INTERVIEW: Joe Manchin says he’s ‘very much concerned’ about inflation and the national debt. He’s not committing to Democrats’ $3.5 trillion spending plan yet.

Joe Manchin at Congress hearing
Sen. Joe Manchin (D-WV).

  • Sen. Joe Manchin says he’s concerned about rising inflation and the national debt.
  • “We have to be fiscally responsible,” the West Virginia Democrat told Insider.
  • Manchin didn’t rule out backing a $3.5 trillion party-line spending plan after another moderate came out against it.
  • See more stories on Insider’s business page.

Sen. Joe Manchin of West Virginia says he hasn’t decided whether to back the $3.5 trillion price tag of a planned Democratic-only spending package, a major priority of President Joe Biden’s.

The key Democratic moderate said in a Friday interview that several factors would weigh into his decision, among them the increasing cost of goods and the nation’s growing debt pile. The price of gasoline, used cars, trucks, and other services has shot up as the economy started reopening and run into various crimps in supply chains.

“I’m very much concerned about inflation in our country,” Manchin told Insider, stressing how much he’s been focused on infrastructure spending and its potential costs. “I’m concerned about the debt that we’re carrying and our ability to compete on a global basis … we have to be fiscally responsible.”

On Wednesday, Sen. Kyrsten Sinema of Arizona came out against the proposed price tag of the $3.5 trillion reconciliation package, although she committed to advancing what’s known as a budget resolution. Adopting that would pave the way for Democrats to start drafting the party-line bill, which can clear the Senate with a simple 51-vote majority instead of the 60 required for most legislation in the modern Senate to avert the filibuster.

Every Senate Democrat must stick together for the package to succeed, and Manchin is onboard for now. He told CNN on Thursday he would vote for the resolution, allowing Democrats to approve a social spending package on their own – possibly in September. He told CNN that he was “keeping an open mind” on the $3.5 trillion price tag.

The West Virginia Democrat told Insider he’s in constant communication with Sinema about her views. “We speak all the time,” Manchin said.

‘I’m not going to put any figures on anything’

Manchin touted the $1 trillion bipartisan infrastructure deal, which will pour federal spending into roads, highways, bridges, broadband, and water. He was one of five Democratic negotiators who hashed out the plan with five Senate Republicans over the span of roughly a month. The plan has the full backing of Biden and top Democrats like Senate Majority Leader Chuck Schumer.

Its passage would set the stage for Senate Democrats to jumpstart the reconciliation process before they leave for the monthlong August recess. Manchin said his support will hinge on the plan’s contents, and didn’t rule out backing its substantial cost. Democrats want to stuff it with measures like free community college, affordable childcare, and national paid leave.

“We have a good piece of legislation that has a lot of good work,” he said. “I think out of respect for all my colleagues who’ve been working on the other budget resolution, we should give that a look and be able work on it in a really productive way.”

He added that he’s “not going to put any figures on anything” until he’s had a chance to review the full bill.

Still, Manchin suggested that his time has been overwhelmingly consumed by negotiating the bipartisan infrastructure deal, and said he hasn’t decided whether to back renewing a federal eviction ban that ends in a day. Democrats are rushing to pass a bill to renew it after Biden urged a last-minute extension.

“I’ve been wrapped up in this so much, I haven’t even seen” it, he told Insider about his work on infrastructure and his potential support for an eviction moratorium.

“We’re gonna take a very serious look at it,” he said.

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Janet Yellen says Treasury is prepared to pay the US’s bills to prevent ‘irreparable harm’ to the economy as GOP balks at raising debt ceiling

Mitch McConnell Janet Yellen Congress Treasury
Senate Minority Leader Mitch McConnell and Treasury Secretary Janet Yellen.

  • Yellen said Treasury is prepared to pay off the country’s bills starting August 2.
  • It comes as McConnell opposes raising the debt ceiling without political concessions.
  • Yellen said even the threat of a default risks major damage to the US economy.
  • See more stories on Insider’s business page.

Treasury Secretary Janet Yellen sent a letter to Congress urging lawmakers to renew the federal government’s ability to pay off its debt ahead of a major deadline, warning that failing to do so in a timely manner risks major damage for average people and the economic recovery.

Republicans led by Senate Minority Leader Mitch McConnell are balking at raising the debt limit without ensuring spending cuts from Democrats. He suggested earlier this week that Democrats would have to do it on their own with no GOP support.

In the letter, Yellen said the US will hit its statutory debt limit on August 1. The next day, she said Treasury is prepared to take “certain extraordinary measures” to pay the country’s outstanding bills and prevent a default that could ripple through the global economy.

“Failure to meet those obligations would cause irreparable harm to the economy and the livelihoods of all Americans,” Yellen wrote on Friday to House Speaker Nancy Pelosi. She noted that raising the debt ceiling doesn’t prompt more federal spending, it only authorizes the government to pay what it already owes.

Yellen underscored the potential damage that even the threat of a default could have on the economy. She cited a 2011 showdown between Obama and House Republicans that led to the first-ever credit downgrade of US debt. Yellen also said it’s hard to predict when Treasury would exhaust its ability to pay off the US’s bills on its own.

On Wednesday, the nonpartisan Congressional Budget Office forecasted Treasury would “probably” run out of cash sometime in October or November.

Republican opposition is hardening now that President Joe Biden sits in the White House. In July 2019, they voted to suspend the borrowing limit for two years under President Donald Trump.

A default from the federal government could precipitate a chain reaction of cash shortages, starting with US bondholders that include people, businesses, and foreign governments. Democrats insisted this week they wouldn’t allow the GOP to use the debt ceiling as a political weapon.

“We’ll handle our business,” Sen. Brian Schatz of Hawaii, a cosponsor of a bill to abolish the debt ceiling, told Insider on Wednesday. “This is something the Hill freaks out about every year or so. We will not negotiate over it, we will not concede anything and we won’t fail to do our job.”

The Biden administration is pushing lawmakers to raise the debt ceiling ahead of the August 2 deadline.

“We certainly expect Congress to act in a bipartisan manner as they did three times under the prior administration to raise the debt limit,” White House Press Secretary Jen Psaki said Friday.

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Democrats slam Mitch McConnell for taking economy ‘hostage’ by rallying GOP against extending US’s ability to pay its bills on time

McConnell
Senate Minority Leader Mitch McConnell said Trump is still “liable” for his conduct in office.

  • Democrats assailed Mitch McConnell for trying to rally Republicans against raising the debt ceiling.
  • “He’s not going to be able to hold the economy hostage,” a top Democrat said Wednesday.
  • Republicans had previously backed raising the debt ceiling under Trump.
  • See more stories on Insider’s business page.

Congressional Democrats slammed Senate Minority Leader Mitch McConnell of Kentucky on Wednesday for threatening to oppose an extension of the US’s ability to pay its bills, a step that could jeopardize the US’s economic recovery if Congress doesn’t act.

Sen. Ron Wyden, chair of the Senate Finance Committee, told reporters that the national debt ballooned under President Donald Trump as a result of the pandemic and a 2017 Republican tax law that reduced the country’s tax revenue from large corporations. The debt grew $7 trillion under the Trump administration.

“Now Mitch McConnell wants to skip out on paying the bills, we are not going to let him do it. He’s not going to be able to hold the economy hostage,” Wyden said. “We are going to move this quick.”

Wyden said Democrats didn’t make political demands in exchange for supporting raising the debt ceiling while Trump was in office. He described McConnell’s move as “stallball.”

“Mitch McConnell is playing Russian roulette with this economy,” Sen. Dick Durbin of Illinois, the second-ranked Democrat in the upper chamber, told reporters.

The Kentucky Republican said in an interview published on Punchbowl News on Monday that Republicans wouldn’t strike a deal with Democrats to raise the debt ceiling, the statutory limit that the federal government can borrow to pay its bills.

McConnell said Democrats would have to do it alone through reconciliation, a legislative track that only requires a majority vote and would therefore be feasible to pass without Republican support.

Wyden declined to answer Insider when asked if it would be difficult to get all 50 Senate Democrats onboard. Still, there were signs that the Biden administration had no intention of striking a deal with the GOP.

“We expect Congress to act in a timely manner to raise or suspend the debt ceiling, as they did three times on a broad bipartisan basis during the last administration,” White House press secretary Jen Psaki said Wednesday. Still, Democrats have not decided how to raise the debt ceiling only nine days before it expires.

“They have to decide what the strategy is, but I do think it’s going to be easy to get Democrats onboard,” Sen. Tim Kaine of Virginia, a member of the Senate Budget Committee, told Insider on Wednesday.

The US is scheduled to hit the debt ceiling limit on July 30, two years after it was last extended. But the Treasury Department has the ability to to pay off the US’s debt on its own for a limited time and head off a default with potentially catastrophic consequences for the economy.

The nonpartisan Congressional Budget Office forecasted on Wednesday the Treasury would “probably” run out of cash sometime in October or November.

Other Democrats simply shrugged off McConnell’s threat.

“‘Meh’ is my official response,” Sen. Brian Schatz of Hawaii, a Democrat sponsoring a bill to abolish the debt ceiling, said in an interview. “Doesn’t matter, we’ll handle our business. This is something the Hill freaks out about every year or so. We will not negotiate over it, we will not concede anything and we won’t fail to do our job.

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Mitch McConnell says GOP won’t strike a deal with Democrats for the US to pay its bills on time, raising risk of derailing the economic recovery

mitch mcconnell
Senate Minority Leader Mitch McConnell, R-Ky., does a cable news interview before the start of a two-week recess, at the Capitol in Washington, Wednesday, June 23, 2021.

  • McConnell ruled out GOP cooperation with Democrats to raise the debt ceiling.
  • “I can’t imagine there will be a single Republican voting to raise the debt ceiling after what we’ve been experiencing,” McConnell told Punchbowl News.
  • Treasury Secretary Yellen warned of an “absolutely catastrophic” hit to the recovery if the debt ceiling isn’t raised.
  • See more stories on Insider’s business page.

Senate Minority Leader Mitch McConnell said that he doesn’t envision any Congressional Republicans voting alongside Democrats to renew the federal government’s authority to pay its bills.

That raises the prospects of derailing the economic recovery if the debt limit isn’t raised quickly enough.

“I can’t imagine a single Republican in this environment that we’re in now – this free-for-all for taxes and spending – to vote to raise the debt limit,” McConnell told Punchbowl News, adding Democrats would have to raise it alone in a party-line bill that’s taking shape.

The Kentucky Republican’s remarks represents a major warning to Democrats as they begin assembling a $3.5 trillion reconciliation plan that’s poised to clear Congress without GOP votes. That’s the legislative pathway for certain bills to be approved with only a majority vote.

The federal government’s borrowing authority is set to end on July 30.

Treasury Secretary Janet Yellen urged lawmakers to raise it as she testified before a panel last month, raising alarm about an “absolutely catastrophic” hit to the economic recovery if the government’s borrowing authority isn’t renewed. Raising the debt limit doesn’t mean federal spending will increase.

If the federal government defaults, Yellen said it could trigger a chain reaction of cash shortages starting with US bond holders that include individuals, businesses, and foreign governments.

The Treasury Department can tap into emergency powers to keep payments flowing until a certain date. But Yellen told Congress it’s tough to predict when those will be exhausted this summer given the economic uncertainty stemming from the pandemic.

Republicans voted to suspend the borrowing limit in July 2019 for two years under President Donald Trump. Experts say Democrats could raise the ceiling in a reconciliation package sometime this fall. But that would require them to list a numerical figure because of the process’s strict budgetary rules, opening the door for GOP political attacks on Democrats as big spenders while the national debt tops $28.5 trillion.

On Wednesday, Republican Sen. Lindsay Graham of South Carolina is set to hold a press conference about Democrats’ “reckless tax and spending spree.”

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Joe Manchin doubles down on refusing to add to the deficit to fund a Democrat-only infrastructure plan

Joe Manchin
WASHINGTON, DC – JUNE 09: Senator Joe Manchin (D-WV) speaks with Xavier Becerra, Secretary of Health and Human Services (HHS) (L), before a Senate Appropriations Subcommittee hearing on June 9, 2021 at the U.S. Capitol in Washington, D.C. The committee is hearing testimony about the Fiscal Year 2022 budget request for the Department of Health and Human Services.

  • Manchin doubled down on his insistence to fully finance a Democrat-only infrastructure package.
  • “I think we’ve put enough free money out,” he said, citing the federal response to the pandemic.
  • Manchin’s support is critical for Democrats in an evenly-divided Senate.
  • ISee more stories on Insider’s business page.

Sen. Joe Manchin is ruling out borrowing money to finance a party-line infrastructure package as Senate Democrats deliberate the range of tax increases that would be needed to pay for President Joe Biden’s agenda.

‘I think everything should be paid for now,” he told reporters. “I think we’ve put enough free money out.”

Manchin later told reporters on Tuesday he would only back an infrastructure package that was fully financed by tax revenue, adding, “How much debt can y’all handle?” He wants to do this with tax increases, though he favors less aggressive measures than Biden put forward such as a smaller corporate tax bump.

“I think we’ve incurred over 28 and a half trillion dollars of debt and I’d like to start paying for it,” he told reporters, referring to the national debt that the US government has accumulated over several decades.

Senate Democrats are still negotiating the final price tag of an infrastructure plan that only requires a simple majority vote, allowing Democrats to skirt Republicans under a legislative pathway known as reconciliation. But they need every Democratic senator to back a party-line package given the 50-50 Senate and their tie-breaking vote from Vice President Kamala Harris.

On reconciliation, Democrats are undertaking a delicate balancing act to find an amount that satisfies progressives who want to spend big and moderates like Manchin who want to fully finance it with tax increases.

“We’re trying to move as quickly as we can,” Sen. Ron Wyden, chair of the Senate Finance Committee and a key player in the talks, told Insider. Talks that began last month could stretch into late July, with passage of a bill sometime in the fall.

The national debt has grown at least $6 trillion over the past year in the wake of the federal government’s response to the pandemic, since multiple federal rescue packages were approved. Still, many economists and the Federal Reserve say that now is the time for Congress to take advantage of low interest rates – which make it cheaper to borrow – and repair the economy.

Sen. Bernie Sanders said Monday that he was seeking a package that was over $3.5 trillion. He argues the package presents Democrats with an opportunity to overhaul the economy in a scale unseen since the 1930s.

“Childcare, clean energy, family care, we know what we need,” Sen. Elizabeth Warren of Massachusetts told reporters. “We’ve got to get to a topline number that will support that.”

Senate Majority Leader Chuck Schumer alluded to the potential potholes that lie ahead on Tuesday.”It is not going to be easy, but it is certainly going to be worth it,” he said.

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Bernie Sanders said he’d oppose a $3 trillion Democrat-only infrastructure plan since it’s ‘much too low,’ potentially setting up spending showdown with Manchin

Bernie Sanders
  • Sanders ruled out backing a Democrat-only infrastructure plan below $3 trillion.
  • “That’s much too low,” he told New York Times opinion columnist Maureen Dowd.
  • It may set up a confrontation with centrists like Joe Manchin, who favor a smaller plan.
  • See more stories on Insider’s business page.

Sen. Bernie Sanders indicated that he would oppose a Democrat-only spending bill if its price tag didn’t top $3 trillion, brushing anything lower as too meager. It may set the stage for a confrontation between Sanders and moderate Democrats looking to restrain the size of a follow-up package.

In an interview with New York Times opinion columnist Maureen Dowd published Saturday, the Vermont senator ruled out backing a party-line infrastructure plan that amounted to either $2 trillion or $3 trillion.

“That’s much too low,” he told Dowd. He also pulled out a list of his priorities for a reconciliation package.

They appeared to include broadband, climate, childcare, universal pre-K, paid family and medical leave, Medicare expansion and housing among others.

“Does anyone deny that our child care system, for example, is a disaster?” Sanders told Dowd. “Does anyone deny that pre-K, similarly, is totally inadequate? Does anyone deny that there’s something absurd that our young people can’t afford to go to college or are leaving school deeply in debt? Does anybody deny that our physical infrastructure is collapsing?”

Sanders’s remarks could potentially set up a showdown with Sen. Joe Manchin of West Virginia as Democrats move ahead with a reconciliation spending package. Reconciliation is a legislative tactic Democrats are poised to use and circumvent Republicans because only a simple majority is needed for certain bills.

The party holds a narrow majority in the House and a 50-50 Senate that relies on a tie-breaking vote from Vice President Kamala Harris. Every Senate Democrat must be onboard as a result or else the package fails.

Manchin has made clear he favors a party-line package that’s fully paid for with tax increases and doesn’t grow the national debt. He previously suggested a $2 trillion price tag.

“I’ve agreed that can be done. I just haven’t agreed on the amount,” he told MSNBC late last month. “I haven’t seen everything that everybody is wanting to put into the bill.”

As chair of the Senate Budget Committee, Sanders wields enormous influence over reconciliation since the panel helps set overall spending levels. Senate Democrats are weighing up to $6 trillion in spending aimed at overhauling the economy with new initiatives in childcare, higher education, monthly cash payments to families, and clean energy programs.

Manchin along with a few other Senate Democrats like Sen. Mark Warner of Virginia have already balked at supporting $6 trillion in spending, making cuts likely.

President Joe Biden has already struck a $1 trillion infrastructure agreement with a centrist group of lawmakers concentrated on roads, bridges, and highways. But House Speaker Nancy Pelosi has dug in on not passing the plan until the Senate also approves a separate reconciliation package containing measures unlikely to draw Republican support.

It’s unclear whether it will ultimately pass, given Senate Minority Leader Mitch McConnell hasn’t thrown his support behind it yet. For now, Senate Majority Leader Chuck Schumer told Democrats to gear up for potentially long days ahead to kick off the reconciliation process before the August recess next month.

“Please be advised that time is of the essence and we have a lot of work to do,” Schumer wrote Friday in a letter to Senate Democrats. “Senators should be prepared for the possibility of working long nights, weekends, and remaining in Washington into the previously-scheduled August state work period.”

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Biden breaks with Trump and says he’ll stick up for Federal Reserve’s independence

Trump Biden
  • Biden said he wanted to break with Trump in sticking up for the Federal Reserve’s independence.
  • “I want to be real clear that I’m not going to do the kinds of things that have been done in the last administration,” Biden said.
  • While he was in office, Trump pressured Fed Chair Powell against raising interest rates.
  • See more stories on Insider’s business page.

President Joe Biden said on Tuesday he would safeguard the independence of the Federal Reserve, breaking with his predecessor, Donald Trump, who often tried pressuring the central bank to lower the cost of borrowing.

“Starting off my presidency, I want to be real clear that I’m not going to do the kinds of things that have been done in the last administration – either talking to the attorney general about who he’s going to prosecute or not prosecute … or for the Fed, telling them what they should and shouldn’t do,” he said at a White House news conference.

“I think the Federal Reserve is an independent operation,” he said, adding he does speak with Treasury Secretary Janet Yellen. The Treasury did not immediately respond to a request for comment.

The remarks reflect another way that the president is distancing himself from his predecessor by preserving the Fed’s traditional independence from the White House. Trump heaped criticism onto Powell throughout his term, assailing him as “an enemy of the state” and a “terrible communicator” from his now-suspended Twitter account.

Trump furiously tried pressuring Powell from raising interest rates while the economy was in the middle of its longest expansion in history in the years leading up to the pandemic. At one point, he suggested Powell may be a “bigger enemy” of the US than China.

Powell played a critical role designing the Fed’s stimulus programs as vast swaths of the economy shut down last year. He also encouraged Congress to continue approving more federal aid for struggling individuals, small businesses, and state and local governments.

“Given the low level of interest rates, there’s no issue about the United States being able to service its debt at this time or in the foreseeable future,” he told NPR recently. Powell, a Trump nominee, has also downplayed the inflation risks stemming from the $1.9 trillion stimulus package.

Powell’s term as Fed chair expires in 2022, and Biden must decide whether to keep him onboard.

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Biden is splitting with Obama on the economy and the proof is in their stimulus plans

obama biden
Former President Barack Obama and Democratic presidential nominee Joe Biden greet each other with a socially distant “air” elbow bump at the end of a drive-in campaign rally at Northwestern High School on October 31, 2020 in Flint, Michigan

  • Biden’s first economic package was bold in its size, breadth, and lack of bipartisanship.
  • It’s a sharp contrast to the smaller package of the Obama era – and that era’s slower recovery.
  • It shows Biden doesn’t want to repeat that decade, and has an economic endgame in mind.
  • See more stories on Insider’s business page.

President Barack Obama and President Joe Biden faced similar circumstances in their first months in office. Both entered the White House in the midst of crippling economic downturns. Both immediately pursued emergency stimulus plans to put the country on track for a recovery. And both spent unprecedented amounts to do so.

But Biden is going bigger, and it could be a very big deal for the future of economic policy.

Biden came out swinging with his $1.9 trillion stimulus package, passed less than two months into his presidency. Beyond its size, scope, and speed, the plan signaled a major deviation from Obama-era logic on spending and working across party lines. The result was a wide-reaching package passed through reconciliation, one that picked up zero Republican votes in both the House and the Senate.

It showed that Biden doesn’t plan to govern like Obama, where the aim was as much bipartisanship as possible and a mindfulness of the size of the federal debt. Biden’s big spending has already evoked comparisons to FDR and LBJ – two presidents Axios reported Biden is very interested in these daysand he may just be getting started. The big question is what comes next.

“The recovery from the Great Recession was long and painful. It exacerbated inequality and other forms of economic scarring,” Claudia Sahm, a former economist at the Federal Reserve, told Insider. “Those experiences are fresh in the minds of policymakers and the public.”

Neither Obama’s office nor the White House responded to requests for comment.

Recover first, pay the bill later

Congress’ recession-recovery playbook has traditionally been fairly simple: offer support where needed, then pull back on aid and turn to austerity once the rebound is on track. Past downturns have seen calls for fiscal support quickly give way to deficit concerns among Republicans and Democrats.

But the record of recoveries from past downturns is informing Biden’s approach. The Federal Reserve’s decision to dampen inflation and start lifting interest rates in 2015 sparked years of weak growth and low inflation. Many economists have since looked back at the rate hikes and the Obama administration’s stimulus package as allowing for a plodding economic rebound.

Biden aims to avoid the same pitfalls. The president has repeatedly expressed his desire to “go big” with relief spending, and, judging by his $1.9 trillion stimulus plan’s popularity, Americans are on board. His strategy leans more on overfilling the hole in the economy than on prematurely closing the taps.

The very nature of the current slump changed the thinking around fiscal stimulus and paved the way for a new era of government support, said Jason Furman, professor of economics at Harvard University and chair of Obama’s Council of Economic Advisors.

“When there is a big disaster like Katrina or the Gulf oil spill or superstorm Sandy, we’ll spend $100 billion. This was like one of those disasters, but happening everywhere at the same time,” Furman said. “People don’t completely believe in fiscal stimulus. They do believe in disaster relief.”

Joe Biden Stimulus
President Joe Biden speaks before signing the American Rescue Plan Act.

Congressional Democrats and Federal Reserve officials have been lining up alongside Biden. The rush to austerity in 2009 was a “big mistake” that left the country in recession for five years, Senate Majority Leader Chuck Schumer said in a March interview on CNN.

More recently, Federal Reserve Chair Jerome Powell told NPR that the economic recovery still takes priority over the national debt. While the country’s spending path is currently unsustainable, low rates ensure it can pay off its debt until the economic activity fully rebounds.

The government will eventually have to put the federal debt on a sustainable path, “but that time is not now,” the Fed chair added.

The central bank is still projecting its first rate hike won’t arrive until after 2023, and officials have hinted they aren’t even considering pulling back on the Fed’s emergency asset purchases. Rising Treasury yields suggest investors have different expectations, but policymakers have so far been steadfast in their patience.

“If my 2010 self could see just how different we’re handling this recovery than we handled that one – when we were just pulling our hair out, because Congress was turning towards austerity when the unemployment rate was literally over 9% – it was just an outrageous approach to the recovery at that time,” Heidi Shierholz, director of policy at the left-leaning Economic Policy Institute and former chief economist to Obama’s secretary of Labor, told Insider. “And so this is just incredibly different.”

A lack of state and local spending hindered Obama’s recovery, but Biden is pouring in billions

Economists began to sound the alarm before the second stimulus, emphasizing the urgent need for state and local funding. As Insider’s Ben Winck and Joseph Zeballos-Roig reported at the time, the CARES Act’s $150 billion for local governments ran out on December 30 – and the lack of similar funds in the Great Recession likely slowed the subsequent recovery. That funding was also scrapped in former President Donald Trump’s second stimulus package; as CNN reported.

joe biden kamala harris oval office
President Joe Biden and Vice President Kamala Harris meet with Governors and Mayors in the Oval Office of the White House Friday, Feb. 12, 2021, to discuss the American Rescue Plan.

But Biden’s $350 billion in state and local aid will prove hugely consequential for cities like New York, which was uniquely pummeled by the pandemic. It was a measure supported and championed by every elected Democratic state treasurer.

It’s also the largest ever investment from the government in Native communities.

Biden’s next major package looks like it will be even bigger. Coming in two parts, the first focusing on physical infrastructure, like roads and bridges, and the second on human infrastructure, like education and childcare, it is expected to cost around $3 trillion.

Biden is embracing his new role as FDR-adjacent

When it comes to his legacy, Biden is reportedly excited about what’s forming. Axios reported that he recently met with presidential historians to discuss the size and speed of potentially huge changes, with comparisons abounding to Presidents Franklin Delano Roosevelt and Lyndon Baines Johnson, who both spearheaded huge expansions of the social safety net.

“The historians’ views were very much in sync with his own: It is time to go even bigger and faster than anyone expected. If that means chucking the filibuster and bipartisanship, so be it,” Axios’ Mike Allen and Jim VandeHei wrote. In fact, they report, Biden loves the narrative that he’s thinking bigger and bolder than Obama.

He’s even gotten praise from another longtime politician and Senate veteran: Progressive figurehead Bernie Sanders. In an interview with The New York Times’ Ezra Klein, Sanders praised Biden for moving past his more “moderate” past and “acting boldly” with the American Rescue Plan.

joe biden bernie sanders
Joe Biden greets Sen. Bernie Sanders before the Democratic presidential primary debate at Drake University on January 14, 2020 in Des Moines, Iowa.

Sanders expressed optimism to Klein, but noted many progressive initiatives remain unfulfilled, such as student debt forgiveness and an increase to the federal minimum wage.

Leonard Burman, the Paul Volcker Chair of Behavioral Economics at Syracuse University’s Maxwell School, told Insider that the Great Depression actually lasted as long as it did because Roosevelt and other leaders feared deficits too much.

FDR actually spent less than would have been “appropriate,” Burman said, and recovery really only came with the influx of spending that accompanied World War Two.

“People think of the New Deal as this really, really aggressive response to the Great Depression,” said Burman, who is also cofounder of the Urban Institute’s Tax Policy Center, and he said it limited pain by creating jobs for some people that needed them and providing other assistance, “but it was way too small. So we literally have now – as far as I know – we’ve never done this.”

“We have lots of experience with spending too little to try to get out of a recession. We don’t have any experience with spending too much,” Burman said. “So it’ll be interesting to see what happens.”

Rampant inflation is the new debt scare

Concerns around a surging government debt pile held back Obama’s stimulus in 2009. Today, the argument looming over Biden and his spending plans has to do with inflation. Specifically, whether all the money Biden is pushing into the economic recovery will fuel a big comeback or instead spark stifling hyperinflation.

The Fed is behind the push for stronger-than-usual price growth. The central bank updated its policy framework in August to target inflation that averages 2% over time, as opposed to the prior goal of simply pursuing 2% inflation.

Officials have since confirmed that, at least for a period after the pandemic, the Fed aims to let inflation trend above 2% to counter years of weak price growth, underscoring just how different the approach is this time around.

GettyImages 1229890667
Fed Chair Jerome Powell is due to speak on Thursday.

The Obama administration “had a hard time” getting some Democratic senators to lift the debt limit and spend roughly $831 billion on the American Recovery and Reinvestment Act, Furman told Insider.

The Biden administration, on the other hand, has had a far easier time uniting Democrats around trillions of dollars worth of relief spending.

“The inflation debate is largely taking place among economists. It’s not a concern that I’ve heard very much from members of Congress,” Furman said. “Biden benefits from people having much more tolerance for larger numbers than they used to.”

Biden and the Fed both want an equitable labor market

Going hand in hand with the Fed’s new inflation target is a goal to pursue “maximum” employment instead of its previous mandate of “full” employment. The updated strategy leans more on using a range of indicators to judge the labor market’s health than focusing on the headline unemployment rate.

Though the central bank acts independently of the White House, the new framework opens the door to economic policy that more aggressively targets a tighter and more equitable labor market.

“There was a time when there was a tight connection between unemployment and inflation. That time is long gone,” Fed Chair Powell said during a March 17 press conference. “We had low unemployment in 2018 and 2019 and the beginning of ’20 without having troubling inflation at all.”

Job gains seen at the end of the last economic expansion largely benefited racial minorities and lower-income Americans, two groups that underperformed the broader unemployment rate for years. Biden’s latest stimulus plan stands to lift demand and pull forward such gains. The millions of jobs still lost to the pandemic indicate there’s plenty of slack in the economy and, therefore, reason to supercharge growth with fiscal support, UBS economists said in a March 9 note.

That slack also supports calls for additional large-scale spending packages. The $3 trillion in new spending is still not enough to get the US economy to the finish line, Sahm told Insider.

“Both the 2001 and 2008 recession were jobless recoveries, in that GDP got back on track much sooner than employment,” she said. “A year into the pandemic, we are still missing 9.5 million jobs relative to pre-pandemic. We cannot afford to have another jobless recovery.”

It’s becoming clear just two months into his presidency that Biden has an endgame in sight: lots of government spending to create a more equitable economy.

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House Democrats kick off work on an infrastructure package after enacting Biden’s stimulus plan

Pelosi Stimulus
Speaker Nancy Pelosi.

  • House Democrats announced Friday they are starting work on an infrastructure package.
  • Pelosi said she hoped talks would be bipartisan on climate, broadband, and transportation issues.
  • Hammering out a bill may end up requiring a lengthy stretch of negotiations.
  • See more stories on Insider’s business page.

House Democrats said on Friday afternoon they have officially started work on an infrastructure package, kicking off what appears likely to be a lengthy stretch of negotiations on a multitrillion-dollar economic recovery bill.

“Building our transportation system has long been bipartisan,” Speaker Nancy Pelosi said in a statement. “It is our hope that spirit will prevail as we address other critical needs in energy and broadband, education and housing, water systems and other priorities.”

She went on: “As we engage in these job-creating initiatives, we must discuss their impact on the federal budget, on creating economic growth and on preserving our planet.”

Rep. Richard Neal of Massachusetts, chair of the House Ways and Means Committee, said in a statement that Pelosi had instructed him to explore “how we can use the tax code to invest in modernizing and uplifting our communities while creating good jobs that will get Americans back on their feet.”

The statements came only hours after Pelosi, Neal, and other top Democrats from both chambers of Congress took a victory lap at the White House on a $1.9 trillion stimulus package that the president signed into law Thursday. Democrats are attempting to quickly capitalize on the law’s popularity with the public and show that their control of Congress and the White House is producing tangible benefits for ordinary Americans, like the $1,400 direct payments in the stimulus.

Biden campaigned on a $2 trillion infrastructure proposal that would focus on addressing climate change, energy reform, and strengthening the middle class. Some Democrats like moderate Sen. Joe Manchin of West Virginia have said they could support a $4 trillion infrastructure and jobs bill.

But Democrats are likely to face hurdles as whether to employ budget reconciliation to fast-track parts of it in a party-line vote, and how to pay for it. Some Senate Democrats and the Biden administration favor raising taxes on corporations and the wealthy, a step likely to trigger Republican opposition.

Pelosi elaborated on potential elements of an infrastructure package during her weekly press conference on Thursday, calling it one of her “favorite subjects.”

“It’s not just roads and bridges, mass transit and high-speed rail, it’s also about water systems,” she said. “Some of the water systems we have are over 100 years old.”

The Biden administration initially said it would release an infrastructure plan in February. It never did so and hasn’t outlined any specifics. Still, there are early indications of its possible scope.

The White House chief of staff, Ron Klain, told Punchbowl News on Wednesday that the administration views robust spending on infrastructure as a way for the US to bolster its global competitiveness. He also said it could include funding for new fleets of electric-vehicle-powering stations and clean power.

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Democrats are planning at least another $2 trillion in stimulus spending, shrugging off fears of growing debt

Joe Biden
President Joe Biden meets with lawmakers in the Oval Office.

  • Democrats are planning at least another $2 trillion in stimulus spending, much of it on infrastructure.
  • Senior Democrats support new taxes on wealthy Americans and large businesses to finance part of a follow-up package.
  • Senate Republicans are likely to press for more targeted spending, and spark a clash in Congress.
  • Visit the Business section of Insider for more stories.

Democrats are on course to approve $1.9 trillion in emergency pandemic spending within the next month. It would be yet another large infusion of federal aid only months after Congress passed a $900 billion aid package in December.

But Democrats show few signs of hitting the brakes anytime soon on federal spending. Instead, President Joe Biden is indicating he may press his foot on the gas and shrug off the growing federal debt.

“In order to grow the economy a year or two, three, and four down the line, we can’t spend too much,” Biden said on Tuesday during a CNN town hall. “Now is the time we should be spending.  Now is the time to go big.” 

It’s a remarkable split for Democrats a decade after the Great Recession. Confronted with the worst economic downturn in generations, President Barack Obama enacted an $800 billion stimulus package in February 2009. Many economists and Democrats now say it was inadequate to address the fallout of the financial crisis.

Previous efforts in Congress on infrastructure legislation collapsed during President Donald Trump’s term. Now, Democrats are in the early stages of a sprawling effort that could encompass jobs, climate change, and energy. They appear emboldened by the Federal Reserve promising to keep borrowing costs low for the near future. Fed Chair Jerome Powell also recently called for a “society-wide commitment” to recover lost jobs.

Rep. Don Beyer (D-Md.), vice chair of the Joint Economic Committee, told Insider that House Democratic leaders discussed a follow-up package this week with at least $2 trillion in further spending.

“I think the number one priority for the White House and Congress will be to build the climate initiatives we’ve so much wanted into an infrastructure bill,” Beyer said in an interview. “The second big thing would be accessible, affordable broadband in rural America and lower-income, urban America.”

The mass blackouts in Texas caused by an Arctic winter storm may add momentum to Democrats urging a major plan to revamp the nation’s infrastructure. Some senior Democrats are starting to press for wide-ranging legislation that comes with tax increases on the wealthy and large businesses.

“The catastrophe in Texas has underscored the urgent need to address the climate crisis and rebuild our infrastructure,” Sen. Ron Wyden (D-Oregon), chair of the Senate Finance Committee, said in a statement to Insider. “In the recovery package, my priorities will be making these critical investments by ensuring the wealthy and mega-corporations pay their fair share.”

Wyden added he would introduce proposals next month to remake the energy tax code and boost clean-energy manufacturing. He also said it was an “an opportunity to undo years of neglect” of roads, highways, and bridges by putting people to work repairing them. 

“The past week has hopefully reminded all of my Republican colleagues that there’s no escaping the effects of climate change and broken infrastructure,” Wyden said.

“Historic investments in infrastructure”

texas storm
Pike Electric service trucks line up after a snow storm on February 16, 2021 in Fort Worth, Texas.

The follow-up economic proposal after the Democratic rescue package will differ in two significant ways. The first is instead of delivering immediate relief to families and struggling businesses, the plan will be directed at sparking long-term economic growth.

White House Press Secretary Jen Psaki said on Wednesday that Biden’s plan “will make historic investments in infrastructure – in the auto industry, in transit, in the power sector – creating millions of good union jobs, and in the process, also addressing the climate crisis head-on.”

The second is Democrats are expected to try and finance permanent parts of the initiative through new taxes instead of deficit spending to offset its addition to the national debt. Last year, Congress and President Trump approved $4 trillion in relief spending to put the economy on life-support and stem the rate of coronavirus infections.

Beyer, a member of the tax-writing House Ways and Means Committee, said he believed many Democratic members of the panel “would really prefer there be a pay-for.” The committee held a hearing early last year on funding infrastructure and one possible method under discussion at the time was raising the gas tax, a step not taken since 1993.

Biden administration officials say they are still hammering out the plan’s details. Treasury Secretary Janet Yellen said in a CNBC interview on Thursday that tax hikes on wealthy Americans and corporations would form part of the bill, though they would be gradually implemented.

It’s unclear how much of a package would be covered with new sources of revenue, though up to half is a possibility. During his presidential run, Biden signaled he was open to a 0.1% financial transactions tax on the selling and trading of stocks and bonds. The nonpartisan Congressional Budget Office estimates such a tax could raise $777 billion in revenue over ten years.

“We can’t have a repeat of their COVID bill”

Bill Cassidy
Sen. Bill Cassidy (R-LA) speaks to reporters on Capitol Hill.

Democrats are grappling with difficult math over the next two years. They control the evenly-divided Senate because Vice President Kamala Harris casts the tie-breaking vote.

Should they use reconciliation to bypass Republicans, Democrats cannot afford any defections – a steep climb given wide differences in views on how aggressively the federal government should move to tackle the climate crisis, create shovel-ready jobs, and levy taxes.

Sen. Joe Manchin (D-W.Va) last month said he supported up to $4 trillion in infrastructure spending. A conservative Democrat, Manchin’s support will likely prove critical to the success of Democratic legislation.

There are Republicans who support upgrading American infrastructure, making a path to a bipartisan deal possible. But drawing 10 Senate Republican votes could lead to difficult trade-offs some Democrats view as unacceptable.

Sen. Bill Cassidy (R-LA), part of a Republican working group that pitched a $618 billion stimulus plan to Biden last month, said any infrastructure measure must be restrained in size and scope.

“We can’t have a repeat of their COVID bill,” Cassidy said in a statement to Insider. “To be successful, any action on infrastructure must be targeted spending and focused on real needs like expanding access to broadband in rural areas and fixing our crumbling bridges.”

Other Republicans said they were reluctant to support a infrastructure plan carrying a major price tag.

“The main thing is that I want to be careful,” Sen. James Inhofe of Oklahoma told Capitol Hill reporters after a White House meeting with Biden on the issue earlier this month. “When you’re working on infrastructure, that’s high dollars.”

The hesitation from Republicans clashes with Democrats eager to embark on robust federal spending – and wield the full power of their control of Congress and the White House.

“We’re only going to get a limited amount of bites at the reconciliation apple,” Beyer told Insider. “Now that we have Chuck Schumer running the Senate, Joe Biden as president, and a 2022 election that will be very contested, we better use our legislative power while we have it.”

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