President Joe Biden faces growing political headwinds from moderates in his party anxious over the potential inflationary impacts of the $1.85trn Build Back Better Act climate and social spending bill he wants Congress to pass soon.
The Bureau of Labour Statistics on Wednesday reported that US inflation hit a three-decade high in October with the consumer price index increasing 6.2% from a year ago.
Prices jumped almost 1% last month, the largest gain since June, surpassing private forecasts and prompting concerns that inflationary pressures are spreading throughout the $22trn US economy.
Democratic Senator Joe Manchin of West Virginia, whose vote is critical for passage in the Senate where Republicans are united in opposition, has cited inflation and record budget deficits as reasons to reduce the partisan bill’s price tag and federal spending more broadly.
“By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” he said Wednesday, following on remarks last week that he could not support a package that risks hurting families suffering from soaring prices.
Manchin said he wants "greater clarity about why Congress chooses to ignore the serious effects inflation and debt have on our economy and existing government programmes."
His earlier objection to $150bn in proposed funding in Build Back Better to incentivise electric utilities to accelerate decarbonisation, and punish those who did not, forced Democrats to eliminate this provision from the bill.
Party officials are anxious over how Senator Kyrsten Sinema of Arizona will react to the inflation report. Sinema has some of the same misgivings as Manchin about impacts from historically large federal outlays.
In the House, where the party has a razor-thin majority of four, a group of centrist Democrats is waiting for the nonpartisan Congressional Budget Office to release cost estimates for the bill’s main provisions including climate, and how this may impact federal borrowing requirements to fund deficits.
The White House asserts that Build Back Better Act, which Biden is touting as the “largest effort to combat climate change in American history,” will be fully paid for through higher taxes and other means, which Biden repeated today.
The package of measures includes $555bn over 10 years aimed at curbing greenhouse gas emissions warming the planet, according to the Washington Post.
There is $320bn for new and expanded tax credits for clean energy manufacturing, electric vehicles, energy storage, renewable energy, and transmission. There is $105bn to address extreme weather and create a so-called Civilian Climate Corps, a government jobs creation initiative to address climate change impacts on public lands and urban communities.
Another $110bn is targeted for investments and incentives for clean energy technology, manufacturing and supply chains that are not reliant on China. The final $20bn would fund government purchases of materials and technologies made in the US from carbon-free processes.
Worse than anticipated
Wednesday’s inflation numbers were worse than anticipated by the White House, threatening to undermine the political boost Biden received last Friday from passage of a bipartisan infrastructure bill that included funding for several dozen clean energy and climate-friendly initiatives.
Polls also show inflation is becoming a big concern for voters, posing unwanted political headaches for Democrats who are looking to protect their fragile congressional majorities in mid-term elections less than a year away. Biden's own popularity is at a low point in his presidency.
“Many people remain unsettled about the economy and we all know why: They see higher prices,” said Biden, noting that “everything from a gallon of gas to a loaf of bread costs more, and it’s worrisome, even though wages are going up.
“Inflation hurts Americans’ pocketbooks, and reversing this trend is a top priority for me,” he added, while urging Democrats to pass Build Back Better Act. It is the fourth big-ticket spending package over the last 11 months in response to Covid-19 and stimulate the economy.
Last December, Congress passed nearly $900bn in aid, then $1.9trn more in February under Biden and the newly minted $1trn Infrastructure Investment and Jobs Act.
Critics, some economists, and Republicans contend that the massive influx of stimulus payments and subsidies has overly turbocharged consumer demand for consumer goods and services, even as Covid-related supply chain bottlenecks worsen.
Scarcity of components, intermediate goods and raw materials has raised procurement and processing costs that businesses are passing on to consumers in the form of higher prices.
Surging costs are impacting both the wind and solar supply chain with GE and other big players warning that inflation and logistics pressures will remain a challenge through at least first quarter 2022.
Under pressure from Biden, the Democratic House leadership wants to bring Build Back Better Act to the floor for a vote before the Thanksgiving holiday on 25 November.
If approved, the bill would go the Senate which is evenly split between Democrats and Republicans. Majority Leader Charles Schumer of New York wants to use an arcane legislative process called reconciliation that allows a simple majority to secure passage, allowing them to circumvent the 60-vote threshold for most major pieces of legislation.
As president of the Senate, Vice President Kamala Harris can case a vote, only if affirmative, and this would break a potential tie on the bill assuming Manchin and Sinema are on board.