The senator "effectively killed President Biden’s signature domestic policy bill in its current form on Sunday, saying he was convinced the spending and tax cuts in the $2.2 trillion legislation will exacerbate already hot inflation," says a New York Times analysis.
The key phrase to me is “in its current form.” Anybody who’s ever negotiated anything knows, it’s not over till it’s over.
Here is the West Virginia Democratic senator’s statement explaining his decision, citing "debt of more than $29 trillion and inflation taxes.”
A host of economists and independent analyses have concluded that the bill isn't economic stimulus, and that it won't pump enough money into consumer pocketbooks next year to raise prices more than a modest amount, says the Times.
The reason has to do with the pace at which the bill spends money and how much it raises through tax increases that are intended to pay for the spending. The legislation spends money over a decade, enabling the taxes it raises on wealthy Americans and businesses, which will siphon money out of the economy, to help counteract the boost from spending and tax cuts.
The bill also doesn't provide the type of direct stimulus included in the $1.9 trillion pandemic aid package Biden signed in March — and Manchin supported. Some of its provisions would give money directly to people, like a continued expanded child tax credit, but others would fund programs that would take time to ramp up, such as universal prekindergarten.
Economists say the net result is likely to be at most a tenth of a percentage point or two increase in the rate of inflation, says the Times analysis. That would be a relatively small effect at a time supply chain crunches, surging global oil demand and a pandemic shift among consumers away from travel and dining out and toward durable goods have combined to raise the annual inflation rate to 6.8 percent, its fastest rate in nearly 40 years, the Times says.
Manchin, "is perhaps the most prominent deficit hawk in the Democratic Party,” says the Times. For months, he's warned the president and congressional leaders that he was uncomfortable with the breadth of what had become a $2.2 trillion bill, citing both the risks of inflation and his fear that the package could further balloon the federal budget deficit, saying several programs that are now estimated to end in a few years would likely be made permanent.
Some Democrats and administration officials believe there's still a chance to recast the bill to suit Manchin’s demands and possibly pass it in the early months of 2022, says the Times.
That bill would be unlikely to fuel inflation next year and would be smaller. The number of programs would shrink, and it would include funding over the next 10 years to pay for the spending, the Times says.