Democrats seek a middle ground on Biden's plans without gutting them

Democrats in Congress are attempting a seemingly impossible feat, trimming a trillion or more dollars from their plan for passing much of President Biden's agenda without undermining the polices they've promised to voters.

Democrats say they want this spending package to address huge economic challenges like education, child care, climate change and poverty. But in order for a bill to pass, they need to keep the price down to satisfy demands from centrists like Sen. Joe Manchin, D-W.Va., who has called for the bill to be capped at $1.5 trillion, while keeping progressives satisfied with the scope of the bill.

Congressional Progressive Caucus Chair Rep. Pramila Jayapal, D-Wash., has insisted that leaders cannot cut the size by forcing lawmakers to decide between priorities.

"We are not going to pit child care against climate change," Jayapal told reporters on a recent teleconference. "We're not going to pit housing against paid leave. We're not going to pit seniors against young people."

That leaves top lawmakers and staff working behind closed doors to make trims that can satisfy everyone.

The battle over the child tax credit

But it isn't an easy task. In many cases, simple changes, like narrowing who is eligible for a program, can trim the price tag but not without shifting the impact of the program.

One clear example of the trade-off is the plan to make the expanded Child Tax Credit permanent.

Democrats temporarily expanded the credit as part of the $1.9 trillion American Rescue Plan. The policy, which lasts through the end of this year, was intended to lift families out of poverty and replace dependent tax credits that were changed under former President Trump's 2017 tax overhaul.

Democrats expanded the credit, which has been in effect since July, to reach lower income families who had previously been excluded, increased the amount of the credit and turned the annual credit into a monthly payment. Now, parents receive as much as $300 per child per month.

Chuck Marr, senior director of federal tax policy at the left-leaning Center on Budget and Policy Priorities, illustrated how the program works for a low-income single mother with a toddler and a second grader.

"Before she was getting about $600 per child per year," he said. "After the increase, she is getting $3,000, for the second grader $3600 for the toddler, an increase of $5,000 income potential game changer for those kids."

Democrats say the policy could cut child poverty nearly in half and they want to make it permanent.

Manchin says he supports a permanent version. But it would have to be trimmed back with new income limitations and work requirements. But Elaine Maag, principal research associate at the left-leaning Tax Policy Center, says those changes could make the credit either unavailable or difficult to administer for people with unpredictable work schedules, seasonal work or intermittent job security.

"If people are worried that they won't be eligible for the credit because their income might change too much, that will dampen participation in this monthly aspect of the credit," she said. "We want the folks who have the most unstable incomes to be most willing to take advantage of the income smoothing components of the legislation."

Threading the needle

Maag said the legislation is carefully constructed to change an existing tax credit so it works better to address high child poverty rates that increased in the pandemic.

"We're coming off a program in 2020, where 27 million children were left out of the full benefit those children were much more likely to be black and brown," she said. "We don't want to implement policies that undermine, you know efforts and improving racial equity at the same time."

Experts say imposing income limits for middle-income earners is another way to trim the cost, but it could lead to tax increases for the people Biden pledged who see no harm from the bill.

Marr says Democrats have another option that maintains the programs while still keeping with their promises to address economic inequality. Instead of focusing on cutting the top line, they could expand plans to increase taxes on the wealthy and corporations to offset the costs.

"I think what's being lost is the tax side," Marr said. "And it's pitting one investment in working-class people versus another, which I think at some level has to happen, but again, the real trade off is between bringing down the size of the package, which is pitting the tax interest of very wealthy people, large corporations, and people who cheat on their tax against these investments."

But those increases don't satisfy centrist Democrats who don't want to vote for trillions of dollars in new spending.

This policy battle is not unique to the Child Tax Credit. Top Democrats have spent the past several weeks replicating this dilemma with plans for universal pre-k, child care support, paid family leave, Medicare expansion and efforts to curb the high cost of prescription drugs.

The challenge party leaders face is trying to keep everyone happy without gutting Biden's plans. [Copyright 2021 NPR]