Preview

Tomorrow President Biden will introduce his Build Back Better plan at an event in Pittsburgh. It’s probably better described as a public investment plan, which is an easier fit than shoehorning everything into the term “infrastructure.” I’ve heard it described as both a $3 trillion and a $4 trillion plan, because there are some tax credits that could take up as much as $1 trillion. But it’s also at least partially offset, up to $3 trillion, with tax increases, so over a decade-long window, you’re talking at most $100 billion a year. Even at $3 trillion, you’re talking about 1 percent of GDP and a 5 percent increase in spending over the budget window. We can hardly afford not to do this.

There’s a care and family element that will not be introduced tomorrow but next month, involving universal pre-kindergarten, free community college, paid family leave, and some extension of the child allowance. I have a lot to say about that—we did an entire special issue on the subject—but we’ll put that aside to focus on the building elements that will be announced tomorrow.

We know the general outlines. There will be a lot of clean energy investment in things like energy-efficient housing, electric vehicle charging stations, and modernization of the electrical grid. There will be some traditional infrastructure spending on roads and bridges and ports and mass transit; that spending is only about $1 trillion in all and will probably get folded into the surface transportation bill. There will be investment in advanced manufacturing and deployment of things like rural broadband and 5G. There will be a component of workforce training. Tax credits to encourage energy efficiency will raise that price tag.

Every politician likes spending money, as long as it’s spent on something their constituents like. Yes, Republicans hate anything that diminishes their fossil fuel benefactors, but there will also be rural broadband to appeal to some of their members, and plenty of traditional spending, and the return of earmarks so that spending can be directed. Everyone likes attending a ribbon cutting ceremony. The pitfalls with this package will entirely be on the revenue side, and to a lesser extent on the process side.

Centrists are demanding these offsets, so just doing the investment and reaping the rewards down the road is unlikely to be allowable. The taxes are likely to get announced later, but really the four big priorities for the Biden team include increasing the topline corporate tax rate from 21 percent to 28 percent; making the tax on capital gains equal to regular income for the wealthy and eliminating the “step up in basis” so unrealized capital gains aren’t wiped out upon death; raising the top marginal tax rate back to 39.6 percent, where it was in the Obama administration; and imposing a global minimum tax on multinational profits obtained from foreign subsidiaries. The Tax Policy Center estimates that this gets you $1.6 trillion over ten years.

There are a bunch of other options, including rolling back the Trump tax cuts to estate and partnership taxes, that look less likely to make it. Transportation Secretary Pete Buttigieg stepped in it by saying that vehicle miles traveled taxes could be included, and then he ran away from that idea. There are also two intriguing pieces: increasing funding to the IRS to audit the wealthy, which could score as a major revenue raiser by collecting more in taxes, and allowing Medicare to negotiate the price of prescription drugs, which saves the government a bundle (and more if the more progressive version of that reform is implemented).

Whether you can piece together something that appeals to a fractious coalition, and whether you have to get all the way to $3 trillion, is the big question. Complicating this further is the same deficit hawks pushing for a $350 billion tax giveaway to the wealthy, in the form of repealing the $10,000 cap on the state and local tax (SALT) deduction. This is particularly relevant in high-income, high-tax states, and the two Democratic leaders in Congress come from California and New York, so you see the problem. Not only are finance industry types (successfully) pushing Chuck Schumer to repeal the SALT cap, but some House moderates are saying their vote is conditioned on repeal as well, and Speaker Pelosi doesn’t have many votes to spare.

As someone who would directly benefit from restoring SALT, let me say that it’s terrible policy, only affecting those who itemize deductions, which is overwhelmingly the very rich. It may seem unfair that only high-tax states are hit by this cap, but on the other hand, high-tax states in general have good services, and their electric grid doesn’t shut down in cold weather. So I’ll take the exchange.

Figuring out the precise types of taxes and spending initiatives to please just enough moderates and progressives to reach a majority would frustrate the most patient person. In that sense, splitting it in two to balance that seems like a good idea. Maybe you get the moderates to grudgingly accept one bill in exchange for getting what they want on another; maybe you get the reverse for progressives. Schumer floating tying the minimum wage increase into the infrastructure package is a tell; that could serve as the carrot for progressives on a bill that would be oriented more to the moderates.

Except you only have one bill left this calendar year to use budget reconciliation rules, after which you’re reliant on 10 Senate Republicans to pass anything. This would seemingly end the multi-bill strategy, which at least gives leadership flexibility to shape bills somewhat differently. However, Schumer is pleading that there’s a loophole in the Budget Act of 1974, allowing the Senate to revisit prior budget resolutions, enabling a second reconciliation bill for the 2021 fiscal year.

In general this is completely absurd, to find different ways to use majority rule without taking away the obstacle to majority rule, aka the filibuster. What makes anyone think Joe Manchin would be against filibuster repeal but for multiple reconciliation packages in a year? I suppose anything’s possible, and politicians have a boundless ability to compartmentalize. But this is an elaborate way to try to hand-wave around the fundamental issue of a minority veto in the U.S. legislature. I know a way to get unlimited “reconciliation” bills: let the majority on a vote win.

We’re in sort of the endless haggling stage of this development, but Biden’s speech tomorrow will begin to narrow the contours.

Internal documents show the virus gaining steam. The CDC director has talked about “impending doom.” (Politico)
I don’t know that any libertarian with a typically selfish conception of freedom will care that vaccine passports will be made in the private sector. (Bloomberg)
Eleven judicial nominees announced today, and I’m still seeing a tilt toward BigLaw; the former public defenders are current judges or law partners. (Whitehouse.gov)
Open enrollment and increased subsidies get closer to the original conception of the Affordable Care Act. (Vox)
Biden team still foot-dragging on the national bank regulator, adding more random names into the mix. (American Banker)
Under no circumstances would I have had former Senator Mark Pryor on the list of those urging Biden toward stronger antitrust enforcement. (New York Times)
Retail pharmacy effort, by its ubiquity, outpacing mass vaccination sites. For the record I got the jab yesterday at a mass site (not federally run) and it was quite efficient. (Politico)