White House dramatically increased tax proposal as it sought to address tensions over next big spending plan
March 29, 2021 Washington Post
The two-pronged package Biden will begin unveiling this week includes higher amounts of federal spending but also significantly more in new tax revenue — with possibly as much as $4 trillion in new spending and more than $3 trillion in tax increases, said the people, who spoke on the condition of anonymity to describe private dynamics. One person familiar with the matter said that the early infrastructure draft did not include every tax increase the White House was eventually considering including in its ultimate proposal, and that the administration believes the tax hikes can also advance its goal of reducing income inequality.
Still, the choice to increase the bill’s tax hikes in part because of its effects on the deficit reflects how concerns over the nation’s spending imbalance are shaping the White House’s internal policy debate. But it also sets up the administration for an enormous political challenge in convincing Congress to pass a package of tax increases on wealthy Americans and companies that together would represent the largest tax hike in generations.
The shift in strategy reveals just one of the many ways the White House has grappled with shaping Biden’s second major legislative effort, which the administration will kick off this week at an event in Pittsburgh.
Biden’s “Build Back Better” agenda is ambitious in scope, aiming to confront global climate change, rebuild the nation’s infrastructure, revive domestic manufacturing and transform U.S. child care, among other goals.
The path toward crafting the legislation has exposed the White House to crosscutting demands from key allies. This account is based on interviews with seven senior administration officials involved in the effort, as well as more than a dozen congressional officials, labor leaders, activists and economists involved in the crafting of the package.
One core tension is to what degree Democrats should emphasize investments in traditional physical infrastructure seen as more likely to garner GOP support — such as roads and bridges — rather than child care and other social spending that liberal economists increasingly have emphasized as critical to ensuring robust economic growth.
It is unclear to what extent Biden has the political capital to do both. Already, the administration has decided to trim its sails somewhat and is not expected to make a child anti-poverty initiative permanent or embrace a plan from Sen. Elizabeth Warren (D-Mass.) to devote as much as $500 billion to push mass transit away from fossil fuels.
“We know that Republicans and particularly blue-collar men really like the physical building kind of infrastructure and see that as leading to good paying jobs for men in particular. And women and the Democratic base really respond to what you might call softer infrastructure — child care; school; caregiving responsibilities — which have come home very vividly during covid,” said Celinda Lake, a Democratic pollster who advised Biden’s 2020 presidential campaign. “It’ll be a challenge, but they have a major opportunity here to do both in a way that both helps these constituencies and is majorly appealing to them as voters.”
Republicans have already begun to attack the White House for embracing large spending and tax plans — which would largely reverse former president Donald Trump’s 2017 tax cut — that reflect Democratic priorities with very narrow majorities in Congress.
Biden’s coming push to raise the corporate tax rate would damage the competitiveness of American firms and push them to relocate jobs abroad, conservatives say. Although Biden hosted a bipartisan group at the White House for infrastructure discussions, Republican lawmakers have complained of little outreach from the administration or interest in their ideas.
“It’s like Republicans saying, ‘We’ll do infrastructure, but pay for it by reversing the Affordable Care Act.’ They don’t really have a seat at the table,” said Donald Schneider, who served as chief economist to Republicans on the House Ways and Means Committee. “This process seems even more insincere than the way the stimulus played out.”
Despite their narrow margins, administration officials have begun comparing their coming efforts to Franklin Delano Roosevelt’s New Deal or Lyndon B. Johnson’s Great Society programs. They see their proposals as more impactful than those put forward by any modern Democratic president, including Barack Obama.
“If you look at what makes the Democratic Party what it is, and what’s considered our greatest hits — our ‘Abbey Roads,’ if you will — it’s not doing something small with Dwight D. Eisenhower or when Bill Clinton triangulated. It’s about creating programs that create a floor of justice and decency in this country,” said Rep. Andy Levin (D-Mich.), who met with officials at the White House last week to discuss the infrastructure plan. “We have that opportunity again now.”
On Wednesday, Biden will unveil the first part of his agenda focused on jobs and improving America’s economic competitiveness.
The plan will center on proposals to repair the nation’s physical infrastructure, such as its bridges, railways, ports, water systems and more, as well as revive domestic manufacturing, invest in research and development, expand clean energy investments, and create a nationwide infrastructure for electric vehicles. This part of the plan also will include major investments in child care and educational facilities, and major investments in caretakers for the elderly and those with disabilities amid the nation’s major aging crisis.
The second part of the plan, which will be unveiled next month, is expected to include initiatives to expand child care; provide paid family and medical leave; approve an expansion of health care and the Affordable Care Act; and extend a larger child benefit recently approved by Congress, among other measures. White House officials have said no decisions have been made about which of the proposals they would aim to move through Congress first.
The proposals are the result of months of behind-the-scenes work across numerous agencies to forge consensus on dozens of knotty policy questions. Although they had some disagreements over its provisions, Democrats in the House and Senate were unified in clamoring for a coronavirus relief bill and gave the White House leeway in shaping the new president’s first bill.
The senior White House officials tasked with assembling the package — primarily National Economic Council Director Brian Deese and Susan Rice, director of the Domestic Policy Council — faced much fiercer tensions among allies than they did over the $1.9 trillion stimulus plan.
Over the past two months, leading business groups privately told the administration that the infrastructure package should be focused primarily on physical capital projects — such as roads and bridges — rather than on the caregiving priorities, such as child care, three people familiar with the internal conversations said. Lobbyists urged the White House to jettison the care economy investments, which also would reduce the amount of tax revenue necessary to fund the package.
“There’s some broad skepticism we can do the other piece in a bipartisan way and there’s a strong desire for the next bill to be bipartisan,” said one aide to a centrist Democratic senator, speaking on the condition of anonymity to frankly reveal internal dynamics, about the White House’s caregiving proposals.
Democrats may use the parliamentary procedure known as reconciliation to approve an infrastructure package with a narrow majority that would not require Republican votes, the same way they approved the coronavirus relief bill. Bill Hoagland, senior vice president at the Bipartisan Policy Center, citing conversations with Senate Democratic staffers, said: “The difficulty is all the advocacy groups have seen the possibility of using reconciliation to move their agendas [for] things that do not normally fall into definition of infrastructure — child care; public health care. The moderates and the center will say, ‘Wait a minute; let’s deal with those through the normal appropriations process.’”
But White House officials assembling the package also faced demands from key constituencies to not let the caregiving proposals be of secondary importance to more-traditional infrastructure investments.
Some people close to the White House said they feel that the emphasis on major physical infrastructure investments reflects a dated nostalgia for a kind of White working-class male worker. In private discussions with the White House National Economic Council, the Council of Economic Advisers and the Domestic Policy Council, SEIU International President Mary Kay Henry urged the administration to follow through on its promise to approve major investments in the care economy.
Henry said she reminded the White House of promises Biden had made in person to low-wage service workers — disproportionately minorities and women who also helped elect him in the fall.
On National Equal Pay Day, Council of Economic Advisers economists Cecilia Rouse and Heather Boushey talked at the White House media briefing about the need for major caregiving investments.
On a private Zoom call earlier this month, economists Heidi Shierholz, Darrick Hamilton and Larry Katz presented Rouse, Boushey and other senior Biden officials with evidence that federal investments in care work would do more to generate jobs and economic growth than physical infrastructure, Shierholz said.
“We’re up against a gender and racial bias that this work is not worth as much as the rubber, steel and auto work of the past century,” Henry said. “The key job right now is we have to in the public imagination and in the congressional debate widen the lens, so that people understand that investment in caregiving is an investment in infrastructure.”
Part of the jockeying over the second effort reflects the broader uncertainty surrounding the administration’s next priority. Biden had initially pledged to release an infrastructure and jobs package that included caregiving investments in February. The process was delayed as the administration worked to finalize and implement the relief package.
But the infrastructure package also involved much more extensive input from a range of senior officials than the relief bill, which was modeled largely after prior coronavirus relief bills.
The climate components of the bill were written in part by Gina McCarthy, White House national climate adviser and former head of the Environmental Protection Agency. Her deputy — Ali Zaidi, a former Obama administration official — took extensive meetings with climate activists as they pressed the administration on how to approve Green New Deal-like investments in clean energy.
Jennifer Granholm, secretary of the Energy Department, was also closely involved in producing the bill. A former governor of Michigan, Granholm pushed for provisions aimed at blunting the impact of job loss in Appalachia and other parts of the country dependent on fossil fuel industries, particularly through money for retraining.
Mark Mazur, a former Obama administration official tapped to deal with tax policy at the Treasury Department, took the lead in drafting a menu of tax increases that were then submitted to the White House for review. Kimberly Clausing, who was an international tax and trade expert at UCLA, helped draft the provisions aimed at taxing multinational profits abroad.
The tax component is expected to be the heaviest lift politically for the administration. The White House is studying a range of tax hikes on wealthy investors, corporations and rich people to pay for the package. Steve Rosenthal, a tax expert at the nonpartisan Tax Policy Center, said the tax increases would be the largest in decades.
But in other ways, the process revealed the limits of the White House’s willingness to be ambitious in its policy goals. Biden’s campaign plan called for more than $7 trillion in health, energy, infrastructure and child-care investments, according to estimates from Americans for Tax Fairness, a left-leaning think tank.
Lindsay Owens, a liberal economist at the Groundwork Collaborative and former aide to congressional Progressive Caucus Chair Rep. Pramila Jayapal (D-Wash.), said of early reports of Biden’s plan: “Congress will need to beef up the draft significantly to come anywhere close to addressing decades of underinvestment in infrastructure and to take on the climate crisis.”
Almost immediately after the relief legislation passed, Sens. Sherrod Brown (D-Ohio), Cory Booker (D-N.J.) and Michael F. Bennet (D-Colo.) began a campaign to lobby the White House to permanently extend the expanded child benefit in the stimulus, according to two people familiar with their efforts. The Democratic senators pressed Vice President Harris, Deese, White House Chief of Staff Ron Klain and White House Council of Economic Advisers member Jared Bernstein, the people said.
The White House agreed to the Democratic senators’ demand only in part, including in the package an extension only through 2025. Making it permanent would increase the 10-year cost of the bill by as much as $500 billion.
“It’s really worrisome — they’re raising a ton of money in this package and this is our opportunity to ensure this lasts,” one senior Democrat involved in the effort said. “This is the chance, right now, to really slot this in.”