The House of Representatives on Friday passed Democrats’ sweeping $1.85 trillion climate and social spending bill, a huge and historic investment in early childhood education, clean energy, and other measures.
The legislation, dubbed the Build Back Better Act (BBB), would dedicate substantial funding to universal pre-K, provide child care subsidies covering roughly 20 million children, and extend an expanded child tax credit for one more year. Additionally, it includes the largest investment in clean energy — predominately in the form of tax credits — that the federal government has ever made.
The bill is a key part of President Joe Biden’s first-year agenda, and it now heads to the Senate, where it’s expected to get pared back due to the opposition moderates like Sen. Joe Manchin (D-WV) have expressed to provisions including paid leave. Its passage in the House, however, is a notable step and an important sign of progress given how long lawmakers have been at an impasse over the legislation.
Friday’s vote follows months of Democratic disagreements over what to include in the bill and what to cut.
Most recently, five House moderates refused to vote on the legislation until it received a score from the Congressional Budget Office estimating its impact on spending and revenue. They signaled, too, that they might not vote for the bill as written if that score failed to align with the White House’s own analysis.
After receiving an estimate on Thursday, which found that the bill would add roughly $160 billion to the debt over 10 years, several of these lawmakers wound up supporting the legislation.
The $160 billion estimate factors in $207 billion in funding that the CBO thinks the government will bring in from additional IRS enforcement. Without this revenue, the CBO estimates that the bill would add $367 billion to the debt over a decade.
Treasury Secretary Janet Yellen, citing analyses by the Treasury Department and the Joint Committee for Taxation, said this week that the bill would be fully paid for, and actually reduce the debt over time. There are some discrepancies between the CBO and White House numbers, however, one of the largest being estimates for IRS enforcement revenue — which the administration put at $480 billion instead of $207 billion.
House moderates’ backing is vital due to Democrats’ narrow majority in the House, which means the party can lose only three votes in the passage of this bill. With moderate support, the legislation got the simple majority it ultimately needed to pass 220-213 along party lines, though Rep. Jared Golden (D-ME) still defected. No Republicans, who’ve broadly criticized the bill for its expansive size, supported the vote, which took place following a lengthy speech made by House Minority Leader Kevin McCarthy.
Despite this movement in the House, however, there are no guarantees about the bill’s future in the Senate. Because moderate senators including Manchin and Kyrsten Sinema (D-AZ) haven’t explicitly said they’re backing the legislation yet, it’s possible the bill could see significant changes before becoming law.
What’s in the Build Back Better Act
As it stands, the roughly $1.85 trillion legislation (one estimate put the House bill spending total as high as $2.4 trillion) concentrates most of its funding on early childhood care and education as well as climate spending.
Major provisions of the House package — and spending estimates calculated by the Committee for a Responsible Federal Budget — currently include:
- $570 billion for climate-related provisions (including clean energy tax credits)
- $380 billion for universal pre-K and child care subsidies
- $275 billion for an increase to the SALT cap
- $205 billion for a four-week paid leave program
- $190 billion for a one-year extension of the expanded child tax credit and making it fully refundable permanently
- $175 billion for the maintenance and construction of affordable housing
- $150 billion for long-term home health care
- $120 billion to extend Affordable Care Act premium tax credits
- $35 billion to expand Medicare coverage to include hearing services
Along with major investments in the social safety net and clean energy, Democrats have used the bill to address their long-held policy goal of enabling Medicare to negotiate drug prices. The legislation would allow the federal government to renegotiate how much Medicare pays for 10 drugs in the near term, a change that’s expected to help lower costs significantly — not just for the government, but for all of those who need those medicines — given the leverage that Medicare has.
To raise revenue to cover the new spending, the legislation contains a slew of changes to the tax code targeting corporations and wealthier individuals. These provisions include a new 15 percent minimum tax rate for corporations, a 1 percent surcharge on corporate stock buybacks, and an additional 8 percent surtax for those making more than $25 million in income.
Another more contentious tax update — a change to the SALT provision — adds about $275 billion in spending to the bill, and would mostly benefit wealthier individuals. The change was demanded by certain Democratic leaders who argued for it because they feel their constituents face significant tax burdens, which are higher in some left-leaning states. The update, which would alter the amount of state and local tax deductions (SALT) individuals could take, would raise the cap of that deduction from $10,000 to $80,000 for the next few years.
Overall, this legislation is still quite expansive, but pretty different from the $3.5 trillion social and climate spending proposal Democrats introduced earlier this year. Because of moderate pushback, programs including free two-year community college education and the expansion of Medicare coverage for dental and vision services, along with increases to the top corporate tax rate, have been stripped out completely. And immigration reform measures and other provisions in the House bill may not make it through the Senate.
What the CBO said about the bill’s cost
The Congressional Budget Office’s estimates suggest the bill would add roughly $160 billion to the national debt between 2022-2031, if IRS enforcement revenue was factored in. It’s an analysis that differs from the estimates made by the White House, though a key discrepancy is due to divergent estimates about the IRS enforcement figures, which was anticipated.
The CBO’s report indicates that the measure’s revenue raisers, including a new tax on stock buybacks and savings from prescription drug negotiations, would be enough to cover most if not all of the bill’s costs. Overall, the CBO estimates that the bill includes about $1.63 trillion in spending and $1.47 trillion in revenue (including the IRS enforcement money), meaning about $160 billion isn’t covered by the pay-fors.
Though the CBO’s data showed that the legislation’s spending isn’t fully addressed by new revenue, its analysis gave some moderate hold-outs in the House the assurances they need to move forward on the bill since most of its figures were in line with the White House’s.
Previously, analyses from the nonpartisan Joint Committee on Taxation and the White House indicated that the revenue the legislation generated would largely match its spending.
An estimate from the Joint Committee on Taxation suggested the measure would bring in about $1.5 trillion in revenue over a decade. That calculation did not include more recently added provisions, like policies to cut prescription drug costs, that are expected to bring in further revenue. Another estimate from the Treasury Department concluded that the full suite of pay-fors including tax increases and drug cost savings would bring in up to $2.2 trillion in 10 years, fully covering the entirety of the bill.
Following the CBO report, the White House has emphasized that it’s even more confident about the legislation’s revenue raisers. “The combination of CBO & JCT’s scores over the last week and Treasury analysis make it clear that Build Back Better is fully paid for, and in fact will reduce our nation’s debt over time through $2 trillion+ in revenue raisers and other savings,” Treasury Secretary Janet Yellen posted in a tweet on Thursday.
The CBO’s estimate of the costs of the bill wound up being lower than what the White House projected, while the revenue that it estimated from prescription drug cost savings was actually higher. Since the White House also expects revenue from IRS enforcement to be more than the CBO’s estimates, it’s told House members it doesn’t expect the bill to add to the debt.
The combination of CBO & JCT’s scores over the last week and Treasury analysis make it clear that Build Back Better is fully paid for, and in fact will reduce our nation’s debt over time through $2 trillion+ in revenue raisers and other savings.— Secretary Janet Yellen (@SecYellen) November 18, 2021
Earlier this month, a White House review found that the bill would reduce the deficit by $36 billion in the first 10 years, and roughly $2 trillion in the second 10 years.
The CBO scoring mostly affirms these analyses with some discrepancies including the amount of money that increased IRS enforcement will bring in. According to the Treasury Department, more aggressive enforcement of tax policies could significantly help the government recoup taxes that wealthy people have failed to pay. The Treasury calculations show that enforcement could add $480 billion in revenue. The CBO, meanwhile, estimates that such enforcement would only bring in $207 billion because of how it measures the effects of these policies.
Other economic experts, including former Treasury Secretary Larry Summers, have echoed the White House’s claims and emphasized that the legislation is fully paid for. “Together, they are smaller over 10 years than this past year’s stimulus was over a single year, and in addition, they are substantially paid for,” Summers has said about both a recently passed bipartisan infrastructure bill and the social spending legislation.
There are still obstacles ahead for the social spending bill
House passage of the social spending bill doesn’t mean that it will pass as-is in the Senate.
Manchin has already indicated that he has outstanding concerns, particularly regarding the four-week paid leave program the House bill includes. In the past, he’s argued that the proposal could be overly burdensome for businesses and that reconciliation isn’t the right process for passing it.
“I’ve been very clear where I stand on that,” Manchin said earlier this week.
Manchin has also long been concerned about the cost of the bill and potential additions to the national debt, an issue he’s continued to raise, along with worries about inflation. “I will not support a bill that is this consequential without thoroughly understanding the impact that it will have on our national debt, our economy and, most importantly, all of our American people,” he’s said. Democratic leaders, meanwhile, emphasize that this bill’s spending is spread out over 10 years and could actually counter inflation because it would reduce the costs that families face on expenses like child care and prescription drugs.
Because the bill is being considered via reconciliation, it can’t pass the Senate without the support of every member of the Democratic caucus. And that means, given Manchin’s positions, it’s likely that the legislation will be tweaked further in the upper chamber.
This debate comes as Congress faces a daunting year-end to-do list. In addition to passing the reconciliation bill, Congress also needs to address the debt ceiling and fund the government in order to prevent a potential global economic calamity and another government shutdown. Lawmakers have until December 3 to accomplish both tasks.
Getting all of these things done before the end of the year would be no small feat: After Congress returns from its Thanksgiving recess, it has about 10 working legislative days before lawmakers are scheduled to leave for another winter break. In that time frame, lawmakers could pass a short-term spending bill to keep the government open, known as a continuing resolution, in order to focus their energies more heavily on reconciliation.
Senate Majority Leader Chuck Schumer, for his part, has said the Senate will pass the social spending bill before leaving for a holiday break, though Manchin has seemed more skeptical about this timing.
His potential pushback, along with that of other moderates, cast doubt on whether the bill will be able to make it through the Senate anytime soon.