This week on Facing the Future, we once again prove the old adage that if you don’t like the way the political winds are blowing in Washington DC, just wait 5 minutes. In this case, our program this week focused on the deal West Virginia Senator Joe Manchin seemed to have agreed to with fellow Democrats on elements of a budget reconciliation package containing pieces of President Biden’s Build Back Better agenda, including some tax increases, climate and energy provisions, and prescription drug price reductions for Medicare. Just hours after we recorded our program, Manchin announced he was no longer supporting the tax or climate provisions that were under negotiation. Joining me to discuss the state of reconciliation talks were two Capitol Hill veterans, Concord Coalition policy director Tori Gorman and our chief economist Steve Robinson.
We also discussed the latest economic news, including the newest jobs report and spiking inflation numbers, and whether that all means we are headed for a recession. In our third segment of the program, Concord’s communications director Av Harris joined me to talk with Robinson about his newest issue brief entitled “Passing the Buck: How the National Debt Burdens Future Generations.”
As for the reconciliation package, Democrats are feeling increasing urgency to get something passed soon. Given the possibility that Republicans will take over control of at least one chamber of Congress after the November elections, it may be the last chance Democrats have to pass any major domestic policy agenda legislation while they still have a majority in the House and Senate and control the White House. Gorman also pointed out that Democrats will lose the ability to use the reconciliation process (avoiding a Senate filibuster) at the end of the fiscal year on September 30.
“They have agreement among Democrats on a prescription drug price package that would allow Medicare to negotiate directly with drug manufacturers on the price of what they call high expenditure prescription drugs in parts B and D,” said Gorman.
The nonpartisan Congressional Budget Office (CBO) estimates that the prescription drug package could result in savings of $288 billion over 10 years, Some of that might be used for an extension of federal subsidies for Americans enrolled in the Affordable Care Act (ACA) health exchange insurance plans. Expanded ACA subsidies were passed as part of the federal COVID relief package in 2021 to preserve health coverage for the millions of Americans who lost their jobs as a consequence of the pandemic. The expansion is set to expire at the end of this year.
Negotiations on a reconciliation bill are happening at a time of more troubling economic signs. The latest figures from the Bureau of Labor Statistics show that the Consumer Price Index has risen 9.1% over the last year, an even higher jump than expected. This may lead the Federal Reserve to impose even steeper interest rate hikes, possibly leading to an economic recession. Robinson says these troubling signs come at the same time as the job market continues to be strong, with the economy adding more than 372,000 jobs in June.
“This is a real dilemma. I don’t envy the Fed,” said Robinson. “They just raised the federal funds rate by three quarters of a percent, or 75 basis points. And there was some chatter saying well this next time maybe they’ll only do a half a percent because they’re worried about the economy, and of course the jobs numbers came in last week strong, with more than 370,000 new jobs created and the unemployment rate at 3.6%. And of course now that the inflation numbers came out, people are saying maybe they need to push interest rates up a full percentage point, or 100 basis points, next time. There’s a lot of doubt out there in terms of what direction the economy is headed. Is the labor market strong enough to carry us through, or is inflation going to tank us because the Fed will be pushed to raise interest rates?”
Robinson also discussed his latest issue brief containing his new modeling that quantifies – in real economic terms – the negative impact on future generations created by the unsustainable growth in our national debt.
“People benefit today by borrowing money and spending it, just like running up your credit card is fun, it’s great, and you get to buy things you really can’t afford,” said Robinson. “But the bottom line is, when the bill comes due, somebody has to pay it. And if you don’t pay it and you roll it over forever, passing the buck from one generation to the next, it turns out that has an effect too. Not only do future generations face higher taxes to pay back the debt, but the central conclusion is that every 10 percentage points of extra debt held by the public results in a 1% reduction in lifetime consumption of future generations. And when the debt gets big enough, those numbers become significant.”
Hear more on Facing the Future. I host the program each week on WKXL in Concord N.H., and it is also available via podcast. Join my guests and me as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.