As expected, it appears that the discussions are focused primarily on reducing the number of years that some policies last, rather than omitting them from the package entirely, though both strategies appear to be in play. Indeed, most of the reported changes line up with the illustrative scenario for a $2 trillion package that we recently laid out citing Goldman forecasts.
That said, this morning Goldman’s political economic Alec Phillips notes that there are some surprising elements to what is being reported:
- A very short child tax credit extension: Discussions appear to be focused on a 1- or 2-year extension of the expanded child tax credit. This is surprising in light of the importance that progressives have placed on the provision. That said, would reduce the cost of the bill by $275-$400bn. The House-proposed BBBA would have extended it for 4 years, through 2025, lining up the expiration with the expiration of the 2017 personal tax cuts. Coming just after the 2024 election, it would have also potentially made further extension an issue in the next presidential election. A 1-2 year extension suggests that Democrats might instead be focused on making this more of an issue ahead of the midterm election, instead. It also raises the possibility that Democrats will propose a further extension next year in separate legislation once the reconciliation bill has been enacted.
- A (much?) lower amount of health spending: There are competing reports on the status of health spending in the talks. Bloomberg reports that discussions center on keeping total health spending in the bill to around $250bn. By the latest count, total spending in the current House-proposed version would be around $1 trillion over ten years. By contrast, CNN reports that the Medicaid expansion of home care benefits would be limited to $250bn. This would actually be an increase, as the House-proposed version includes $190bn for the new benefit (though advocates have said that the proposal might not work with less than $250bn). Goldman expects that neither report reflects what is likely to be in the final version of the bill, and that health spending is greater than $250bn overall but that the Medicaid home care portion is less than $250bn.
And while things may finally be moving again, keep an eye on Manchin: earlier today CNN reported that he won’t say if he’ll back $1.9T price tag, which is north of his number. “Everyone is throwing things back and forth. We’re considering everything and trying to find a pathway forward,” he said and didn’t want to weigh in on emerging deal…
Wed, 10/20/2021 – 13:00
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Author: Tyler Durden