Budget bill reopens moderate vs. progressive divide for Dems

One side is energized by the prospect of the greatest expansion of government support since the New Deal nearly a century ago. The other is fearful about dramatically expanding Washington's reach at an enormous cost.

They're all Democrats Yet each side is taking vastly different approaches to guiding the massive $3.5 trillion spending bill through Congress.

The party is again confronting the competing political priorities between its progressive and moderate wings. The House version of the bill that was drafted this week ushered in a new phase of the debate that could test whether Democrats can match their bold campaign rhetoric on everything from income inequality to climate change with actual legislation.

Any stumble may have serious consequences for the party's prospects during next year's midterms, when it will try to prevent Republicans from retaking Congress. The finished product could alienate centrists who say it goes too far, or frustrate those on the left who argue it's too timid at a moment of great consequence.

“This is critically important for Democrats and for their message in next year’s election," said former New York congressman Joe Crowley a veteran Democrat who was upset in the 2018 primary by progressive star Rep. Alexandria Ocasio-Cortez. "We’re going to blink and we’re going to be in 2022.”

Crowley said bills proposing trillions of dollars in spending were “simply something I never had to deal with in my 20 years" in office. "These are enormous figures by any standard,” he said.

But, Crowley added, no matter the final price tag, ”Let’s not lose sight of the fact that this will be transformational regardless.”

With Republicans universally opposed to the bill, Democratic leaders have a narrow path as they navigate an evenly divided Senate and thin House majority.

Many Democrats agree on the goals included in the legislation, such as providing universal pre-kindergarten and tuition-free community college while increasing federal funding for child care, paid family leave and combating climate change. The party also is aiming to expand health care coverage through Medicare and create pathways to citizenship for millions of immigrants in the country illegally.

But there are differences over how much such a measure should cost and how it should be paid for.

Democratic Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, who met privately with President Joe Biden on Wednesday, have balked at the $3.5 trillion price tag.

House Democrats, meanwhile, have proposed a 26.5% top corporate tax rate to help cover the cost. That's less than Biden's 28% target. But Manchin has pushed for an even lower corporate rate of 25%.

There are also divides over how to impose levies on top earners. Biden has advocated restoring the top tax rate on capital gains to 39.6%. House Democrats, however, would tax such income, which is often generated by the wealthy, at 25%. They would also impose a 3% surcharge on individual income above $5 million.

Biden further supports higher taxes for those earning at least $400,000 annually, even as some progressives would like to see a lower threshold for higher taxes to kick in.

“We’re not going to raise taxes on anyone making under $400,000. That’s a lot of money,” the president said Thursday. "Some of my liberal friends are saying it should be lower than that.”

Biden discussed the matter Thursday with House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer, and the White House said they agreed “it is only fair” that the spending bill is paid for “by repealing the Trump tax giveaways to the wealthiest Americans and big corporations.”

Differences over tax thresholds are technical, but they represent a desire among many House Democratic leaders to protect their most vulnerable members in moderate districts from attacks that they support profligate taxes and spending.

“There’s a supposition by our friends on the progressive left that it hardly matters what you do, as long as it’s big," said Will Marshall, president of the Progressive Policy Institute, a centrist Washington think tank. Instead, Democrats are ideologically diverse enough that “people who run in competitive races simply can’t embrace the same kind of ideas that people who run in safe, blue Democratic districts,” Marshall said.

Joseph Geevarghese, executive director of the progressive activist group Our Revolution, countered that "It would be incredibly problematic for the president to say, ‘Look we won both chambers of Congress. We won the White House. We couldn’t deliver better health care, we couldn’t deliver transformational change on the climate.'”

“It is not going to be explainable to the American people," Geevarghese said, "and I think there’ll be consequences as a result.”

Democrats have been here before. The progressive versus moderate divide dominated the early stages of the party's 2020 presidential primary with Biden and Vermont Sen. Bernie Sanders serving as the most prominent representatives of each end of the spectrum.

Sanders, an independent who caucuses with the Democrats, scored early victories. But the party ultimately coalesced around Biden, in part because of an urgent desire to unify behind a candidate who could have the broadest appeal and defeat then-President Donald Trump.

Biden has since largely kept the party unified by adopting many top progressive priorities, such as spearheading a $1.9 trillion coronavirus relief bill that passed in March and supporting a now-stalled proposal to raise the national minimum wage to $15 per hour. He has resisted, however, some of the biggest progressive goals, including the universal health care proposal known as Medicare for All.

But it's unclear whether that equilibrium can be maintained.

Already, Our Revolution and other progressive activists have staged protests outside the offices of moderates including Manchin. They've begun referring to themselves as the “tea party of the left” combatting “obstructionist corporate Democrats.”

Manchin is so far unmoved. "I’ve been very clear and very open" about the need to reduce the budget bill's price tag, he said.

In the House, meanwhile, Democratic Florida Rep. Stephanie Murphy, head of the moderate Blue Dog Coalition, opposed parts of the spending package in committee, arguing that her party’s effort to muscle it through was too rushed.

Progressives, though, have responded by playing their own legislative hardball. Democratic Rep. Pramila Jayapal of Washington, co-chairwoman of House Progressive Caucus, said the group remains unified behind a vow not to support a separate bill that many moderate Democrats are more excited about — a $1 trillion, bipartisan public works measure — until the spending bill advances.

“Joe Manchin has power, of course. We need his vote. But so do, really, every single one of us, because in the House, (Democrats) have a margin of three votes,” Jayapal said on a conference call with progressive activists. “Everyone’s a Joe Manchin here."

Sanders, who spearheaded the proposal as head of the Senate Budget Committee after some progressives pushed for spending plans worth as much as $6 trillion, says the current price tag is compromise enough and has vowed not to accept further cuts. He says tax increases on the rich can resonate with working class voters from both parties.

Marshall said many voters in battleground House districts do indeed applaud higher levies for the wealthy as “tax fairness,” but that support wanes if additional spending focuses more on social programs than economic stimulus.

“It has to be tied to a plan to create good jobs, spur innovation and growth,” said Marshall, who added that many in swing districts have also expressed concerns about running up federal debts and contributing to rising inflation.

Still, he said, it would be even more costly for Democrats if the squabbles over the budget proposal's final price tag drag on.

“I think Democrats will find a way to compose their differences simply because they can’t afford to have this president fail," Marshall said. "The margins are just too narrow.”