Soaring inflation is shaking up negotiations on Capitol Hill over President Biden’s Build Back Better agenda, giving Sen. Joe Manchin (D-W.Va.) and other centrists more leverage to push for a smaller reconciliation package.
The annual inflation rate hit a 30-year high under Labor Department statistics released Wednesday, giving ammunition for Manchin to argue against government spending.
In the wake of the numbers, Democratic aides and strategists are growing less optimistic that Manchin can be persuaded to support adding back a proposal to establish a national paid family leave program. And it’s possible Manchin could more forcefully press for new cuts.
Manchin has cited rising inflation as one of his main reasons for not supporting a social spending bill above $1.5 trillion, and he’s held back from publicly backing the slimmed-down $1.75 trillion framework while he studies its potential impact on the economy and prices.
“Manchin is a fiscal conservative. He always has been and always will be,” said Mike Plante, a Democratic political consultant based in West Virginia who advised Manchin’s 2000 gubernatorial campaign.
“His fear is that we end up passing things that essentially are not fully paid for and we’ll kick the can down the road. And he has to be shown that’s not being done,” Plante added. “He wants to make sure that the programs that are being funded will have an impact and there are reasonable revenue streams for them and we’re not just passing things for the sake of saying we did something.”
After the Labor Department reported Wednesday that the consumer price index jumped 6.2 percent in October compared to a year ago, Manchin warned “the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse.”
He’d already cited inflation as a top concern in September, saying that prices at Dollar General stores are rising and “that’s hard for West Virginia, a lot of people do shop there.”
Democrats see inflation as a factor in the Virginia governor’s race. Republican Glenn Youngkin, who defeated Democrat Terry McAuliffe, highlighted rising gas prices in the weeks leading up to the election by calling for a suspension of the state’s gasoline tax.
David Hallock Jr., a Democratic consultant based in Virginia, said “the election showed that voters are frustrated.”
“They don’t feel elected officials, which are primarily the Democrats who are in charge now, are listening to them or understand what’s happening on the ground,” he said.
He warned of problems down the road, asking, “What happens with Christmas spending, holiday spending? Do people realize they’re spending more than normal to get the same amount of holiday presidents?”
Even President Biden expressed disbelief at the cost of fuel on Wednesday, undercutting fellow Democrats who argue that inflation is transitory and the alarm over gas prices is exaggerated.
“Did you ever think you’d be paying this much for a gallon of gas? In some parts of California, they’re paying $4.50 a gallon!” the president wondered aloud at an event in Baltimore.
Senior White House officials and Democratic leaders now realize the new inflation measurements pose a serious obstacle to getting Manchin’s support and are maneuvering to anticipate the maverick Democrat’s arguments.
White House chief of staff Ron Klain argued on CNN Wednesday that Build Back Better would help bring down costs for average Americans.
Asked if the reconciliation bill is “essentially dead” because of inflation, Klain insisted: “Quite the opposite.”
“I think if your concern is the cost of living, it’s a concern we have here at the White House, it’s a concern Sen. Manchin shares, the Build Back Better bill is the best answer we have to bring those costs down,” he told CNN’s Jake Tapper.
Senate Majority Leader Charles Schumer (D-N.Y.) made the same argument.
“The best way to address inflation is to pass a bill that creates jobs, reduces bottlenecks, and is totally paid for by making sure the wealthy pay their fair share. That’s just what we’re doing with the Build Back Better Act,” he tweeted Wednesday.
The Roosevelt Institute, which supports this view, argues that the Build Back Better Act would provide $10 billion to the Commerce Department to address bottlenecks in the manufacturing supply chain, provide billions of dollars in subsidies for renewable energy to stabilize energy prices and provide federal assistance for child care to help more people return to the workforce.
Former Sen. Ben Nelson (Neb.), a centrist Democrat who was a pivotal vote for passing then-President Obama’s stimulus plan during the 2009 Great Recession, said the new inflation numbers give Manchin and other fiscal conservatives strong grounds to argue for a smaller reconciliation bill.
“I think it has to have an effect,” Nelson said of the inflation data on the debate over the size of the reconciliation package. “This is a word of caution when you see the highest numbers in 30 years. You better take a close look at it and err on the side of caution.”
“I think we have to take a much more cautious approach to what the number is, where the spending occurs,” Nelson said of the total size and priorities of the budget reconciliation package.
Manchin’s concerns about an overheating economy and rising inflation will raise the stakes for the Congressional Budget Office (CBO) analysis projecting the total cost of the budget reconciliation package.
If CBO finds the bill is substantially higher than the $1.75 trillion advertised by the White House, then Manchin and allied Democratic centrists in the House are expected to call for additional cuts.
The final CBO score may not come out until the week of Thanksgiving, which could delay the final negotiations on the size of the bill until the first week of December.
Manchin voted for the $2.2 trillion CARES Act, which Congress passed at the onset of the COVID-19 pandemic, as well as the $915 billion COVID-19 relief bill passed at the end of 2020 and the $1.9 trillion American Rescue Plan that passed Congress with only Democratic votes in June.
But in September, Manchin called for a “strategic pause,” noting that Congress has spent $5 trillion over 18 months to combat the pandemic.
In a Wall Street Journal op-ed titled “Why I won’t support spending another $3.5 trillion,” Manchin argued “an overheating economy has imposed a costly ‘inflation tax’ on every middle- and working-class American.”