Here’s why Manchin is worried about ‘budget gimmicks’ in the Democrats’ spending bill

By CNN

Published November 2, 2021 5:49 AM

By Tami Luhby and Katie Lobosco, CNN

President Joe Biden and congressional Democratic leaders have slashed the size of the party’s sweeping spending package in half to woo Sen. Joe Manchin. Yet, the West Virginia lawmaker is still throwing up red flags about the size of the proposal and the measures that would pay for it.

Accusing his colleagues of playing “shell games” and including “budget gimmicks,” Manchin said Monday that “the real cost” of the $1.75 trillion bill would be almost twice that amount if its provisions were extended or made permanent. And he said he won’t support it without knowing how it would “impact our debt and our economy and our country.”

Manchin is fuming over one of the main ways the Democrats shrunk the package, which originally totaled $3.5 trillion over 10 years. They shortened the duration of several measures, thereby reducing their cost.

For instance, the enhanced child tax credit would be extended for only one additional year, instead of four. The beefed-up Affordable Care Act subsidies would continue only through 2025, instead of being made permanent.

It’s a technique used by both Republicans and Democrats, who hope that the measures will prove too popular with the public to let lapse, no matter who controls Congress. The Republicans’ 2017 Tax Cuts and Jobs Act contained numerous temporary provisions, with the individual income tax reductions set to expire after 2025.

Possible permanent extensions

If all the spending and revenue provisions in the Democrats’ budget reconciliation package were made permanent, it would cost nearly $4 trillion over the next decade, according to the Penn Wharton Budget Model, an independent research group that Manchin has consulted.

The largest expense by far would be the enhanced child tax credit, which provides up to $3,600 a year for each child up to age 6 and $3,000 for each one ages 6 through 17. It would cost more than $1.8 trillion over the next 10 years if made permanent, according to Penn Wharton.

The beefed-up credit was created by the Democrats’ coronavirus relief plan and is currently only in place for 2021. Under the White House framework released last week, the one-year extension of enhancements to the child and earned income tax credits would cost $200 billion.

Making the expanded earned income tax credit permanent would cost $125 billion, Penn Wharton estimates.

The more generous Affordable Care Act subsidies would cost $243 billion if they were permanent, instead of the $130 billion estimated by the White House.

And the universal pre-school and child care measures would total $700 billion, rather than the $400 billion listed in the White House framework, which calls for only six years of funding.

“The Democrats right now are saying to Republicans: ‘We’re going to turn on this universal pre-K and child care. How are you going to turn it off in a couple of years?,'” said Richard Prisinzano, Penn Wharton’s director of policy analysis. “The Republicans did the same thing, saying, ‘We’re going to make the individual tax cuts temporary.'”

Revenue raisers may fall short

The White House says that the bill would be fully paid for, estimating that the proposed tax increases on corporations and the wealthy would bring in nearly $2 trillion of new revenue to Uncle Sam over 10 years. But two independent analyses suggest the White House is overestimating how much money those taxes will raise, finding that they won’t cover the full cost of the spending plan.

Penn Wharton Budget Model estimates the bill would raise about $1.5 trillion over 10 years and the right-leaning Tax Foundation found it would raise $1.2 trillion over the same time period. In both cases, the bill would fall short of fully funding the $1.75 trillion plan and ultimately add billions of dollars to the deficit.

Both analyses found that the proposed 15% minimum book tax on large corporations and the 1% tax on stock buybacks — two of the biggest proposed revenue raisers — wouldn’t bring in nearly as much money as the White House predicts.

They both also expect that the proposal to beef up IRS enforcement to ensure that high-earning Americans are paying what they owe would result in less revenue than the $400 billion the White House claims. An earlier report from the Congressional Budget Office said that the proposal would raise half that amount over 10 years.

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