Joe Manchin just killed Build Back Better — and saved the US economy in the process
In an interview on Sunday, Sen. Joe Manchin (D-W.Va.) struck what will likely be a fatal blow to Democrats’ Build Back Better Act (BBB), telling Fox News he will vote “no” on the $2 trillion legislation.
“If I can’t go home and explain to the people of West Virginia, I can’t vote for it. And I cannot vote to continue with this piece of legislation. I just can’t. I’ve tried everything humanly possible. I can’t get there,” Manchin said on “Fox News Sunday.”
Manchin’s decision to effectively end Democrats’ chances of passing their Build Back Better bill poses significant political problems for his party, which has repeatedly promised its liberal base that it would usher in “big” and “bold” reforms.
Nearly one year into the Biden presidency, Democrats have secured few signature legislative victories, and with the president’s popularity plummeting, it doesn’t seem likely the Build Back Better Act will be among them.
Many congressional Democrats have railed against Manchin for refusing to toe the party line on one of the most expensive bills in U.S. history. But the truth is that by rejecting BBB, Manchin likely saved the American economy from sliding into a reckless and potentially disastrous economic hole.
If BBB had become law, it would have very likely required trillions of dollars in additional debt or tax increases over the next decade, spurring inflation and killing economic growth in the process.
Despite repeated promises from President Biden that BBB will cost “zero dollars,” the nonpartisan Congressional Budget Office (CBO) has estimated that the bill would add $365 billion to the national deficit over the 2022-2031 period, not including $207 billion in additional revenues that could be added by increasing tax enforcement measures and expanding the Internal Revenue Service (IRS).
This, however, is a wildly misleading estimate, because the CBO’s calculation assumes that many of BBB’s largest programs and tax credits would be allowed to expire, in some cases after only a single year. This is incredibly unlikely and gives the false sense that BBB is much more affordable than it actually is.
In order to give the appearance that BBB is affordable and to ensure the legislation can be passed using the budget reconciliation process in the Senate, Congress included numerous misleading sunset provisions that would theoretically phase out key parts of the bill in a relatively short period.
For example, the legislation’s universal pre-K program, which would officially cost $110 billion over a decade, is set to end after just six years. If it were to continue for the full decade, its total cost would be $205 billion, nearly double the figure included in CBO’s estimates.
The same is true for the bill’s child care provision, which would cost just $275 billion if it were to pass and be allowed to sunset, but $460 billion if it were to remain in place for the full 10-year period.
According to budget watchdogs such as the Committee for a Responsible Federal Budget, BBB’s real price tag – one that includes true 10-year cost estimates for the bill’s most important provisions – is nearly $5 trillion, and the impact on the federal deficit would likely be closer to $3 trillion.
The additional $3 trillion in debt would need to be covered through tax increases or, more realistically, money printing. In either case, the economy would suffer dramatically.
Build Back Better would, as written, impose large tax increases on wealthier families, investors and corporations. The costs for many of these increases would almost certainly be passed on to consumers and workers in the form of higher prices, reduced product or service quality, and/or layoffs.
The Tax Foundation estimates that Build Back Better would result in 125,000 fewer full-time equivalent jobs and a net GDP loss of 0.48 percent.
If Congress were to impose nearly $3 trillion in additional taxes to pay for BBB over just a decade, the resulting GDP and job losses would be even more dramatic.
Printing money to pay the additional $3 trillion in costs could be even more catastrophic for the economy. The United States is already facing an inflation crisis fueled by record levels of government spending and money-printing related to the COVID-19 lockdowns and recovery.
According to a recent CNBC report, “The consumer price index, which measures the cost of a wide-ranging basket of goods and services, rose 0.8% for the month” of November, which is “good for a 6.8% pace on a year over year basis and the fastest rate since June 1982.”
Creating trillions of additional dollars would only make these extremely high levels of inflation even worse in the months and years to come.
Joe Manchin may not soon win any popularity contests in Washington, but his brave decision to reject his party’s reckless plan to add trillions more to the deficit will have a profoundly positive impact on the economy.
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