Chartbook #138: Build Back Better, Dead Again
On Thursday last week, the Build Back Better package that was to define the first term of the Biden presidency with a combination of climate funding, health care measures and progressive taxation, was declared dead, for the second time. The last rites had first been pronounced in December last year. It was then revived. Now it seems to have a stake planted squarely in its heart.
As reported by the NYT, the mood in Washington was desperate:
Privately, Senate Democratic staff members seethed and sobbed on Thursday night, after more than a year of working nights and weekends to scale back, water down, trim and tailor the climate legislation … only to have it rejected inches from the finish line. “Rage keeps me from tears,” Senator Edward J. Markey, Democrat of Massachusetts and a longtime advocate for climate legislation, wrote on Twitter late Thursday.
As David Dayan put it in the American Prospect:
What was once a transformative, multitrillion-dollar agenda to face numerous long-standing crises in domestic policy has narrowed to an exceptionally narrow drug price reform, the main part of which—price negotiation in Medicare—doesn’t kick in until 2026, two years after the next presidential election, and a two-year extension on ACA subsidies that were set to expire at the end of the year. Eighteen months of fruitless negotiation has come down to that.
The health part may still pass. There is some talk that climate bits might be brought back in the autumn. But no one really believes that. In November the betting is that the Democrats will lose control of Congress, which means that for progressive politics a historic window of opportunity has slammed shut. The US is now unlikely to meet the ambitious emissions targets - a 50-52 percent cut in CO2 emissions relative to 2005 - that the Biden administration announced to the world in the spring of 2021.
As Jonathan Chait put it in New York Magazine’s Intelligencer:
Joe Biden once dreamed of an FDR-size domestic-reform agenda. But the collapse of negotiations in Congress … will ensure he achieves nothing of the sort — not Roosevelt-size, not Obama-size, nor even Clinton-size. (Bill Clinton managed to increase taxes on the rich, expand the Earned Income Tax Credit, and create a health-care benefit for poor children.) In addition to losing its chance to address any domestic social need in an enduring way, the administration is also having imperiled its global leadership on climate change and a global corporate minimum tax, two measures that hinged on Biden getting his own country’s house in order.
The death of Build Back Better is yet another failure of the American political class to respond to the multiple global crises of our current moment - climate, pandemic, immigration, financial instability, global inequality and economic risk - that I’ve been calling the polycrisis. As the world swelters under extreme heat, Washington - in certain respects still the command center of global power - has declared that it has other, more pressing concerns to attend to, such as inflation - as though there were any meaningful trade off - or passing a gargantuan defense bill.
Whilst the Pentagon arms for a confrontation with America’s enemies abroad - notably China and Russia - as John Podesta, formerly senior counselor to President Barack Obama and founder of the Center for American Progress, put it in rather melodramatic terms: the failure of Build Back Better has “doomed humanity”.
And this Washington drama has a villain: Joe Manchin. The Senator from West Virginia is single-handedly responsible for crippling Biden’s key proposal not once, but two times over.
Throughout the tortuous process of negotiation that began in the summer of 2021, the administration and Congressional leaders worked closely with Manchin in the hope of persuading him to back some combination of Biden’s infrastructure, welfare, taxation and climate proposals. In the process, Biden’s ambitious agenda was subject to salami slicing.
First the Congressional centrists sliced off the infrastructure component, and the Democratic leadership went along. For David Dayen at the American Prospect.
The defining moment might have been when Democratic leadership decided to back the bipartisan infrastructure bill and take centrists and Republicans at their word that they would vote for anything else in exchange.
Then there was the package of $300 billion to be spent on tax credits for producers and consumers of wind and solar power and buyers of electric vehicles. As the NYT reports:
It would be the single largest expenditure by the United States to fight climate change. (Senator) Mr. Wyden sought Mr. Manchin’s input to shape the tax package in such a way that the West Virginian would support it. Mr. Manchin obliged: He told Mr. Wyden to rewrite the package according to his specifications, so that the tax credits could also be used for nuclear energy and for carbon capture and sequestration, a nascent technology that has so far not proved commercially viable but that could theoretically allow power plants that burn coal, oil or gas to continue to operate without climate-warming emissions.
The $300 billion subsidy package was flanked by regulatory measures
At the same time, other Democrats were crafting an even more ambitious climate provision for the bill, known as a clean energy standard, that would have paid electric utilities to replace coal- and gas-fired power plants and penalized those that didn’t. In a private memo signed last summer with Senator Chuck Schumer of New York, the majority leader, Mr. Manchin, the chairman of the Senate energy and natural resources committee, secured control over the design of the program. But by October, Mr. Manchin had backed out of the clean energy standard, saying he could not support any version. Democrats deleted the entire proposal.
Then in December, Mr. Manchin pulled out of negotiations altogether, saying he could not vote for the overall spending package. Talks were dead for months.
At this point, Build Back Better died its first death.
But the administration and Congressional Democrats had not given up. In the spring of 2022 talks resumed, but now Manchin’s position was stronger than ever. The administration was becoming increasingly desperate to pass legislation of some kind and the war in Ukraine sent petrol and gas prices soaring, strengthening the hand of those who demanded a voice for fossil fuels.
“Russia’s invasion of Ukraine gave Manchin a huge new bargaining authority, as did record inflation,” said Paul Bledsoe, a strategic adviser at the Progressive Policy Institute. That, he said, “changed the dynamic.”
Every time Manchin hacked away at the bill, the climate policy community scrambled to come up with solutions and exception. By last week Manchin appeared to have everything he wanted. Build Back Better had become as much a short-term promotion package for fossil fuel production, as a long-term renewable energy program. As late as Wednesday night it seemed that a deal had been clinched. But then, Manchin walked away. In the end he did not even attempt to make a case, simply waving at reporters and pointing to inflation. So nonchalant was his dismissal that it left commentators wondering whether a deal had ever been there for the taking.
Manchin makes a villain straight out of central casting. He took more campaign donations from the oil and gas industry than any other Senator and owed his personal fortune to dealing in the coal business. He is vain and extremely sensitive. But explaining how he is able to exercise the leverage he is, is a more subtle question than simply tracing his personal finances. It is not good enough at this moment of disillusionment simply to blame one bad apple.
As Kate Aronoff put it in the New Republic:
Manchin is as good a person as any to heap blame onto. He has blood on his hands. It’s comforting to have a single person to focus rage on. But his power to make or break climate policy was years, maybe centuries in the making. Until the real causes are snuffed out—from an undemocratic Constitution to a political system beholden to corporate profits—they’ll just keep boiling us.
America is both one of the birth places of modern climate politics and the place where climate politics has gone to die, not once but over and over again. Biden’s is now the third democratic administration in succession to try to pass major climate legislation and to fail. Clinton tried with a carbon tax. Obama tried with cap and trade carbon pricing. Both efforts collapsed.
The 2021-2022 Build Back Better package was the product of a learning process. It started from the assumption that carbon pricing was impossible in modern America. Instead, the Biden administration would focus on a combination of regulations - clean air - and subsidies for electric vehicle adoption. These were not vague gestures. The scenarios were carefully calibrated by the leading climate modeling teams. Never before had economic policy plans been so closely harnessed to emissions modeling. At least until the winter of 2021-2 there was still optimism that the compromise packages would allow America to meet its 2030 objectives. But even the most sophisticated modeling and dedicated campaigning were not enough to overcome Manchin’s cynical maneuvering.
Manchin is a figure who draws the eye. But he only has the sway that he does because the Democratic majority is as slim as it is. You could blame that on the failings of the Democratic party. Anguished postmortems will fill the summer and autumn, even more so if the Democrats do as badly in the midterms as is to be expected.
But was there really a strategy by which the Democrats might have won thumping majorities in 2020 in both houses of Congress enabling them to pass major legislation in the face of the filibuster rules and the anti-majoritarian procedures of Capitol Hill? One must surely doubt. For decades, neither the Democrats nor the Republicans have commanded the kind of huge majorities that enabled the New Deal of the 1930s and 1940s. America a profoundly divided society that does not easily yield large majorities for ambitious legislation from either side. Already in the 1990s, neoliberalism, though hegemonic in the political elite, lacked large majority support. Carter, Reagan and Clinton all had to maneuver carefully.
Nor is America peculiar in this regard. Bruno Amable has made a similar case for contemporary France. With the break-up of traditional left and right social blocs, modern societies are fragmented without a clear alignment of political parties and projects with familiar social coalitions. Opinion pollsters generally find that the public in Europe and the US can be divided into five or six distinct social, political and cultural segments. The obvious way to organize power, therefore, is through some kind of moderated proportional representation model and a multi-tier coalition system of the type that operates in Germany. By contrast, the two party, first past the post systems in US as in the UK create a highly unpredictable political scene, in which the two main parties span interests and sub-groups that have hugely divergent interests and politics and the head to head off run off is hard to call, unless it is stabilized through gerrymandering of constituencies.
Invoking the German example is not meant to imply a simple solution either to the constitution of effective governance or the hegemony of green modernization in particular. In Germany too, the substance of climate policy remains disputed. But there is little or no scope for outright denial or obliviousness to the issue. What Joe Manchin along with the entire GOP has just done to the Biden administration, which is to put in question the priority of the entire climate agenda, would be unthinkable.
It is tempting to say that ultimately the problem in the US is that climate is just not popular enough. But that begs the question. Climate is not an issue that asserts itself simply through the force of facts. It is not the same as pollution or a war. Climate is abstract. To join the dots, to make it salient requires political work. Activists, scientists, the media, a few key politicians have, in fact, done that work in the US and the evidence is that they are gaining ground.
A poll conducted in early May by the Pew Research Center found a majority of Americans, 58 percent, think the federal government is doing too little to reduce the effects of global warming while 22 percent said it is doing the right amount and 18 percent said it is doing too much. In the same survey, 71 percent said their community had been hit by extreme weather in the past year and a majority linked it to climate change.
As Matto Mildenberger a leading political scientist in the field of climate policy remarks, the narrative that climate was of declining salience to the public simply does not stand up.
Even in West Virginia, Manchin was criticized by the coal miners union for his efforts to block Build Back Better.
The problem with climate politics in the US is not that you could not find a popular majority for a suitably designed program, but that the GOP and centrist Democrats have no interest in proposing or agreeing to such a policy. Beyond the individual figure of Manchin, this is where lobbying by fossil fuel industry matters. The influence of oil, gas and coal lobbyists and their associated industries works not on the broad mass of the public, but on the political class, to ensure that they dissuade, moderate and ultimately kill off proposals like Build Back Better.
Of course lobby groups play a key part here. Manchin is clearly in their pocket. But that by itself is not an adequate answer either. The fossil fuel industries, even in West Virginia, does not account for a dominant share of regional, let alone national economic activity. And there are, after all, major interests who stand to gain from the low cost energy that the renewable energy transition promises. So, this is the other key role for fossil lobbying. Not only do they seek to persuade the political class to oppose measures like Build Back Better they dissuade other business groupings from forming the kinds of coalitions for green modernization that are beginning to set the tone in Europe.
Another way of putting the same point is to ask why Build Back Better did not have more powerful friends? How could a giant national program come to depend on the vote of a single Senator who represents a state with a population smaller than that of Brooklyn. On this score, it is worth listening more closely to Manchin and the justifications he offers. His arguments are illogical but nevertheless telling. As reported by the New York Times
At the start of this week, Mr. Manchin said his top concern was the price at the pump and the need for more fossil fuels. “How do we bring down the price of gasoline?” he said. “From the energy thing, but you can’t do it unless you produce more. If there’s people that don’t want to produce more fossil, then you got a problem. That’s just reality. You got to do it.”
On Wednesday, after data was released showing the nation’s inflation rate at 9.1 percent, the highest in a year, Mr. Manchin said in a statement, “No matter what spending aspirations some in Congress may have, it is clear to anyone who visits a grocery store or a gas station that we cannot add any more fuel to this inflation fire.”
As one of his spokespersons went on to elaborate:
“Senator Manchin, believes it’s time for leaders to put political agendas aside, reevaluate and adjust to the economic realities the country faces to avoid taking steps that add fuel to the inflation fire.”
In comments to TV news crews widely circulated by Fox, Manchin gestured to a supposed connection between inflation and debt. To fight inflation you have to “get the debt under control” he declared. This was not a moment for a big spending package like Build Back Better. Of course, the proposed legislation included taxation too, but on that too Manchin was a skeptic. He doesn’t want to squeeze American business.
What this suggests is that it may be a mistake to view the failure of Build Back Better primarily through lens of climate. It may, in fact, be better thought of as part of a more comprehensive effort on part of centrist Democrats, for whom Manchin makes a convenient frontman, to stall the reformist energies that were briefly unleashed on the left-wing of the Democratic Party in 2021.
The theory of change that informed the effort to pass Build Back Better was itself broad-based. Loosely derived from Green New Deal vision, Biden’s Jobs and Families Plans linked climate to a wider agenda of progressive policies. The gamble was that you could thus build a powerful electoral coalition. By the same token, however, you also multiplied your enemies. As Chait describes it in American Prospect:
In the final weeks (AT: June/July 2022), Manchin returned to the bargaining table with a deal that still would have counted as a substantial achievement. The plan would have raised taxes on the ultrarich and allowed the federal government to save money by negotiating the cost of some prescription drugs. The proceeds from these measures — likely around a trillion dollars — would have been split between deficit reduction, energy investments (short-term fossil-fuel production, and long-term green-energy investment), and enhanced support for tax credits to help people buy health insurance. A key faction of Democrats in the House, along with Senator Kyrsten Sinema, blanched at the tax hikes. Moderates have been privately coordinating their opposition, and it seems very likely that Manchin’s sudden opposition to raising taxes on the rich comes not from him, but from them — he sometimes takes the heat for fellow Democratic moderates. In this case, he is likely channeling their concerns and passing them off as his own.
Not only did opposition in the House led by Josh Gottheimer of New Jersey rally around opposition on taxes on the richest Americans, another issue was corporate taxation. In the progressive agenda of the early Biden administration, a key plank was the effort led by Janet Yellen at Treasury to create a global coalition around a 15 percent minimum corporation tax. The provision was due to be included in the reconciliation bill, which under the arcane procedures of the Senate, would bundle together all the key policy proposals to be voted through by the Democrats wafer thin majority. But as Brian Faler reported at Politico, Manchin raised objections to this too.
Sen. Joe Manchin on Friday rejected the idea of imposing a 15 percent global minimum tax on U.S. companies, blowing a big hole in the Biden administration’s campaign to remake the international tax system. Speaking with West Virginia radio host Hoppy Kercheval, Manchin (D-W.Va.) said he doesn’t support the administration’s plan because other countries have yet to adopt the tax, and he doesn’t want to put American companies at a competitive disadvantage. “We’re not going to go down that path overseas right now,” said Manchin. “Because the rest of the countries won’t follow, and we’ll put all of our international companies in jeopardy, which harms the American economy.” “Can’t do that, so we took that off the table,” said Manchin, referring to his closed-door talks with Senate Majority Leader.
What, you might ask, have climate measures got to do with global taxation? The link are so called “pay fors”, a legacy of the move spearheaded by Nancy Pelosi and supported by Janet Yellen’s Treasury in 2021 to ensure that the second wave of Biden administration measures did not add considerably to the national debt. That meant that climate and other spending would have to be funded through taxes. That went some way towards allaying the fears of fiscal conservatives, but it also widened the coalition against enacting any legislation at all.
The unintended side effect of Biden’s failed mega-pack of progressive measures is that Donald Trump’s $3 trillion December 2017 tax cuts that overwhelmingly favor the richest Americans are now likely by default to become permanent. As Chait comments:
Donald Trump was able to unite his party behind an unpopular tax cut for the rich. Biden was unable to unite his party behind a popular reversal of that bill, or even a partial reversal. Political scientists have an explanation for both these things: The wealthy hold a disproportionate influence on both the elite in parties, pulling Democrats to the left of their voters on social issues, and Republicans to the right of their voters on economic issues.
As David Dayen points out in American Prospect, this is an astonishing reversal. Trump’s December 2017 tax measures were wildly unpopular. Reversing them and restoring the tax code of 2017 ought to provide all the funding the Democrats need. And yet instead, thanks to the Democrats themselves, Trump’s tax regime will make it unscathed through the Biden Presidency.
within months of Biden taking office, a pro-Trump tax cuts caucus took shape. Suddenly, the likes of Sinema, Gottheimer and Schrader and others were uninterested in raising taxes on corporations, capital gains, inheritances, pass-through businesses, wealthy households, or really anything or anyone else. The Biden administration and Senate leaders kept bargaining for other ideas. If the pro-tax cut caucus didn’t like raising marginal rates, how about a tax just on billionaires? If they didn’t like new corporate rates, how about a global minimum tax for large corporations, negotiated with the entire world, that would prevent evasion? How about just beefing up IRS enforcement so that the taxes actually owed under the current structure are actually collected? One by one, the pro-Trump tax cuts caucus rejected these. The only part of the Trump tax cuts they really wanted to change was to reverse the repeal of the state and local tax deduction, practically the only non-giveaway to the rich in the whole package. Manchin finally became a full-fledged member of the pro-Trump tax cuts caucus last week, when he rejected any tax increases in reconciliation. The entire premise of Democratic policy for the last two years—use the rollbacks of the most unpopular (the only unpopular?) tax cut maybe in history to offset a new round of deeply needed public investment—was dead. … The Trump tax cuts are going to be made permanent, signed by whoever is president in 2025, if not by Biden before that. Despite lofty promises, not a single dollar of the uniquely unpopular policy, courtesy of the president maybe more reviled by Democrats than any other, will be touched. ….
This is the full measure of the failure of the early Biden administration. It allowed innovative long-term spending plans to be burdened with short-term funding requirements. Those could largely have been met by reversing Trump’s 2017 cuts. And yet today it stands empty handed. Not only is Build Back Better dead, but Trump’s tax cuts live on and that double loss has been inflicted on Biden by the Centrists within his own party.
As David Dayen comments:
(w)hy are the Trump tax cuts still standing? Is it something to do with tax policy in particular, and the Democratic allergy to tax increases? Is it a function of bare Congressional majorities, ridiculous legislative rules like the filibuster, and too-dramatic goals overlaid onto them? I think it goes deeper, and signals how Democrats have just forgotten what constitutes governing. The way they create policy ideas, form political coalitions, and work to pass measures through Congress is just impossibly broken. If you have unanimous opposition to a bad policy with no real political proponents and then can’t get a single thing done about it in the space of five years, it speaks to an essential malfunctioning at every level of the party and the process. Nobody should get a pass for it. It's nothing short of an embarrassment.
Having failed comprehensively in Congress, the Biden administration now insists that it will double down on administrative regulations as a way to push forward the climate fight.
“Action on climate change and clean energy remains more urgent than ever,” Mr. Biden said. “So let me be clear: if the Senate will not move to tackle the climate crisis and strengthen our domestic clean energy industry, I will take strong executive action to meet this moment.”
But so far the administrative actions taken by the administration have in fact pointed in the opposite direction, aiming to appease the likes of Manchin and accelerate oil and gas development.
the Interior Department offered the possibility of 11 new offshore oil and gas lease sales in the Gulf of Mexico and Alaska — despite Mr. Biden’s campaign promise to end new drilling in federal waters … The White House also was weighing whether to allow a path for other fossil fuel projects, like a gas pipeline in West Virginia, in order to gain Mr. Manchin’s vote. …. The administration delayed federal rules to address methane, mercury and other pollutants from oil and gas facilities so as not to anger Mr. Manchin during negotiations, according to several administration officials. That’s two years lost time in a regulatory process that can be lengthy.
Meanwhile, the entire viability of the regulatory route has been put in question by the Supreme Court where the conservative majority recently voted to limit the Environmental Protection Agency’s ability to regulate carbon emissions from power plants. The EPA can continue to regulate greenhouse gases, but it has effectively lost the power to force the closure of the most polluting coal-fired plants, or compel utilities to switch to renewables.
Eighteen months on from the inauguration of January 2021, the Biden administration faces the shipwreck of its domestic policy agenda. Dayan sums up the mood on the left well
Most important, stopping the will-they-or-won’t-they is an absolute political imperative. The party is exhausted by failure, and won’t hold out for another couple months of wishes and hopes. Eighteen months of Joe Manchin being America’s most well-known Democrat is enough. Just put (AT: what remains of) the bill on the floor and get this over with. Get something completed, and spend the August recess thinking about how we got here.
The future as far as American progressives are concerned looks grim.
For two years in Washington the Republicans, hunkered down in iron clad opposition, were a sideshow. The politics that mattered were within the Democratic party, between the left, centrists and right-wing. Now, with the midterms looming, we are about to embark on a new, darker chapter dominated by the efforts of a resurgent GOP to crush the remaining life out of the Biden White House and to prepare the ground for the Presidential elections in 2024.
This gear shift in Washington will affect the entire world.
When Biden’s climate agenda was announced in the spring of 2021 it was not merely a national event. The White House hosted a global climate summit ahead of COP26 in Glasgow. The point was to demonstrate that America was “back”. Both Biden’s climate and tax agenda were designed with global deals in mind. On both fronts US credibility is now cut to shreds.
This is, no doubt, very bad news. Reading the commentary on Manchin’s sabotage of Build Back Better you would be forgiven for thinking that it implied a death warrant for the world. But such exaggerations reflect the shock of the moment rather than clear-headed analysis of America’s actual influence on world affairs in 2022.
There may once have been a moment, in the 1990s perhaps, where global climate politics really did revolve around the battles in Washington DC. But today that is a deeply anachronistic view. America’s share of global emissions is less than 14 percent, half that of China, and its share is falling year by year.
Of course, a world with a cooperative, United States committed to the energy transition would be a better world. Trump showed how the US can anchor an anti climate coalition. But even with an obstructive United States, the energy transition in Europe and large parts of Asia has a momentum that will carry it forward regardless. Fundamentally, what impels this logic is the difference between energy exporters and energy importers and the increasingly compelling cost advantages of renewable energy.
As far as the world is concerned it merely confirms the fact that the US is an unreliable partner in the energy transition and has an in-built and profound structural bias towards fossil fuels.
The collapse of Build Back Better is bad news, above all, for America itself.
What it means is that the US energy transition will be slowed down. It will proceed without support and at a considerable disadvantage. It places Detroit, for instance, in an invidious position. The risk is that in the not too distant future the US becomes collateral damage as eurasian transition proceeds. That is bad news for US capital. American business misses out on the profits to be made from green modernization. Whilst carbon pricing is creating an entirely new asset class in Europe, America cannot even get to first base.
American capitalism will no doubt survive. What is more in question is the future of American society and the political system built on it. Above all the failure of the Biden administration’s domestic agenda is terrible news for “ordinary” Americans. It is one more sign of the refusal of the American political class to devise coherent and future-orientated solutions for American society as a whole. Instead of charting the off-ramp towards a greener future, the Biden Presidency is mounting a sustained campaign to hustle America’s oil and gas producers to maximize production and humbling itself before Saudi Arabia. The autopsies on Biden’s Build Back Better package may give Joe Manchin as the cause of death. But America’s problems with the energy transition go far deeper than that.
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