Two Pieces or Three?
The Wall Street Journal reports Biden Plans to Split Spending Plan in Two
President Biden plans to split up his next big government-spending push into two programs and will lay out his vision for an infrastructure-focused first proposal, including green-energy programs, at an event in Pittsburgh this week, a top administration official said Sunday.
The second proposal, which the administration plans to release in April, would focus more on child care and healthcare programs, among other priorities for the administration, White House press secretary Jen Psaki said on “Fox News Sunday.”
At some point the administration plans to propose tax increases on higher-income households and businesses to help pay for the programs, though it has yet to lay out its tax strategy or how it will fit together with the next two proposals.
Divide and Conquer or Trojan Horse?
Infrastructure spending is easy to split off. It will contain enough earmarks and boondoggles for Red and Blue states that it will sail through Congress despite Mitch McConnell’s mostly accurate assessment on Fox News last week.
“They’re now cooking up yet another package they’re going to call infrastructure, but it’s going to be a Trojan horse that includes massive tax increases on Americans. They’re going hard left,” said McConnell.
The $3 trillion infrastructure bill may contain pieces of tax reform or even all of it, if Democrats can get enough Republicans to sign off, but taxes increases are a tough sell.
The purpose of splitting the bills in two or three is to get enough Republicans on board for each of the pieces, except taxes.
The final piece, Taxes will not fly with Republicans, but if Biden can get the rest through with 60 votes, then if Democrats do not lose any votes in the Senate they will be able to pass a massive tax bill through reconciliation with only 50 votes.
This is not a trojan horse strategy. It is a divide and conquer strategy.
Reconciliation Rules
The key to Biden’s divide and conquer strategy is in reconciliation rules.
It normally takes 60 votes to pass a bill in the Senate to kill a filibuster. In special situations, however, Reconciliation Rules allow passage by a simple majority.
Reconciliation bills can be passed on spending, revenue, and the federal debt limit, and the Senate can pass one bill per year affecting each subject. Congress can thus pass a maximum of three reconciliation bills per year, though in practice it has often passed a single reconciliation bill affecting both spending and revenue.
Policy changes that are extraneous to the budget are limited by the “Byrd Rule”, which also prohibits reconciliation bills from increasing the federal deficit after a ten-year period or making changes to Social Security.
The reconciliation process was created by the Congressional Budget Act of 1974 and was first used in 1980.
Biden wants to get as much through Congress with Republican support as he can.
Infrastructure will be an easy sell. Then Biden may opt to throw taxes into the next piece or alternatively opt for a second easy bite if he can get enough Republican on board or simply unwilling to filibuster.
The Lock and the Key
Divide and Conquer is highly likely to work provided Democrats do not lose a single vote in the Senate.
Senator Joe Manchin (D, West Virginia) is the Lock and the Key. He comes from the most Republican state in the union. And disagrees with Democrats on many issues.
His vote can prevent passage of a bill or ram it through.
Without Manchin, Democrats come up short in the Senate 51-49. With Manchin on board, the Senate ties 50-50 and Vice President Kamala Harris gets to cast the tie breaker.
Expect Higher Taxes, Possibly a VAT
Last week Manchin came on board with tax hikes. I commented Expect Higher Taxes, Possibly a VAT, to Support Huge $4 Trillion Infrastructure Bill
The smart money expects higher taxes of some kind with Manchin on board.
Manchin is the lock and the key with divide and conquer as the overall strategy.
Mish
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We are as Rome
Doomed
This administration has already shown that it doesn’t give a damn about us. But I would have given my first child and left nut to get rid of Trump, so I’m not complaining. I can always move back home if things really get back here. Like if I can’t land a federal job soon.
Very interesting topic
Thank you
link to northlondongrammar.com
As the former Director of Accounting for the second most populous county in Colorado, I saw earmarks as a positive. Our Congress people would actually ask the County Commissioners what their most important priorities are.
Were those Commissioners honest enough to answer “lining my pockets”. LOL
That’s what most are doing either directly or indirectly via kickbacks.
Senator Tillis is going to be out for surgery. Manchin and in some books Synema are the keys one way, and Romney and Collins are the keys the other way.
I am totally against mileage tax. Esp since I live rural. We already have high gas taxes here and if they think they’re putting gps in my cars they have another thing coming.
We definitely don’t need a mileage tax because we already have one. It’s called the gas tax which you pay based on how much you drive (plus your vehicle efficiency). Technically that money is already supposed to be maintaining the infrastructure. Of course it goes in to general coffers and gets stolen by other departments.
But in no way should there be another mileage tax.
Exactly. In fact, a few years ago I heard some congressman lamenting that the highway trust fund was being depleted because cars were much more fuel EFFICIENT nowadays. IMHO, that (& other examples) shows — in a nutshell — that govt can’t accurately predict the economic actions of people caused by govt’s own actions.
The fact that a gas tax is a mileage tax is obvious to all but the political idiots proposing another one
We really need to bring back ear-marks. Back during Reagan I bought into the notion tha ear-mark meant government waste and pork barrell projects. What I and many others failed to realize is that this is how Washington gets deals done. its the grease that gets eveything flowing. It’s necessary and vital. Without ear marks there’s no deal making
Well, yours is an honest approach. Many are frustrated that we are told one thing about legislation and upon reviewing it, we find pork and hidden agendas.
Dollars that would otherwise be used to pay taxes needed pay for these spending programs.
Tax the rich. trump already gave me a 6k tax hike.
What was the hike from? Was it the cap on state & local taxes or a different provision?
It’s semantics, but reversing some of hte tax cuts under Trump that many thought ill advised doesn’t sound foolish. What I have an issue is that partially reversing a tax cut is suddenly seen as funding new initiatives when we had a deficit before and the cut accelerated the deficit.
Biden’s long history in the Senate is playing to his advantage. He’s even starting to tout his age. I don’t agree with everythign, but I appreciate the sanity and that at leat there’s a plan . Felt like decision making was too visceral and the strategy to get things passed was based on tweets and beating people up.
you two get a room
Its hard for me to believe that these massive spending bills with the “pork” that accompanies them, will work as sold to the American people. Dollars in the hands of industry, innovative businesses and consumer driven Americans would have better odds of working than government managed programs.
And how do you get the money in the hands of industry, innovative businesses and the consumer?
Dollars that would otherwise be used to pay taxes needed pay for these spending programs.
Infrastructure means solid blue collar jobs for their kids. It won’t last forever, but the kids will get trade experience.
Define “massive”
Democrats like higher taxes and Democrats just got elected so we will get higher taxes. The question should be higher taxes for whom? A global VAT hits everybody no matter what their incomes are so I don’t think that would fly. I could expect a limited VAT on some luxury items and possibly assets such as real estate over a certain value. That would raise a hell of a lot. Infrastructure needs a lot of money but finally it will be voted. As Mish pointed out there is something in it for everybody. The Republicans even though some deny it are hand-in-hand with the Democrats in authorizing heavy spending to get the economy back on track. They agree for the moment and won’t block the bill when it comes. In a couple of years they can come back to the tax story in time for the elections.
Nobody likes higher taxes. Both the democrats and republicans spend more and more every year. The republicans want to keep borrowing. The democrats want to pay as we go.
Which makes more sense to you?
It all depends on who you ask.
For example, people near end of life (60+) or people without kids they may say keep borrowing since they (nor their descendants) will ever have to pay.
Also, technically borrowing comes from the super rich or other countries. So if you want to tax the rich more or stiff China it makes sense to borrow until you default because it’s not like the government ever has to give back collateral.
Any decent tax attorney will get the purchasers of luxury items and real estate easily around the VAT.
It’s sad that most of the infrastructure is not for real infrastructure but rather a fancy name for a green deal we don’t need given his much real infrastructure (roads, bridges, finish rolling out 5G everywhere, upgrading power grid etc) would truly help American productivity.
After that is done, then they can start doing actual green stuff.
one person’s waste is another man’s infrastructure. If you like widgets its good, if you hate widgets its bad.
Also it may be there are other non-obvious ways to reduce carbon footprint that provide better bang for the buck. For example it may be better to provide a massive rebate plan for people to upgrade their home insulation to save on heating/cooling costs.
I know my home here in Fl is 40 years old and still has original single pane windows that leak AC cooling like crazy in the summer costing a ton of power to keep cool. You can’t replace anything here now that’s not storm rated and those are expensive as I was quoted something like 120K to do all my home windows/doors with the very best rated (both storm & energy). That’s an absurd cost so I won’t be doing it though I am sure I could get it down to half that if I went with lesser rated stuff and that’s still too much for me to pay.
Just after I posted the above I stumbled across this interesting article about Biomass being considered Carbon Neutral (burning trees is better than Coal apparently) at the moment.
link to politico.com
Manchin is a Democrat. He succeeded Robert Byrd. There will be enough pork in any of these bills for WVa. He will vote for them after he gets whatever he wants. And he’ll vote for tax increases too, since nobody in WVa earns more than $400,000. If they pass a VAT, he’ll make sure the low-income folks get a rebate from the IRS.
Biden just nominated Manchin’s wife, Gayle, to the Applachian Commission. Like her husband, she has been feeding at the government trough her entire adult life. Her qualifications are a Master of Arts in Reading. That should help her assist her husband in speed-reading all those 5,000 page spending bills. But, I’m sure she’s a nice lady, a good wife, mother and grandmother. Here’s to good government.
The return of earmarks is the worst thing Biden has done.
The best thing Obama ever did was get rid of them and Trump continued that policy. Their return means taxpayers lose and marks Biden as a perfect Swamp Creature.