The Schumer-Manchin Bill is in Real Trouble; Social Security, a Campaign Issue
Author: Greg Valliere
August 4, 2022
SENATE DEMOCRATIC LEADERS are scrambling to appease Sen. Kyrsten Sinema (D-Ariz.), who has made demands this week to colleagues in private negotiations: Sinema wants no carried interest provision or big corporate tax hikes — or she will walk, leaving Democrats one vote short of victory.
PARTY LEADERS WILL HAVE TO MAKE CONCESSIONS: The carried interest provision, like Rasputin, seemingly cannot be killed. Sinema wants it out of the final bill, and she probably will succeed. And the proposed 15% minimum corporate tax may have to be scaled back to appease her.
COMPLICATING THIS NARRATIVE is the likelihood that several provisions may have to be abandoned after the Senate parliamentarian rules on what can be considered under the complicated reconciliation process. At risk in the negotiations are the electric vehicle provision, capping insulin costs, leasing of public lands for energy production, and the tax provisions.
THIS BILL will either get smaller or it will die in the Senate. The current bill is
filled with pork (see this morning’s Wall Street Journal editorial) and it gives Republicans a strong argument during this fall’s campaign that more taxes and spending will harm an economy facing a potential recession.
BOTTOM LINE: Several sectors — renewable energy, health care, manufacturers who face tax hikes — would face a modest impact if a bill passes. But the macro impact on the economy and the markets would be minimal; a $700 billion package over ten years would be a rounding error.
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THE THIRD RAIL OF POLITICS is any discussion about cutting Social Security or Medicare benefits: you don’t touch the third rail. To the horror of Mitch McConnell and other mainstream Republicans, the erratic GOP Sen. Ron Johnson of Wisconsin yesterday advocated shifting these programs from mandatory to discretionary, requiring renewal every year.
WE GIVE JOHNSON AND SEN. RICK SCOTT of Florida credit for highlighting the costs of these two massive programs, but a requirement to authorize them every year inevitably would worry beneficiaries because of the threat — like the frequent threat of a government shutdown — could erupt annually, raising anxiety over Social Security and Medicare.
NEEDLESS TO SAY, Democrats pounced on Johnson’s remarks, contending that seniors would be jeopardized. McConnell clearly stated that he would not permit this to pass, but he’s now on the defensive on two important issues: abortion and Social Security.
THE BIGGEST IMPACT OF JOHNSON’S REMARKS may be the damage done to his own re-election fight in Wisconsin, which already was a close call. Johnson, a conservative Republican, could become the underdog — still another state for McConnell to worry about, along with Pennsylvania, Ohio, Arizona and Georgia, where GOP candidates suddenly look vulnerable.
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