House Passes Biden’s "Build Back Better" Legislation

On November 19, the U.S. House of Representatives passed a $1.85 trillion “Build Back Better” 10-year budget reconciliation package by a party-line vote of 220-213. The bill, which would spend hundreds of billions of dollars on climate change, universal pre-kindergarten, health care, housing, and more, faces an uncertain future in the Senate where Democrats will need every one of its 50 votes (plus Vice President Harris’s tiebreaking vote) to pass the plan. Concerns raised by moderate Democrats over tax increases, budget deficits, and inflation could still derail the package.

Although significantly decreased from the initial $3.5 billion proposal, Democratic Senate moderates remain concerned that the bill would increase the deficit, a problem largely ignored during the Trump administration, but which has gained new attention as the national debt has almost doubled from $15 trillion to $30 trilion over the last decade. The biggest increases came in 2020 and 2021 due to in massive spending to stave of the health and economic effects from COVID-19.

Deficit concerns among House moderates were satisfied by a Congressional Budget Office (CBO) report that estimated that the bill would add only $160 billion to the debt over the next decade. Many predict that the CBO estimates will prove to be optimistic.

Ongoing negotiations over Biden’s agenda have been tense as the extremely slim Democratic majorities in both the House and Senate have given the Administration literally no room to lose support. In the House, Democrats have 221 seats in the 435-person chamber, meaning they could have only afforded to lose three votes (they only lost one – Rep. Jared Golden (D-ME).

In the Senate, Democrats must pass this kind of key legislation through a lengthy and complex budget process that can be passed through reconciliation, which needs only a 50-vote majority, as opposed to the typical 60 votes margin needed to pass legislation via regular order in the Senate. Moderate Democratic Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have already expressed significant reservations about the price tag and tax increases associated with the original $3.5 trillion proposal and their opposition forced a compromise leading to the $1.85 trillion House bill. Senator Manchin still has concerns over the House bill and, thus far, has prevented a Senate vote.

The House passed legislation includes:

• $555 billion to create tax credits for companies and consumers who use clean energy though the installation of solar panels and the purchase of electric vehicles, while also providing financial incentives for clean energy manufacturing and spending toward the creation of a Civilian Climate Corps which would restore forests and wetlands
• $400 billion for universal pre-kindergarten for all children aged three and four.
• $190 billion to expand the child tax credits that were created during the pandemic and which would provide each parent with $300 per month for children under the age of six and $250 per month for children between six and 17
• $200 billion for the creation of a national paid leave program that would provide employees with four weeks annually of paid family and medical leave
• $165 billion for the expansion of Medicare coverage
• $150 billion for a Medicaid program which would support long-term home health care for elderly and disabled Americans
• $150 billion for increasing affordable housing by adding an additional 1 million new rental and single-family homes
• $275 billion for an increase in the deduction allowed for state and local taxes from $10,000 to $80,000

Notably, the spending for many of these provisions, particularly related to climate change, long-term care, and the child tax credit, are much lower than was originally proposed in the $3.5 trillion program. The proposed tax increases that would have paid for at least a portion of the original has also been cut back. The House passed bill contains the following tax changes:

• 15% minimum tax on the book income of corporations reporting over $1 billion in profits on financial statements
• 5% individual surtax on earners with an income over $10 million
• 8% individual surtax on earners with an income over $25 million
• 1% surcharge on corporate stock buybacks

Many of these proposals, especially the 15% minimum tax on corporations with earnings over $1 billion and the 1% tax on corporate stock buybacks, have drawn opposition from some business groups.

Moderate opposition also required Democrats to shed a program that would have provided free two-year community college education, the expansion of Medicare coverage for dental and vision, and an increase in the corporate tax rate. It does provide $1 billion for immigration reform and includes a provision which would provide a legal protection against deportation for approximately seven million undocumented individuals who have lived in the United States since January 2011. It is not certain that this provision will survive in the Senate which has strict rules governing what can and cannot be included in a Budget Resolution.

Regardless, this was a victory for the Congressional Democrats. The bill adds significantly to the $1 trillion COVID-19 relief package and the separate $1.2 trillion infrastructure bill that President Biden has already signed into law.

The unanimous House Republican opposition is expected to be repeated in the Senate as well, where Manchin’s concerns continue over the costs of the bill, what it would add to the deficit, and how it may increase inflation. As of now, what, if any, changes to the bill would result in obtaining Manchin’s support remains unknown.