Joe Manchin attracted a great deal of press attention last night by issuing a long statement expressing his list of mostly familiar grievances with Joe Biden’s Build Back Better agenda. What drew less attention were some shorter and more elliptical comments he made laying out areas of agreement. If you read between the lines, and add some optimistic assumptions, you can see the outline of a potential deal.
The biggest problem Democrats face is financing the program, given that every dollar Democrats can raise, either through higher taxes on the wealthy or reduced spending on prescription drugs, has a team of lobbyists pleading its case. Manchin laid out a practical way through: repeal of the high-end portion of the Trump tax cuts to pay for it. “I want to do a tax overhaul,” he said. “One thing you understand that all Democrats agreed on, there’s not a lot of things we all agree on, is that the 2017 tax cuts are unfair and weighted toward the high end. Let’s fix that.”
The benefit here is that Democrats are already on record as voting against the Trump tax cuts. Manchin and Sinema both voted them down. And their opposition has been amply supported by a host of studies showing the Trump tax cuts utterly failed in their intended goal of encouraging business investment, and simply dumped a windfall gain on the rich.
Of course, most wealthy people aren’t going to want to give the money back just because the experiment failed. They’ll continue fighting to hold on to their windfall. But Manchin’s way of framing the issue makes it harder for Sinema or other Democrats to oppose the financing mechanism. It’s not a radical new tax scheme, simply a continuation of policies that were in effect recently and which represent tax rates Democrats supported all along.
On the spending side, Manchin was more cryptic. “Do you know how convoluted the tax system is? Do you really understand? We don’t have a one-week, two-week deadline, I don’t believe, on this. Because everything’s covered,” he told reporters. “There’s nobody going to go without. The child tax credit ends at the end of the year and everything else goes to 2023.”
The child tax credit could well be the anchor of the spending side of Biden’s plan. Democrats passed an enhanced child credit at the beginning of the year as an emergency measure, but they made clear that their intent all along was to extend it permanently, and Manchin’s comments imply he supports the goal.
The child tax credit is a powerful tool of social policy. It has already cut child hunger and poverty, especially deep poverty. Studies have found that alleviating childhood poverty has long-term effects on a child’s life, leading to higher educational attainment, reduced likelihood of being arrested, and higher lifetime earnings.
Making the full child tax credit permanent would cost close to a trillion dollars over the next decade, according to the Bipartisan Policy Center, which strongly endorses the policy. Democrats have been hoping to advance this policy on the cheap by extending it only through 2025, and gambling that future Congresses will be forced to extend it further afterward.
But that scheme hides the true cost, and also subjects a vital policy to the whims of future elected officials who may be Republican and could, at minimum, screw with the program design in highly damaging ways. A child tax credit that relies on indefinite future extensions by President Donald Trump Jr. is much less secure than one that’s written into law and given a permanent funding source.
A second advantage of anchoring Build Back Better around a child tax credit is that it enhances Democrats’ ability to explain their plan. The biggest drawback of a sprawling domestic agenda is that there’s too much in it for people to remember. Having a single message of changing the tax code to make the rich pay more (popular!) and let working-class families pay less (popular!) gives the party a strong message to run on the next two election cycles.
Manchin has talked about means-testing benefits, so that they go to needy families rather than comfortable ones. The program already has a means test, and if Manchin insists on lowering the threshold, that’s workable.
What matters is that the program avoid the red tape that makes it hard for poor families to actually enroll, or that punishes them with surprise billing when it turns out they claimed too high a credit because their income grew. Simplicity of design matters, and the habit of some moderate Democrats to assume something more complex will work better or attract more political support has been belied by real-life experience. A point made by the left that the center ought to take to heart is that real people hate dealing with bureaucratic paperwork.
Manchin has touted the need for adding work requirements to the child tax credits. But there are measures to promote employment that are both more humane and more effective than consigning children to hunger and severe poverty. Universal child tax credits can help families avoid spiraling into the cycle of poverty — losing your home, falling into depression or addiction — that prevents the adults from being able to return to the workforce when the economy emerges from a recession. More importantly, if the adults fail to recover, the child tax credit can act as a breaker on intergenerational poverty, giving the children of the very poor a chance to have a better life.
Manchin is also going to have to give ground on including measures to address climate change. Progressives have already given up many of their fondest hopes for this bill, and are going to have to give up more. It’s reasonable to argue that they need to win a bigger majority if they want to accomplish everything. But addressing climate change cannot wait.
Maybe Manchin wants to throw a lot of money at carbon-capture research that might leave open some future for coal. Maybe he wants to pay off coal miners who will lose their jobs. There are currently around 40,000 people left working in the coal industry — giving every one of them a check for half a million dollars tax-free would cost $20 billion. Democrats are likely to understand spending money to smooth out the cost of transitioning off of carbon, but will not forgive passing up the last best chance to address climate change.
Manchin represents a state that has very few wealthy people and disproportionately high poverty. He has the chance to design a social-policy agenda that would permanently transform the social safety net and give his constituents a chance at a middle-class life they never had. He ought to be taking the opportunity to advocate the broadest possible bill — expanding access to child care, education, and health care for retirees and workers alike.
But if he finds the taxes on the wealthy too much to bear, he can start by building a plan around a generous, permanent, and universal monthly child tax credit. That would not fulfill liberal ambitions, not by a long shot. But it would be a real legacy.
