Democrats Punt Again on Biden’s Agenda – Opinion: Potomac Watch – WSJ Podcasts

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This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.

Announcer: From the opinion pages of the Wall Street Journal, this is Potomac Watch.

Kyle Peterson: Democrats in Congress kick a vote on President Biden’s agenda to next week, as Merrick Garland testifies about his letter on threats to school boards. Welcome, I’m Kyle Peterson with the Wall Street Journal. We’re joined today by my colleagues, WSJ columnist Bill McGurn, and editorial writer Jason Willick.
After months of negotiations, Thursday, President Biden announced a framework for his budget reconciliation bill coming in at around $1.75 trillion. Part of what he said is any single element of this framework would be fundamentally viewed as a fundamental change in America. Taken together, they’re truly consequential. He also called himself a capitalist, and said that on the new taxes that are part of this framework, he said, “All I’m asking is pay your fair share.” Unquote. So Bill, what did you make of Biden’s remarks and are we really, really actually getting near the finish line now?

Bill McGurn: Yeah, I actually agree with him on a few things. One is, one of the extraordinary things about the whole process is that it seems the wrong people are objecting and the wrong people are supporting. I think Joe Biden is right, that even at its very watered down level, this is a radical bill that will transform a lot of things. Push us further in the way of an entitlement society, of a high tax society like Europe and so forth. Even with this watered down thing, I think progressives should be taking a victory lap. Granted, it’s not the six trillion that Bernie originally wanted, but it’s still a significant push. So it strikes me as odd that the so-called moderates are the ones that are supporting the thing, and the progressives are revolting. It really should be the other way around.
For example, Joe Manchin has said he’s skeptical about efforts to put us down the path to an entitlement society. And before he said, my ceiling is 1.5 trillion. Now he seems to be saying, well, I’m assuming if they compromise and come down, I’d accept 1.75 trillion. But as he must know, a lot of the pay-fors in this bill are phony. There’s a lot of phony accounting. It’s a lot more expensive than 1.7, 5 trillion. And it does put us on more of a path to the entitlement society. So I’m quite surprised that it’s the moderates, just because the top line figure has come down, that seems to be okay with it and think of it as victory. And the progressives think of it as a great defeat, even though I think it would be a great victory for them. Not the one they wanted, but pretty big.

Kyle Peterson: But 1.75 trillion is not six trillion as Bernie Sanders wanted, as Bill recounts. But it’s also not 3.5 trillion, which is the figure that we were talking about several weeks ago. And so there has been a lot of effort to whittle that down. Some of it through budgetary gimmicks, some of it by dropping provisions from the framework. Jason, can you just give us a sense of what sticks out to you in terms of what in this framework and what got dropped?

Jason Willick: Well, there were some defeats for the progressives on the climate side. There was also, you mentioned budgetary gimmicks. The child tax credit is extended for just one year to make it look like it costs a hundred billion dollars instead of a trillion dollars. And I mean, they’re trying to do something for everybody. I mean, you even had Ron Klain, the White House Chief of Staff, retweeting something to the effect of, this is a grab bag of partial policies, in an effort to appease all Democratic constituencies. They seem to be basically trying to water down each of these individual entitlement programs in the bill to make the cost lower, rather than focusing only on one entitlement program. Only on pre-K, for example.
So that’s the way it seems to be going. And I think some progressives are upset about that because they perceive rightly, that that’s not the way to really entrench your entitlement programs, with this grab bag approach.

Kyle Peterson: And similar to that on the child tax credit, there is an extension of some Obamacare subsidies through 2025. And the point of doing it only through 2025 is that the House can say … or the White House can say it only costs $130 billion instead of something like $500 billion to do it over a whole decade. In terms of things that are out, this proposal for drug price controls looks like it’s out. This billionaire wealth tax that we’ve discussed looks like it’s out.
In place of that there’s going to be a 5% surtax on gross incomes of more than $10 million, and 3% on more than $25 million. So essentially 8% total for the top rate, which takes the combined top rate, if you add federal and state, and cities in some cases, to 60% in New York in California. Or around there. The corporate minimum tax that we’ve discussed looks like it’s in this framework. There’s also a 1% tax on stock buybacks. And one thing that is very prominent that is out, that the moderates want at least of the framework, is this repeal of the cap on the deduction for state and local taxes. But the moderates are still saying that is going to be added later in the process bill.
And so part of what is remarkable about this though, is Biden came out, he announced this framework. The point of that was to allow the trillion dollar infrastructure bill that had been held up, to pass on Thursday so that Biden could take that victory as he left on his overseas trips. And instead, Bill, the progressives revolted and they said, we’re going to do these at the same time.

Bill McGurn: Yeah. Look, it’s been a game of chicken between the moderates and the progressives. And the progressives are now saying, I think in the House, I think egged on by Bernie Sanders, that we’re not going to vote for the infrastructure bill until we see the actual text. Not just a framework, an agreement about what’s going to be in, but the actual text of a bill. And the commitment that it will pass in the Senate, that for example, Kyrsten Sinema and Joe Manchin would support it.
And they’re right in the sense that lots of stuff can be agreed to in principle and it doesn’t make the final cut. You mentioned SALT. There’s some speculation that SALT will be in it. In other words, that they will lift this cap, or raise the cap at least, which is a real benefit to high income earners in high tax blue states, right? And that would be interesting if they did that because that’s a really expensive giveaway, it costs a lot in terms of revenue.
And then there’s some speculation that they’d make up for that by reimposing the tax later. But that’s kind of fake, this idea that it would be reimposed. We don’t know. So it’s another one of those things where people keep saying, well, we have agreement on this, and we don’t have the actual text. What we do know is some of the bad stuff, as you mentioned, the top marginal rates. Our editorial pointed out that today, the top rate in the United Kingdom is 45%, 47% in Italy, and 47.5% in Germany, and 55% in France. We would be above that if you count in state and local taxes too.
So I do think this is going to be a disaster if it goes through. And ironically, I’m rooting for the progressive to their ground and not vote for the infrastructure bill. Because if they’re tied, I’d like to see them both go down.

Kyle Peterson: But it is notable that at least one group of these progressives, the progressive caucus seems to be board with the framework, even though it is $1.75 Trillion instead of $3.5 trillion. On Thursday, this was the statement from Pramila Jayapal, the chair of the progressive caucus. She said, “We wanted a $3.5 trillion package, but we understand the reality of the situation.’Unquote. And so she seemed to suggest there could be more changes made to the framework between now and next week when there’s…

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