Alexandria Ocasio-Cortez and Joe Manchin are both disappointed.
The stridently progressive Democratic congresswoman from New York and the staunchly conservative Democratic Senator from West Virginia represent opposite extremes of their party. The reservations each has about President Joe Biden’s US$2.3-trillion infrastructure plan and US$2.5-trillion tax proposal foreshadow a bruising fight ahead for the new administration.
Ms. Ocasio-Cortez, who has become a major power broker within her party since winning a New York seat in 2018, had been hoping President Joe Biden would heed her exhortations to go all out on an infrastructure plan aimed at decarbonizing the U.S. economy and ending the country’s “human infrastructure” deficit. But she insists the package is not nearly big enough “to realize the very inspiring vision that Mr. Biden has advanced.” She intends to push for more.
Still, AOC, who introduced her Green New Deal proposal shortly after taking her seat in the House of Representatives in early 2019, takes credit for having changed the conversation in Washington. “As much as I think some parts of the party try to avoid saying ‘Green New Deal’ and really dance around and try to not use that term, ultimately, the framework I think has been adopted,” the 31-year-old congresswoman told NPR last week.
Mr. Manchin, an ex-governor who won a Senate seat in 2010 by campaigning against then-president Barack Obama’s health-care law, sees things differently. He thinks the Biden plan to end fossil fuel subsidies and increase incentives for green energy would lead to job losses in his state, where coal mining remains a backbone of the economy. He calls Mr. Biden’s proposal to raise the U.S. federal corporate tax rate to 28 per cent from 21 per cent a non-starter.
“The [infrastructure] bill, basically, is not going to end up that way,” Mr. Manchin told a West Virginia radio station on Easter Monday. “If I don’t vote to get on it, it’s not going anywhere. So we’re going to have some leverage here. And it’s more than just me. … There’s six or seven other Democrats that feel very strongly about this.”
In almost any other political system, Ms. Ocasio-Cortez and Mr. Manchin would not be members of the same party. But unfortunately for Mr. Biden, they are, and he must find a way to keep both of them happy if he has any hope of keeping Democrats united.
Mr. Manchin would appear to have a stronger hand than AOC. Republicans and Democrats each hold 50 seats in the Senate. Hence, Mr. Biden needs to keep all Senate Democrats on board to pass legislation, with Vice-President Kamala Harris casting the deciding Democratic vote. And that is only if Democrats use procedural tactics to get around a Republican filibuster, which is what they did to pass Mr. Biden’s US$1.9-trillion stimulus package.
If Mr. Manchin digs in his heels, Mr. Biden faces a big problem. If other moderate Senate Democrats such as Virginia’s Mark Warner and Arizona’s Kyrsten Sinema join Mr. Manchin in pushing to water down the infrastructure and tax bills, his party could implode.
In launching his tax and infrastructure plans, Mr. Biden embraced the language of the progressive wing of his party. It now expects payback for having held its nose to get him elected. Progressives would have preferred either Bernie Sanders or Elizabeth Warren in the White House. They can live with Mr. Biden – but only if he delivers on some of the non-negotiable items on their agenda, starting with higher corporate taxes.
Hence, Treasury Secretary Janet Yellen’s call this week for a global minimum corporate tax that would make it easier for her to raise the headline U.S. rate to 28 per cent without putting her country at a greater competitive disadvantage to low-tax countries.
Ms. Yellen insisted that the new revenue raised through corporate tax hikes would pay for investments in infrastructure and boost U.S. gross domestic product by 1.6 per cent by 2024. However, an analysis by the University of Pennsylvania’s Penn Wharton Budget Model concluded that, overall, Biden’s tax and spending proposals would depress economic growth.
“Although the plan’s public investments increase the productivity of capital and labour, that productivity boost is not enough to overcome additional crowding out of capital due to increased government deficits,” the Penn Wharton analysis found. “By 2031, the [legislation’s] spending provisions would increase public debt by 8.16 per cent, decrease the capital stock by 1.17 percent, and decrease GDP by 0.25 percent.”
Freshly elected with a solid mandate, Mr. Biden is betting he still has enough political capital to smooth over the divide within his own party. He will soon find out if he is right.
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