Biden’s Economic Agenda Faces Familiar Hurdle With Fight Over Financing

As Democrats pursue both bipartisan infrastructure negotiations and a catch-all economic package, old divisions persist on how to fund the spending.,

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WASHINGTON — President Biden’s ambitions for a large-scale investment in the nation’s aging public works system along with other parts of his economic agenda hinge on what has always been the most difficult problem for lawmakers: agreeing on how to pay for the spending.

That question has sent a group of centrist senators scrounging to find creative ways to cover nearly $600 billion in new spending that they want to include as part of a potential compromise plan to invest in roads, broadband internet, electric utilities and other federal infrastructure projects.

The White House and Republicans have ruled out entire categories of potential ways to raise revenues. The impasse has become the subject of increasingly urgent talks between a large group of Senate Democrats, Republicans, White House officials and, at times, the president himself.

Among the ideas that senators have discussed in recent days are repurposing unspent coronavirus relief funds, increasing enforcement by the I.R.S. and establishing user fees for drivers, including indexing the gas tax to inflation.

Mr. Biden dispatched aides to Capitol Hill on Tuesday for discussions that his press secretary, Jen Psaki, said yielded progress but no agreement. Top White House officials are set to meet on Wednesday evening with Senator Chuck Schumer of New York, the majority leader, and Speaker Nancy Pelosi of California. Those discussions will center on infrastructure negotiations as well as a separate effort to move a large chunk of the president’s $4 trillion economic agenda through the Senate without any Republican votes using a procedural mechanism known as reconciliation.

Among those expected to attend the meeting are Brian Deese, the director of the National Economic Council; Steve Ricchetti, a top adviser to Mr. Biden; Louisa Terrell, the director of the White House Office of Legislative Affairs; Shalanda Young, the acting director of the Office of Management and Budget, and Susan E. Rice, who leads the White House Domestic Policy Council, according to an official familiar with the plans.

Democratic leaders in Congress are preparing to move a sweeping, multitrillion-dollar bill through the reconciliation process to avoid the need for Republican votes and approve spending on physical infrastructure, education, emissions reduction, child care, paid leave, antipoverty efforts and more. But centrist Democrats in the Senate — along with Mr. Biden — have said repeatedly that they want to strike a deal with Republicans on what would be a pared-down version of the president’s plan to rebuild roads, bridges and other infrastructure projects.

The bipartisan group has not reached public agreement on how to finance the spending. Moderates in both parties insist that any deal be paid for with new revenues. Mr. Biden has offered $4 trillion in potential revenue sources, all concentrated on increasing the tax burden on businesses and high earners. Republicans have countered with hundreds of billions of their own, including increased taxes for drivers and repurposing previously borrowed money from the $1.9 trillion Covid relief bill that Mr. Biden signed into law this year.

The senators who spearheaded the original framework spent much of Tuesday huddling with Mr. Deese, Mr. Ricchetti and Ms. Terrell to iron out the details of an outline to provide for $1.2 trillion over eight years, of which $579 billion is new funding, and how to finance it.

“These things are always complicated and tough,” said Senator Rob Portman, Republican of Ohio, as he left the Capitol on Tuesday. “We’re getting there. We’re moving in the right direction.”

Both sides did not appear to have enough common ground to formally announce how they would fund the plan. Shuttling across the Capitol for hourslong meetings scheduled around votes, the five Democrats and five Republicans declined to offer specifics beyond their prevailing optimism and plans to continue discussions.

“Pay-fors,” Senator Bill Cassidy of Louisiana, one of the Republicans negotiating the agreement, said when asked what the remaining stumbling blocks were. “Anytime you’re coming up with $579 billion, you’ve got to figure out how to do it.”

Mr. Biden has pledged to not raise taxes on the middle class, including at the gasoline pump. Senate Republicans refuse to increase tax rates for businesses and high earners. Both sides have dug in, to the surprise of some business leaders and other lobbyists in Washington.

White House officials have shifted in recent weeks to pressing Republicans to support one of Mr. Biden’s proposals that would not amount to an increase in tax rates: a plan to spend tens of billions of dollars on increased enforcement by the I.R.S. The administration says such a plan would collect hundreds of billions of dollars from high earners and corporations that owe, but do not pay, their fair share of taxes. Republicans say they are concerned about the scope of the provision, but they have continued to discuss it in private meetings.

“I would say we’ve put a lot of different options on pay-fors on the table,” Ms. Psaki told reporters on Tuesday. “And our view is: There’s a fundamental question right now. Are Republicans, members of Congress, do they believe that rich people should have to pay the taxes they owe, or should we increase the cost of travelers who are just trying to make it to work? That’s the basic question here. So we’ll see if they can make progress on that exact point.”

ImageSenator Kyrsten Sinema, Democrat of Arizona, is among the group of centrists that reached a tentative agreement on a framework for an infrastructure plan this month.
Senator Kyrsten Sinema, Democrat of Arizona, is among the group of centrists that reached a tentative agreement on a framework for an infrastructure plan this month.Credit…Erin Schaff/The New York Times

Lawmakers expressed optimism that a deal could be reached this week, but they acknowledged the division over raising revenues.

“It’s always the hard part of an infrastructure package,” said Senator Shelley Moore Capito, Republican of West Virginia, who unsuccessfully tried to negotiate an even narrower package with Mr. Biden.

“There’s a pretty good dividing line sometimes between Republicans and Democrats — certainly is on taxes,” she added. “But the president’s taken any kind of user fee off the table — which is traditionally where you pay for these things — so that just makes it extra hard.”

Neil Bradley, the executive vice president and chief policy officer at the U.S. Chamber of Commerce, said on Tuesday that he expected any final deal to include some money from Mr. Biden’s plans to increase I.R.S. enforcement.

He said he expected a final deal to have some pay-for surprises. “I suspect they’re going to have some creative ones that we don’t know about yet,” Mr. Bradley said.

The debate over how to finance Mr. Biden’s economic agenda will also extend to any package that lawmakers seek to push through using reconciliation, which could be as much as $6 trillion. Senator Bernie Sanders, the Vermont independent who chairs the Senate Budget Committee, has asked Democrats on the panel to outline their priorities for the package as he aims to pass a budget blueprint to start the process by July.

“I think the priorities that the president has established, that we have established, are solid,” Mr. Sanders said in an interview as he described his strategy. “But, you know, we’re going to have to make sure that we end up with numbers that 50 members can agree on.”

He added that his intention was to pay for new initiatives — like child care subsidies and health care expansion — through “progressive taxation,” including raising taxes on the wealthy and corporations. But he did not extend that to one-off spending like road or bridge repairs or improving water systems, saying, “it is not necessary to pay for, in my view, one-time capital improvements in the infrastructure.”

In an early indication of what Mr. Sanders called an effort to “soothe the edges,” he said he was open to relaxing a $10,000 cap on how much taxpayers can deduct in state and local taxes.

Several Democrats, particularly lawmakers representing New York and California, have warned that they might not support any changes to the tax code that do not address that provision. A draft budget document circulated by staff on Capitol Hill and obtained by The New York Times appeared to include funds for a partial repeal of the state and local tax deduction, which could mean eliminating the cap for all but the highest earners, or raising the level of the cap. There were few details about how those funds would be distributed, and lawmakers and aides cautioned that the plan was in flux.

“I have a problem with extremely wealthy people being able to get the complete deduction,” Mr. Sanders said. “I think that’s an issue we’ll have to work on.”

Cecilia Kang and Luke Broadwater contributed reporting.

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