The Scramble to Pass Biden’s Agenda – Opinion: Potomac Watch – WSJ Podcasts

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

Kyle Peterson: Democrats in Congress are still at odds over many pieces of their reconciliation bill, with President Biden about to leave the country and an October 31st deadline looming. Welcome, I’m Kyle Peterson with the Wall Street Journal. We’re joined today by my colleagues, WSJ columnists Bill McGurn and Kim Strassel. The headlines keep saying that a deal is just around the corner here, but to my eye, there are still a lot of Democratic factions that are at fundamental odds with each other.
And I’ll read a quote from Jeff Merkley, the Oregon Senator. He said, “There’s just huge pieces of this that are not nailed down. So each time I hear, well, it’s almost done, I don’t know what the hell people are talking about.” Unquote. And so Bill to start here, why do we keep hearing this? That a deal is just around the corner, if these factions in the Democratic party are farther apart than they seem?

Bill McGurn: Well, I think, one, there’s a lot of wishful thinking about this that they can get it done. And two, I think that the two main obstacles, Kyrsten Sinema and Joe Manchin, have been largely quiet. When they’ve spoken in general terms, they’ve been saying, yes, we can talk. We’re sitting down. And I think that’s created a false optimism, because as you point out, I think on fundamental issues, they’re still far apart. Bernie just laid down his red lines on Medicare expansion. AOC says we’re not going to vote on the bills the way Nancy Pelosi wants until we actually have an actual bill … reconciliation bill, she means. That they can look at, not just a framework.
So a lot of the other people seem to be hardening their positions on this. And I think it comes down to this. There is no bill until there is a bill, by which I mean text, written down, and we can look at what provisions made it in and what provisions didn’t make it in. And that’s the tough part because there’s a lot of objection on each side on a lot of pieces of this puzzle.

Kyle Peterson: Just so people don’t think that I’m cherry picking Jeff Merkley there, I’ll give a perspective from the other chamber of Congress. Here’s Pennsylvania representative, Brendan Boyle. He says, “We are just missing two things. What exactly is going to be in the bill and how we’re going to pay for it? Other than that, we’re good to go.” Unquote. And so Kim, at least he hasn’t lost his sense of humor.

Kim Strassel: Yeah. The press is really to blame here and I’m happy to see that the press is finally quoting some people talking honestly. Because what’s been happening is the White House and congressional leaders have been on a campaign to say all is good. And to do that in a way that forces Manchin and Sinema to get on with it. And the reality is … let’s just go through the list, okay? So here’s what hasn’t been decided yet.
They have not decided how to pay for this thing. Okay. The House and Senate have got very different approaches on this. The House bill that was actually passed out of committee actually tries to raise all of its money by mostly raising corporate tax rates, individual tax rates. Kyrsten Sinema has said no to that. As I think we’re going to talk about a little bit more, Senator Wyden has now put out a billionaires tax. Turns out, Joe Manchin may have an issue with that. There is some agreement around a corporate minimum tax, but that’s not something that’s passed the House. So that’s all … the revenue side remains a mess.
Medicare, Bernie Sanders has said, yes, we must have the power to negotiate with pharmaceutical companies to lower the price of drugs for Medicare. And yes, we must expand Medicare benefits. Joe Manchin and Kyrsten Sinema are still saying no to those things. Paid family leave, they had hacked down their proposal. It was at 12 weeks, they got it to four. Manchin and is still saying he doesn’t want to do it. He’s being lobbied by people like New York Senator Kirsten Gillibrand, but that’s not been sorted out.
Medicaid expansion to the dozen red states that have not signed up for the program. House Democrats are insisting on that, Joe Manchin has said that he has real issues with the fairness of proposal. There are still people attempting to get an immigration provision into this, even though the Senate parliamentarian killed the first attempt at that. SALT the repeal of the state and local tax deduction, that’s not been sorted out. The IRS snooping provision, that hasn’t been sorted out.
If you step back, what I see here and it’s interesting, is that Joe Manchin apparently said what he meant and meant what he said back in that document he gave Chuck Schumer before all of this began. And what we’ve really been doing for the past six weeks is having liberals come to grips with the fact of that reality. And this thing is slowly getting whittled down. And as Bill said, the question is going to be how long before the progressives say no, and this thing breaks apart.

Kyle Peterson: Let me go first to this billionaire’s tax, because we talked about this on the podcast yesterday. And we asked a lot of questions that did not have answers. And we have some of those answers now. Senator Wyden has released the text of this proposal. And Bill, one of the things we talked about was the question of what you do with illiquid assets that are difficult to value, art collections and so forth. And the way that he’s proposing to deal with that problem is to just essentially not apply the tax to them mark-to-market year after year, like he would do with stocks and so forth.
But you would wait until you sell the asset and then you would get a little bit of an interest penalty on it to make up for the difference because you weren’t paying the tax all along. And the issue there, Bill, is it seems to me that that would be a big incentive maybe to take companies private, or to keep companies private. But treating these assets differently creates all sorts of opportunities for gamesmanship with the tax code, I think.

Bill McGurn: Absolutely. I think that whatever scheme they have is just going to prove unworkable and unfair. And we’re going to have a lot of unintended consequences, as you mentioned, whether it’s companies going private. It also seems unfair if you buy a stock for $10 and you sell it 10 years later for $100, you pay the tax on the $90, plus another penalty. It’s essentially a penalty on top of whatever capital gains you pay. And that could be because in the middle there, it had a big rise.
I just think these are unworkable. I don’t see how they can get this through. I mean, a wealth tax, as we mentioned yesterday, has constitutional issues, has practical issues. I don’t think that squeezing this through to get something on paper before the president leaves for a trip abroad is the way to reform your tax code. And I just can’t believe that something of this magnitude is going to be able to be snuck in and every one will sign off.

Kyle Peterson: The other big question we had yesterday was how you handle losses if an asset rises and the billionaire pays the tax, and then there’s a correction, stock market falls, what have you, does he get a refund on that? And the answer seems to be, yes. The Wyden proposal would allow losses to carry forward and to carry backward for three years. But again, it seems like this is adding complications to the code that’s going to lead to problems.
I mean, you can imagine situations where somebody is an owner or founder of a company that is way overvalued in the stock market. You can put your own name on that if you want. And after paying all the taxes, as it rises to that value, it settles back to the fundamentals. And this owner, founder, what have you, can carry back those losses for three years, can carry them forward. But it’s not clear, Kim, that…

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