The Budget Reconciliation Fight Isn't Really About Progressives Vs. Moderates

Don’t believe misleading media coverage of the standoff in Congress. Here’s what’s actually going on.

Max B. Sawicky

(Photo by Paul Morigi/Getty Images for Unbendable Media)

It’s crunch time for the Biden Budget, and likely for the future of the Biden administration, Democratic control of Congress, the fate of American democracy and hope for the world. No pressure! We tend to see political issues in ideological terms of Left versus Right, but in this situation that really gives too much credit to those throwing sand in the gears.

President Biden’s budget legislation is currently hanging fire in the Congress. One piece is a bipartisan bill to finance public investment in physical capital, also known as infrastructure. The other — a reconciliation bill — is the product of Sen. Bernie Sanders’ (I‑Vt.) budget committee and provides a massive progressive expansion of social spending on human needs and Green New Deal-ish initiatives.

Originally there was an agreement among Democrats that both bills would be passed together. Now, a rump group of Members of Congress wants to pass their preferred bipartisan bill and fade into the woodwork when it comes to enacting the bigger, progressive reconciliation bill. In response, the Congressional Progressive Caucus (CPC) has promised to tank the infrastructure bill absent a firm commitment to support reconciliation.

Even before the budget is sorted out, the functioning of the government itself is in question, thanks to the periodic, bizarre ritual around the debt ceiling, a nonsensical institution that enables the federal government to pay for spending that has already been approved. 

As things stand, a handful of Democrats are blocking passage of the reconciliation bill and imperiling the enactment of Biden’s agenda. The legislation has the support of the White House and party leadership. Meanwhile, Republicans are blocking an increase in the debt ceiling, which could cause the United States government to default on its debt, with potentially devastating consequences. 

Solving these wholly solvable problems will require obstructionist lawmakers to change their positions so that the bills in question can pass. And with negotiations stalling in Washington, creating the pressure to change the behavior of intransigent members of Congress demands public outrage — and organizing. 

While national groups such as People’s Action and Sunrise Movement are taking action to force the hands of holdout politicians, much of the public unfortunately remains confused or in the dark on the stakes of these fights — in large part due to misleading press coverage. 

In the interest of better educating everyday working Americans about the importance of passing vital programs — and stoking necessary outrage — here are some correctives to common misconceptions about what’s happening in the nation’s capital. 

Don’t call them moderates”

One fundamental misconception is that support for both the infrastructure and reconciliation bills is prey to a centrist-to-progressive gradient of public opinion, anchored by concerns over the national debt. For instance, a Wednesday story at the New York Times on the budget standoff leads with a reference to the challenge of forging a compromise between moderates and progressives.”

The truth is that debt and the deficit rank low in the hierarchy of public sentiment. In the same vein, virtually nobody in America cares about procedural issues like the debt ceiling and the filibuster.

On the other hand, Biden’s spending policies are extremely popular. After introducing a pair of massive pandemic and recession-related packages earlier this year, Biden’s approval rating stood at 59 percent. The problem is that his policies are more popular with us lowly common folk than with our well-paid members of Congress.

Deficit scolds claim to want all social programs paid for.” The merits of this economic delusion aside, when they are presented with ways to do just that, they make like Homer Simpson backing away into the hedges.

The tax increases in the reconciliation bill — known as the Build Back Better plan, or BBB — are often glossed over next to the $3.5 trillion price tag. But $3.5 trillion is just the spending side, which would go to enact such critical policies as child care, paid family leave, investments in affordable housing, Medicare expansion, extending the Child Tax Credit, universal preschool and tuition-free community college, and financing of large-scale climate change mitigation efforts. 

The details are still being hashed out, but by recent estimates, around half of that spending would be matched by tax increases in the legislation. If you’re critical of the package because of concerns over deficits, as has been offered up by holdout Sen. Joe Manchin (D‑W.V.), it’s not logical to look askance at the pay-fors” on the tax side. That is not a reasonable conservative position — it is learned stupidity that insults the intelligence of the public.

A similar irrationality surrounds discussion of the tax increases. Under Biden’s tax plan, the vast majority of taxpayers would see no tax increases, as pointed out by the Institute on Taxation and Economic Policy. Most Americans with income below $400,000 a year, and an even larger proportion with income under $200,000, would actually see tax cuts, not increases. These are the people that any Democratic member of Congress should care about. Opposing such a tax change really stretches the definition of moderate,” unless we are talking about moderate Republicans. 

So-called moderates might think they are defending their constituents from tax increases. For instance, Rep. Josh Gottheimer (D‑N.J.) is reported to have said, We need to be careful not to do anything that’s too big or too much in the middle of a pandemic and an economic crisis.” But as more than one economist has pointed out, the risks now lie on the side of doing too little, not too much.

The fact that the proposed tax increases will impact only the rich raises the question of who the moderates” are defending, if not the wealthy and corporate donors. Not coincidentally, in the midst of negotiations over the BBB, Manchin’s fellow holdout Sen. Kyrsten Sinema (D‑Ariz.) is hosting fund-raisers with lobbyists who are working to torpedo the tax increases, which will mean blowing up the entire budget. This posture is not consistent with any concern about deficits or tax burdens on middle-class families.

Another point of conflict over the BBB legislation lies in the prescription drug field, and serves as another example of the triumph of graft over ideology. Alongside taxes on the rich, enabling the federal government to bargain down pharmaceutical prices for Medicare beneficiaries is another pay-for” that supports the $3.5 trillion in proposed spending increases. You can’t bemoan the deficit impact of the spending and oppose the means to reduce it. But that’s exactly what some Democrats are doing, particularly Reps. Kathleen Rice of New York, Scott Peters of California and Kurt Schrader of Oregon. Peters and Schrader are, unsurprisingly, shameless recipients of Big Pharma dough. Rice is more ecumenical, achieving support from the FIRE sector (finance, insurance, real estate).

We shouldn’t call these Democrats moderates” — and neither should the mainstream press. Yet that is how the media continues to portray them, despite the fact that they are now working to block President Biden and the Democratic Party’s agenda. 

$3.5 trillion is not that big, really

Another source of confusion lies in the headline numbers” of the BBB legislation. In the teeth of the pandemic and the recession, Congress last year enacted multi-trillion dollar relief measures that, on their face, may appear to be less than the latest Democratic proposals. But as Eric Levitz points out, the $3.5 trillion reconciliation bill is spread out over ten years, whereas the recent spending bills were concentrated in the short term. 

On an annual basis, we are really talking about $350 billion, not $3.5 trillion. And don’t forget, about half of that would be paid for” in the legislation. While that amount of money is still more than everybody but Jeff Bezos-types have, the proper scale of comparison is GDP. News articles striving for clicks tend to hype big numbers, in what Daily Kos blogger David Nir aptly describes as the traditional media’s war on denominators.” But compared to the latest GDP estimates, half of $350 billion is less than one percent. Is that really too much?

The relevant yardstick against which to gauge deficit increases is the extent of slack in the economy — the gap between current and full” employment. Adam Hersh of the Economic Policy Institute pegs the current shortfall — or potential for employment growth — at up to nine million jobs. In some respects, this could be an understatement. The ratio of employment to population has never returned to its peak of 20 years ago. We should also keep in mind that these aggregate estimates of employment possibilities assume a continuing hiring bias against people of color and women.

Hersh reports that the estimated effects of the Biden legislation, both the infrastructure and reconciliation bills, are in the range of four million jobs. But if he’s right about the potential for an increase of up to nine million jobs, then the pending budget initiatives could profitably go even further in stoking job creation. 

As progressives in Congress have been insisting, $3.5 trillion was already a compromise — they initially wanted a $6 trillion reconciliation package. Hersh also relays findings from fellow economists Pollin, Chakraborty and Wicks-Lim that indicate the green” component of the legislation is insufficient to move the United States to carbon neutrality. So the package is conservative — and inadequate — as it pertains to climate as well.

The relevant warning sign of excessive deficit spending would be a spike in inflation. There were some upticks earlier this year, but those have since moderated. The bond market would normally reflect expectations of changes in inflation, but so far there have been no moves of that nature either.

The debt ceiling is dumb

The United States actually has two debt ceilings, one more than is necessary. The first one is whatever Congress decides when it passes a budget. That debt ceiling is the pre-existing, outstanding debt plus the deficit in the budget. Debt can rise no higher. Laying a second ceiling on top of that is just an opportunity for some miscreant to gum up the works by insisting that the second ceiling be lower than the first.

A failure to raise the second debt ceiling prevents the U.S. government from paying bills already incurred. Basically, it gives the losers in previous votes on the budget another shot, another way the rules are stacked against social spending. Unpaid bills, especially missed interest payments on government bonds, are a default on those debts, ordinarily the safest financial asset in the world. 

Nobody knows what would result from a default, though by the evidence of the stock market this week, nothing good. Moody’s predicts that the a debt default would cause a recession leading to the loss of nearly six million jobs, increasing the unemployment rate up to nine percent. 

Another credit downgrade might have as little impact as the one last year, during the administration of Trump the stable genius. Or, it could bring a lasting increase in federal borrowing costs that contracts the space for the new spending. That would be very bad. 

Yet, despite these dire potential outcomes, the GOP remains steadfast in its refusal to raise the debt ceiling. Republicans claim Democrats are being reckless in their spending plans, ignoring the fact that the debt ceiling pertains to spending that was approved by Trump and a GOP Senate. The media might have you confused on this point, but don’t be. 

Time for outrage

As CPC chair Pramila Jayapal (D‑Wash.) has pointed out, many of the most politically vulnerable Democrats are now pushing to pass the full reconciliation bill, whereas a number of those attempting to block it or water it down — such as Reps. Rice and Peters — are from safe blue districts. On Thursday, Jayapal tweeted, 96 percent of Democrats in Congress are ready to move forward with the Build Back Better Act AND infrastructure. Let’s be clear: It’s not progressives holding up the President’s agenda, it’s the 4 percent who are going back on our deal.” This dynamic underscores what is actually at stake in the fight. 

Leading Democrats and the White House understand that passing the reconciliation bill, while also raising the debt limit and passing a CR, is critical to making Biden’s agenda a reality — the same agenda that Democrats ran on across the country. If these Democrats hope to avoid a shellacking in next year’s midterms, their best bet is to follow through on their campaign promises, no matter what self-described moderates” may demand. 

And as for the public, the time is now to demand that the entire Democratic caucus get in line to pass life-changing social programs. Raise hell, protest and voice your displeasure at the holdouts. And if they stand firm in their disloyalty to the Democratic Party’s agenda, then throw the bums out when primary time rolls around.

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Max B. Sawicky is a senior research fellow at the Center for Economic and Policy Research. He has worked at the Economic Policy Institute and the Government Accountability Office, and has written for numerous progressive outlets.

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