Here’s What It Actually Means To Cut $1 Trillion From The Democrats’ Big Social Spending Bill
Democrats will have to choose between greatly watering down all of their policies or giving up on some big promises.
WASHINGTON — Democrats are facing torturous choices of which social programs to slash or get rid of altogether, as they will have to cut $1 trillion or even $2 trillion out of their signature social spending bill.
While the topline numbers have gotten a lot of attention, there’s been little public discussion about what cutting the Build Back Better Act in half actually looks like: abandoning programs and reforms badly wanted by progressives and centrists alike.
Do you give up on a child tax credit that helped cut the child poverty level in half, or the country’s first universal paid family leave program? Do you drop prekindergarten subsidies or expanding Medicare to cover vision, hearing, and dental? What if you can afford investments in green energy or expanding the Affordable Care Act but not both?
After winning the White House and Congress, Democrats kicked off an ambitious plan to holistically reform America’s social safety net and tackle climate change with massive investments in green energy. The total price tag, including tax credits, was set at $3.5 trillion over 10 years. Now, they’re looking at something around half that.
Democratic Sens. Joe Manchin and Kyrsten Sinema are pushing their party to drastically shrink the size of their Build Back Better Act. It’s not clear what the final number will be but guesses range from $1.5 trillion — Manchin’s proposal — to President Joe Biden’s counteroffer of somewhere over $2 trillion.
One of the top Democratic priorities is universal paid family and medical leave, allowing people to take paid time off due to illness, having a baby, or looking after a sick family member. Estimates peg this at about $550 billion. (All numbers are projected costs over 10 years, which is how Congress calculates the price.)
Take that policy and add a few hundred billion to move the country toward green energy, plus around $800 billion to make permanent the universal child tax credit, enacted on a temporary basis earlier this year, that is giving parents up to $3,600 per year for each child. At that point, you’ve pretty much hit your budget cap.
But this hypothetical bill doesn’t include things like expanding the Affordable Care Act to provide health insurance to over 2 million people, long-term care for older adults, universal prekindergarten for 3- and 4-year-olds, funding for schools, and many other prized progressive ideas. To add any of these, you have to either take something else out or shrink it way down.
Democrats have two choices: They can either cut out major planks of the bill or they can winnow each program down, making them skimpier and temporary to fit into the budget. If you only extend the child tax credit for five years and bet that in 2026 the government of the day will extend it again, that brings down the price tag substantially. But if you bet wrong, the tax credit ends.
“If you set up programs so they are automatically going to expire, that creates the risk that they actually do expire,” said Ben Ritz, a director at the Progressive Policy Institute. “I think it’s very problematic for Congress to create a new benefit that people come to rely on and then a few years later it goes away.”
Ritz pointed to the Affordable Care Act signed into law, permanently, by President Obama. Republicans have failed to actively repeal the ACA despite years of vowing to do so. But it would be a very different calculus if they could simply do nothing and let it expire on its own.
Ritz put together a framework of what a roughly $2 trillion Build Back Better Act could look like. It includes:
$800 billion to make the child tax credit permanent.
$600 billion of green investments, including funding for public transit, energy grid modernization, and industry subsidies for utilities that switch to green energy.
$425 billion to expand ACA subsidies and Medicaid eligibility to provide health insurance to 2.2 million people with lower incomes.
$175 billion for prekindergarten, plus some funding for job training.
No estimates of what a $2 trillion plan would look like have come out of Congress, because the party is still fighting over the size of the bill. Sen. Bernie Sanders recently called on Manchin and Sinema to stop hiding behind numbers and say exactly what policies they want cut out of the bill.
“We’ve got 48 senators who support $3.5 trillion. We’ve got two who don’t,” said Sanders. “It is wrong, it is really not playing fair, that one or two people think they should be able to stop what 48 members of the Democratic caucus want, what the American people want, what the president of the United States wants.”
But the Senate being split 50-50 means any single Democratic senator has the power to tank the bill. Manchin has expressed a willingness to compromise, but not to go anywhere near a bill the size of $3.5 trillion. Sinema has said even less about her demands, at least publicly.
Democrats may need to decide whether to cut a slew of smaller programs out of the Build Back Better Act. Affordable housing funding ($332 billion), increased financial assistance for students ($111 billion), child nutrition programs such as free meals at schools ($35 billion), and upgrades to Veterans Affairs facilities ($18 billion) are among the less-talked-about items that flesh out the bill. Many or all of them may need to be jettisoned.
Again, it comes down to the choice of having the bill do a few things well — and permanently — or a great number of things with less funding and on a temporary basis.
Ritz argued that Democrats will have an easier time running on passing a few large, impactful programs, potentially allowing them to pass more in the future.
“It makes sense to have a bill that we can message, say this is what the purpose of the bill is: having an inclusive recovery and focusing on the future,” Ritz said. “Trying to do 50 different programs, I think it’ll come off as a progressive wish list and the purpose gets lost.”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the honest policy debates haven’t begun yet as progressive and centrist Democrats angle for positioning. “It would be great to have the details of what we’re actually talking about,” she said.
Her group doesn’t take a position on which policies should be included, but they’ve made one exception in opposing a contentious tax break referred to by the shorthand SALT.
A group of Democrats and Republicans, dubbing themselves the SALT Caucus, are pushing to raise the cap on the State and Local Tax (thus the acronym) Deduction, allowing filers to save on their federal income tax if they pay high taxes to their local governments. The most vocal Democrats who support the policy tend to come from California, New York, and New Jersey, where constituents would most benefit.
Lifting the SALT cap provides only a small benefit to middle-income earners but can greatly benefit tax filers with over $1 million in income. Budget-wise, it could cost as much as $100 billion per year.
It’s in stark contrast to the rest of the Build Back Better Act. The bill could end up raising about $2 trillion in tax revenue from large corporations and wealthy Americans, depending on what the final text looks like. Even Manchin supports increasing taxes on the rich to pay for social programs.
SALT would do the opposite, cutting into money for social programs to pass a tax cut that disproportionately benefits the wealthy.
A group of House Democrats are vowing not to support the reconciliation bill unless SALT relief is included. It’s one of the many sticking points that have no obvious solution, and with the size and contents of the bill in flux, no one knows the prospects for it getting in. But among all the proposals in the Build Back Better Act, SALT relief is getting among the most pushback.
“It’s the most regressive tax cut basically you could craft,” MacGuineas said. “In an entire package that is designed to help families that need it the most, there’s not a single justification for that one.”