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Wednesday, July 28, 2021

The Sanders Democrats Go For Broke

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The price of Republicans losing those two Georgia Senate seats in January was always going to be steep, and late Tuesday Democrats presented America with the bill: $4.1 trillion. That’s how much in new taxes and spending President Biden, Bernie Sanders and

Nancy Pelosi

hope to ram through Congress with the narrowest majorities in decades.

Senate Democrats announced that they’ve agreed on a top-line budget resolution total of $3.5 trillion. They hope to pass this with 50 Senate Democrats plus Vice President

Kamala Harris

to break the tie. That’s in addition to the $600 billion or so in net spending in the bipartisan infrastructure framework.

Don’t believe the spin that this is a compromise from the $6 trillion that Mr. Sanders floated some weeks ago. That was a feint to make the final number appear more moderate. This would be the largest spending increase in U.S. history, and a huge increase in the size and scope of government. It would lift federal spending as a share of GDP to more than 25% from the modern norm of 20% to 21% or so. Democrats are going for broke—literally.

“Every major program that President Biden has asked us for is funded in a robust way. And we are making some additions to that,” crowed Majority Leader Chuck Schumer, standing next to Mr. Sanders. “Most important, something that Senator Sanders has led, and convinced America is so important, which is a robust expansion of Medicare, including money for dental, vision and hearing.”

Mr. Schumer didn’t mention the cost of this new Medicare fillip: about $300 billion. And for a Medicare entitlement that the Trustees in their annual report say will already start to run out of money as early as 2024.

The details of the budget resolution will be filled out by Congressional committees, but that word “entitlement” is the key. The Sanders-Pelosi strategy—Mr. Biden is along for the ride—is to create several new programs that will expand automatically without an annual appropriation by Congress.

Any American who qualifies will get the cash for universal pre-K, paid family leave, a new federal child-care program, free community college, and more. Democrats will start these programs small, but they will grow inexorably into huge claims on the Treasury and they will be politically impossible to reform or repeal.

The resolution will also underwrite a vast climate agenda, including green-energy subsidies running into the hundreds of billions. Democrats plan more money as well for permanently higher ObamaCare subsidies, teachers unions, affordable housing, home healthcare, food subsidies and welfare programs.

All of this will be “paid for” with a combination of tax increases and phony accounting. Mr. Biden’s spending proposals made this appear to work by offsetting eight years of spending with 15 years of tax increases. Democrats will try something similar to get around the rules of budget reconciliation. Remember how they made ObamaCare look budget neutral in 2010 by claiming a government takeover of student loans was a money raiser? Student debt is now heading to be a trillion-dollar loser.

The tax increases also won’t be small. Taxes are likely to rise for corporations (meaning workers, shareholders and consumers), capital gains, and high earners at the very least. With so much spending to finance, Democrats demanding a restoration of the state-and-local tax deduction could be out of luck.

The leadership’s political strategy here is pure power politics: Start the budget train moving and squeeze the swing-state Democrats to get on board or take the blame for failure. Don’t bet on Long Island Rep. Tom Suozzi, one of the most vocal SALT advocates, to stand in the way. Sens. Joe Manchin or Kyrsten Sinema may be able to whittle down the size of the tax increases, but in the end they too will be faced with a binary choice: Vote for the reconciliation bill, or face the party’s wrath.

***

The sweeping nature of the bill exposes the misjudgment of Republicans who think their bipartisan infrastructure bill will derail Democratic plans. Ohio Republican Rob Portman recently told the

New York Times

that by removing the infrastructure “sweetener,” it is “less likely that reconciliation will pass at the level that Democrats are talking about.”

He underestimates how bloody minded Democrats are. They believe this is a rare moment to put in place a permanent expansion of government, and they are going to do it whether or not Republicans give Mr. Manchin the political cover of a bipartisan infrastructure deal. The only chance Republicans have to stop the $4.1 trillion Sanders-Pelosi agenda is to make the public case against it and force Democrats on Capitol Hill to take sole responsibility for the consequences if they pass it.

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