicans are already attacking Bourdeaux over Biden’s tax agenda, which his Treasury Department estimates would boost revenue by $3.6 trillion over a decade. Bourdeaux says the attacks won’t stick, that she gets applause when she talks about fairness in the tax code and billionaires and big corporations that today are paying little to nothing. But she isn’t locked into everything Biden’s proposed. 

“I’m not here to do anybody in, and I strongly support my small businesses and want to make sure that they are not put in any kind of disadvantage. All we’re saying is that everyone should pay their fair share,” she said. “There is space for negotiation on those proposals.”

At the same time that Peters wants to keep overall costs down, he wants to lift the $10,000 cap on state and local tax deductions — which cost his average constituent, whose income is six figures, over $18,000 in deductions per household in 2018, according to Internal Service Revenue data. He says Democratic leaders will struggle to pass any reconciliation bill that doesn’t provide “SALT” cap relief.

Like every other Democrat, Peters voted against the 2017 GOP tax cuts that imposed the SALT cap but also cut taxes on net for many of the richest households. Peters says he’s OK with raising the top 37 percent individual tax rate back to 39.6 percent, and raising the corporate rate from 21 percent to 25 percent, along with some sort of corporate minimum tax. 

But San Diego is a major hub for venture capital investment, particularly in a thriving biotech sector. Raising the top capital gains rate from 23.8 percent to 43.4 percent, as Biden proposes, is too much for Peters, who prefers something more in the 28 percent ballpark — where it was for a decade from 1987 to 1997, including under two GOP presidents. 

Another “pay-for” that could give Democrats fits is prescription drug spending.

Sanders’ leaked budget outlines more than $600 billion in 10-year savings, mostly through price negotiations with drugmakers. The Congressional Budget Office says drug price negotiation language the House passed in 2019, which Bourdeaux supports, would generate about $500 billion. 

For Peters, however, the “international reference pricing” provisions, which require the Department of Health and Human Services to negotiate prices for selected drugs so they don’t exceed 120 percent of the average in six other big countries, are a nonstarter. He said he’d vote against any budget reconciliation bill that includes that language, and that he’s not alone.

“It’s not really ‘negotiations,’ it’s really price-setting. And it would signal to investors that you can’t make a return on investment if you invest in the development of drugs. And it would kill that industry,” Peters said. “I will not vote for that.”

San Diego is the third-biggest “cluster” for life sciences firms in the country behind Boston and San Francisco, according to real estate manager Jones Lang LaSalle. The San Diego Regional Economic Development Corporation says the sector supports about 27,000 local jobs; Peters says all of those would be at risk if the reference pricing provisions pass.

Peters says a better plan is one from Sens. Charles E. Grassley, R-Iowa, and Ron Wyden, D-Ore., that would still achieve about $100 billion savings from requiring manufacturers to pay rebates to Medicare if prices rise faster than inflation, among other things.

Reference pricing won’t pass the Senate, Peters said.

“The processing I would suggest to the Biden administration is that maybe the budget resolution should originate in the Senate, rather than make members of the House vote for a lot of things that are politically unwise and will never become law,” he said.

That would be a lesson learned from the “BTU tax” vote in 1993 and the 2009 “cap-and-trade” vote; both measures went nowhere in the Democratic-controlled Senate. The House flipped to the GOP the following year on both occasions.

Peter Cohn edits CQ Roll Call’s budget and appropriations coverage.