Politics

Free community college, corporate tax hikes in peril as Democrats try to win votes for Biden's economic plan

Key Points
  • Key pieces of President Joe Biden's economic plan are in peril.
  • Democrats will likely cut two years of free community college and a renewable energy plan from their sprawling economic plan as they try to lower costs to a $1.75 trillion to $1.9 trillion range.
  • Democrats are also seeking out alternatives in case opposition from Sen. Kyrsten Sinema, D-Ariz., sinks proposed tax hikes on corporations and the wealthiest Americans.
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Chunks of the sprawling Democratic economic plan appeared in peril Wednesday as the party struggled to win the votes to pass it.

Lawmakers signaled they could have to scrap entire programs to slash costs from a package they have billed as the biggest boon for working families in decades. The core measures proposed to pay for the plan — tax increases on corporations and the wealthiest Americans — also faced the prospect of falling to the wayside as Sen. Kyrsten Sinema, D-Ariz., opposes the hikes, sources told CNBC.

The developments add to the political maze Democrats have to navigate in trying to push the proposal through with narrow majorities in Congress in the coming weeks. The party has negotiated for weeks as it tries to appease the centrists Sinema and Sen. Joe Manchin, D-W.V., along with dozens of House progressives.

Democratic leaders have moved to cut the plan's cost and revise the measures it will use to pay for it in order to win votes. Amid a rush of talks, Senate Majority Leader Chuck Schumer, D-N.Y., has said he wants to strike a deal this week.

"There was universal agreement in that room that we have to come to an agreement and we've got to get it done, we want to get it done this week," he told reporters Tuesday after a lunch with Senate Democrats.

Asked Wednesday if Democrats could reach a deal on a framework this week, House Speaker Nancy Pelosi said, "it's possible."

Rep. Pramila Jayapal (D-WA) waks towards reporters after a meeting with House Speaker Nancy Pelosi's (D-CA) in her office in the U.S. Capitol Building on September 21, 2021 in Washington, DC.
Anna Moneymaker | Getty Images

During a series of meetings with Democratic lawmakers on Tuesday, President Joe Biden floated a $1.75 trillion to $1.9 trillion price tag for his proposal to expand the social safety net and curb climate change, a source told CNBC. As the party tries to cut back its initial $3.5 trillion plan, Democrats are set to remove a provision that would offer two free years of community college.

"It looks like that's probably going to be out," Congressional Progressive Caucus Chair Rep. Pramila Jayapal, D-Wash., said after meeting with the president.

Free community college is expected to join at least one other policy on the chopping block: a $150 billion program to encourage utility companies to switch to renewable energy. Democrats will likely drop the plan due to opposition from Manchin, a conservative West Virginia Democrat who represents a coal-producing state and has a personal financial stake in the industry.

The party will also consider extending the enhanced child tax credit for one year, NBC News reported. Many Democrats had pushed to keep the policy in place for up to five years — or even make it permanent.

Asked Wednesday about reports that Democrats would cut the community college provision or scale back the child tax credit extension, Pelosi said, "I don't know where that stuff even came from." The California Democrat added that scaling back the programs is "not a decision."

On a call with Democratic lawmakers Wednesday, White House officials proposed alternatives if they have to remove the corporate and individual tax hikes from the plan, two sources told CNBC. They include a tax on stock buybacks, a minimum tax on corporate book income, an overhaul of the international tax system and increased enforcement of existing tax laws, according to the sources.

Schumer and Pelosi have said they want to pass the social safety net and climate plan — along with a $1 trillion bipartisan infrastructure bill approved by the Senate — by the end of October. Democrats appear to have next to no chance of meeting the deadline.

The party aims to approve the infrastructure plan, which would extend surface transportation funding for five years, before money for those programs dries up at the end of the month. Passing the bill will require movement on the broader social safety net legislation, as progressives have opposed approving one plan without the other.

The talks will shape whether millions of Americans will see their government benefits boosted for years. They will also determine how large of a role the world's largest economy takes in curbing climate change.

Biden and Democrats also want to show tangible progress in improving Americans' lives ahead of the 2022 midterm elections. The party will try to defend majorities in the House and Senate in an environment that would historically favor Republicans.

The proposal was set to expand paid leave, child care and Medicare, extend the strengthened child tax credit, and establish universal pre-K and two years of free community college. Lawmakers have started to scale back or remove key programs to win over skeptical centrists.

Manchin — who met with both Biden and Senate Budget Committee Chair Bernie Sanders on Tuesday — has called for a $1.5 trillion bill.

"We have been talking for a long time and I think action is — we need to move very, very quickly," Sanders, a Vermont independent, told reporters after the meeting with Manchin. "So what we are trying to do is move this process along as quickly as we can."

Sinema also met with Biden on Tuesday. The president huddled separately with House progressives including Jayapal and a group of centrist representatives and senators.

After Biden's talks with lawmakers, White House press secretary Jen Psaki said the president "is more confident this evening about the path forward to delivering for the American people on strong, sustained economic growth that benefits everyone." She added that Democrats had "broad agreement that there is urgency in moving forward over the next several days and that the window for finalizing a package is closing."

Biden went to his hometown of Scranton, Pennsylvania, on Wednesday to sell his economic plans.

— CNBC's Ylan Mui contributed to this report.

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