WASHINGTON — As Democratic leaders struggle to unite their caucus behind a sprawling domestic policy package, it is increasingly clear the $3.5 trillion in spending and tax increases will have to be pared back, possibly by a lot, to make it to President Biden’s desk.
This will require difficult decisions for a party divided by mistrust and competing priorities. There is still room for agreement in a package that will shape American life in every aspect, including public education and health care. It is possible to reach an agreement even with a divided Congress.
These are the possible ways to structure a final agreement.
This plan is slightly less ambitious and uses budget tricks to lower the cost.
At the beginning of the bill’s development, Senator Bernie Sanders (an independent from Vermont) urged his colleagues that they spend as much as $6 trillion over 10 consecutive years.
Assistants said that Mr. Sanders and his fellow senators used budget gimmicks to reduce the bill’s scope to $3.5 trillion over 10 year. This included setting earlier deadlines for programs and reducing their size to lower their costs.
Instead of sacrificing whole programs, Democrats decided to reduce the amount of money that was devoted to them. This is an option they could use to cut back on the package.
Democrats have said they want to extend the refundable child tax credit, which was expanded as part of the $1.9 trillion pandemic aid bill enacted in March and now provides benefits to more than 93 percent of children — 69 million — by sending monthly checks of up to $300 per child to families. They could lower overall costs by extending the package to 2024 rather than 2025.
Similarly, a proposed expansion of Medicare benefits to cover dental, vision and hearing provisions could be phased in more slowly, reducing its cost in the bill’s official 10-year time frame.
House Democrats proposed that seniors have access to vision benefits immediately, hearing benefit in 2023, as well as a dental program for 2028. Some Senate Democrats are keen to see the dental benefit implemented sooner. Although it would be more cost-effective to roll it out slowly, Democrats will most likely not see any immediate political benefits.
A lowest-common-denominator $900 billion package that extends existing health and child care benefits.
Democrats may be able to extend tax credits and other benefits, which were established for one year under the $1.9 trillion pandemic aid law (known as the American Rescue Plan). According to the Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group, that skinny option would total $900 billion, still more than President Barack Obama’s 2009 stimulus plan, which, when it passed, was considered huge.
The expansion of the child credit tax credit has already been described as a significant step forward in anti-poverty efforts. The House plans to extend the credit through 2025, at an estimated cost of $500 billion to the Treasury.
The Affordable Care Bill greatly increased subsidies for purchasing health insurance, and those subsidies were extended to the middle classes through 2022. The cost to extend them for 10 more years would be $210 billion.
Pandemic relief legislation raised the maximum earned-income credit for workers who do not have children to $540 from $1,500. It also raised the income limit to qualify to the program from approximately $16,000 to around $21,000. The cost of extending that program would be $135 billion. Another popular but temporary provision — a much larger child and dependent care tax credit — could be extended by a decade for $95 billion.
This thin option shouldn’t be too difficult politically, considering that both the House of Representatives and Senate have already approved them. To extend the child tax credit for another decade, the cost would rise to $1.5 trillion.
House Ways and Means Committee could pay for such a plan by drafting proposals to increase taxes on the wealthy and raise the corporate income tax rate.
The bill is a middle ground $1.5 trillion that funds programs to combat climate change.
Progressive Democrats have indicated that they will not vote for the $1 trillion infrastructure bill that has already passed the Senate and would fund new roads, bridges and tunnels without ensuring passage of the climate change and social welfare bill, which would push the country’s fleet of cars, trucks and buses more toward electric power, supported by electric utilities fortified to handle all those vehicles and fueled by solar, wind and other renewable sources. They claim that passing the former without the second could make global warming worse.
To answer those concerns, Democrats could include the social welfare components of the lowest-common-denominator option — extending the temporary benefits of the American Rescue Plan — while going big on climate change. According to the Committee for a Responsible Federal Budget, climate provisions would run up to $585 billion over ten years.
They would force utilities to stop using natural gas-fired electricity plants.
These efforts, combined with a full, 10-year extension to the child credit would make the total $2.1 trillion.
The House Ways and Means Committee drafted the remaining international corporate and business tax modifications. This would almost pay for the option.