Democrats Launch Attempt to Rescue Biden’s Economic Agenda

With midterms looming, the party focuses on tax, energy and prescription-drug goals in push to win Sen. Joe Manchin’s support

By Andrew Duehren, (WSJ), Updated Apr. 27

WASHINGTON—Democrats began a last-ditch effort to cobble together a narrower version of President Biden's once-sweeping economic agenda that could win the critical support of Sen. Joe Manchin (D., W.Va.) and hand the party a legislative victory ahead of the fall’s elections.

Mr. Manchin met with Senate Majority Leader Chuck Schumer (D., N.Y.) on Tuesday to discuss the possibility of a party-line package focused on raising taxes and reducing the budget deficit, and he convened a group of lawmakers from both parties on Monday to discuss ways to bolster energy production, another priority for Mr. Manchin.

Democrats see the coming weeks as a critical window to attempt to rescue their waylaid ambitions in the 50-50 Senate, where the party must rely on Mr. Manchin’s vote to achieve policy goals broadly opposed by Republicans. Mr. Manchin last year rejected a House-passed package for roughly $2 trillion in spending on healthcare, climate and child-care programs, dooming the plan dubbed Build Back Better. Democrats have since tiptoed around their prized policy goals in hopes of eventually settling on a compromise with the West Virginian.

President Biden said at a news conference Wednesday that the stalled $2 trillion Build Back Better proposal would likely have to be split up to get certain pieces, like provisions on climate, energy and early-childhood education, passed. Photo: Oliver Contreras/Sipa/Bloomberg News

With the midterm elections months away, many Democrats are eager to try to kick-start talks before campaign-season politics further complicate the effort—and before they possibly lose their thin control of the Senate and House.

“I think it’s a make-or-break moment for the elements of Build Back Better that are still on the table,” said Sen. Chris Van Hollen (D., Md.). “The clock is ticking. This is a perishable moment.”

Mr. Manchin has said he would support legislation focused on raising taxes, cutting the deficit, producing more energy in the U.S. and reducing the cost of prescription drugs. He has rejected various proposals to expand the social safety net, including creating a national paid-leave program and offering a more-generous child tax credit.

‘I think it’s a make-or-break moment for the elements of Build Back Better that are still on the table.’

— Sen. Chris Van. Hollen (D., Md.)

While Democrats appear to have accepted that many of their original policy goals for the bill won’t pass this Congress, they have given priority to measures to fight climate change in the revamped effort. Mr. Manchin has in recent weeks sought to incorporate measures facilitating fossil-fuel production as well.

The meeting of Republicans and Democrats on Monday about energy policy was an early, broad discussion, according to lawmakers and aides.

“I’m working with a group trying to find a bipartisan way that we can move forward on energy, and we’ll just have to see where we get,” Mr. Manchin said.

Forging an agreement on energy policy that can win broad support from Democrats, who prioritize aid for clean energy sources such as wind and solar power, and Republicans, who want to support fossil fuels, will be challenging. Sen. Kevin Cramer (R., N.D.), who attended the meeting, said Republicans would oppose any plan that resembles Democrats’ previous plans for reducing carbon emissions.

“That leaves maybe a fairly narrow band depending on what price people are willing to pay,” Mr. Cramer said.

Mr. Manchin’s overture to Republicans, meanwhile, puzzled some Democrats, with some skeptical that the talks would produce anything they could support.

“I mean it’s way too early to see what they’re going to include and what’s going to be involved. I’m going to vote for the strongest possible climate provisions. I’m skeptical that a bipartisan solution is going to yield the results when it hasn’t so far,” said Sen. Tina Smith (D., Minn.).

White House press secretary Jen Psaki said the administration wouldn’t prejudge Mr. Manchin’s pursuit of a bipartisan energy plan. She said the White House would “continue to engage with a broad range of Democrats, including, of course, Sen. Manchin, about how to get the president’s agenda done.”

A White House official said that any bipartisan energy deal would have to meet the Biden administration’s goals on climate change and energy costs, adding that such a deal wouldn’t replace a separate party-line effort.

In his meeting with Mr. Schumer, Mr. Manchin said the pair discussed how to combat inflation, which is running at the highest level in four decades, by raising taxes and reducing the deficit. Reducing the deficit with tax increases could ease inflation by pulling money out of the economy.

Trying to reduce inflation has become a major preoccupation for Democrats as it has surged in the past year, weighing on the party’s poll numbers. Mr. Manchin said his concerns about inflation drove him to oppose the House-passed version of Build Back Better last year, and Democrats have scrambled for ways to show that they are taking on the issue.

Mr. Manchin said Democrats should pursue tax increases along party lines through a process called reconciliation, which allows lawmakers to skirt the 60-vote filibuster threshold in the Senate. Republicans have vigorously opposed Democrats’ plans for raising taxes, which would reverse or change elements of the 2017 tax law the GOP ushered through Congress along party lines and implement crucial pieces of the global minimum corporate tax agreement that is a priority for the Biden administration.

“We talked about inflation, [Mr. Schumer] wants to do something, and basically whatever’s done with the tax code, using that toward fighting inflation,” said Mr. Manchin.

Mr. Schumer, in his own remarks, said raising taxes is the best tool Democrats have to fight inflation.

“If you want to get rid of inflation, the only way to do it is to undo a lot of the Trump tax cuts and raise rates. No Republican is ever going to do that, so the only way to get rid of inflation is through reconciliation,” Mr. Schumer said.

Economists point to pandemic-induced bottlenecks in supply chains and a jump in energy costs, paired with a surge in consumer demand spurred in part by expansive government stimulus, as the key drivers of today’s high inflation. As such, policy makers’ options for quickly reducing inflation are limited, economists say. A bill that reduces the deficit by raising taxes could help ease inflation, economists said, depending on how much lawmakers put toward deficit reduction as opposed to new outlays, and how the tax and spending provisions are structured.

Even as Democrats broadly support the goal of raising taxes, they have had important disagreements over how to do so. Mr. Manchin again this week said Democrats should raise the corporate rate to 25% from 21% and the top capital-gains rate to 28% from 23.8%.

While the majority of Democrats support those steps, another critical centrist, Sen. Kyrsten Sinema (D., Ariz.) has opposed them, forcing the party to rejigger the tax plans in talks last year. The party settled on a series of alternatives, such as a corporate minimum tax, to raise revenue, but Mr. Manchin has sought to change Ms. Sinema’s mind about the tax plans—so far unsuccessfully.

“Any new, narrow proposal—including deficit reduction—already has enough tax reform options to pay for it,” a spokeswoman for Ms. Sinema said. “These reforms are supported by the White House, target tax avoidance and ensure corporations pay taxes, while not increasing costs on small businesses or everyday Americans already hurting from inflation.”

Write to Andrew Duehren at andrew.duehren@wsj.com

Appeared in the April 28, 2022, print edition as 'Democrats Launch Effort To Rescue Economic Plan'.