Democrats Release Budget Enabling Biden’s $3.5T Tax, Economic Plan

Senate Democrats released the text of their budget resolution that sets up President Joe Biden’s $3.5 trillion economic agenda, as well as a showdown with Republicans over the debt limit in September.

The budget blueprint is expected to be voted on this week in the Senate soon after final passage of Biden’s bipartisan $550 billion infrastructure package. It allows Democrats to bypass Republicans to expand the social safety net and address climate change, paid for by raising taxes on the wealthy and corporations.

The blueprint would be followed as soon as September with text implementing a broad array of new education, health and climate programs as well as an extension of tax cuts for the middle class. All 50 senators who caucus with Democrats will have to unite behind it for it to prevail.

“By making education, health care, child care, and housing more affordable, we can give tens of millions of families a leg up,” Senate Majority Leader Chuck Schumer said in a letter to Senate Democrats on the budget. “This legislation will provide the largest tax cut for American families in a generation, while making the wealthy pay their fair share.”

Debt Limit Issues

Democrats opted not to include an increase in the federal debt limit, which will have to be passed soon after Congress returns to work next month, along with a stop-gap spending bill to keep the government open after the end of the fiscal year on Sept. 30.

Senate Republican leader Mitch McConnell has vowed that Republicans won’t cooperate in lifting the federal borrowing limit — potentially setting up a fiscal cliff with the risk of both a government shutdown and a default on its debts — because Democrats are moving forward on their own with a massive tax and spending program.

“They want Republicans to give them political cover for the partisan debt bomb that they’ll go right on to detonate with zero input from us,” McConnell said last week.

The budget blueprint, while teeing up a $3.5 trillion plan, would allow about half of it to be financed with debt.

The Democratic plan gives the Senate Finance Committee wide latitude to draft policies that would increase taxes on corporations and those making more than $400,000 a year, and instructs lawmakers to provide tax cuts for those making less.

In addition the resolution asks the committee to find additional revenue to pay for the $3.5 trillion in spending from health care savings and a new fee on carbon polluters.

While the Finance panel would have to reduce the deficit by at least a nominal $1 billion, other committees, including ones covering health, energy, the environment, agriculture and so on, would be allowed to craft provisions adding about $1.75 trillion in red ink over a decade.

The document also includes references to policy areas that Democrats see as crucial to their re-elections in the 2022 midterms, including enacting policies to create paid family leave, extend the child tax credit, and expand Medicare benefits to include dental, vision and hearing.

SALT Matter

The plan also explicitly tells lawmakers to make the state and local tax, or SALT, deduction more generous. More than 20 House Democrats have threatened to not vote for Biden’s economic agenda unless it also included an expansion of the SALT tax break.

Senate Budget Chairman Bernie Sanders said the budget plan would enable “the most consequential piece of legislation for working people, the elderly, the children, the sick and the poor since FDR and the New Deal of the 1930s,” and contrasted that with Republican tax cuts in 2017.

“Today, with Democrats in control of the Senate, we will use reconciliation to benefit the working class, not the billionaire class,” he said.

The budget resolution doesn’t include instructions for a debt limit bill bypassing a filibuster, but it sets the “appropriate” level of debt each year. The envisioned debt in the blueprint would rise to $33.5 trillion in fiscal 2024, and to more than $45 trillion in 2031.

While Democrats appear to be united in favor of passing the budget resolution, the final package faces obstacles. Some Democrats, including Joe Manchin of West Virginia, have said they don’t want to add to the deficit. Arizona’s Kyrsten Sinema has said she wouldn’t support a bill spending $3.5 trillion.

Moving forward with the budget and the follow-on package is key to passage of the $550 billion bipartisan infrastructure package in the House. Speaker Nancy Pelosi has said she won’t allow that plan to get a vote until the Senate passes the larger spending and tax package.

While Republicans have no power to block the budget resolution, they can make the process painful politically and physically by forcing an all-night, nearly unlimited round of votes on amendments known as the “vote-a-rama.”

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