The US House of Representatives passed President Biden’s $2 trillion “Build Back Better” act (the “BBB”) Friday morning on a 220-213 party line vote. The Act now heads to the Senate, where Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have expressed significant skepticism for many of its provisions, indicating that further changes are likely coming to the scope of the bill’s spending as well as the tax provisions that are being added and changed to pay for new spending in areas like clean energy, education and child care subsidies, healthcare, affordable housing and elder care. Many of the provisions are only funded for several years in an effort to reduce the bill’s total cost. According to the Congressional Budget Office, the bill would increase the federal budget deficit by $160 billion over the next 10 years.
Child Care, Child Tax Credit Extension, Paid Leave & Pre-Kindergarten
Nearly one third of the bill’s spending relates to families with children. The most significant change is the creation of a $273 billion child care entitlement program. Initially the program would be focused on raising child care providers’ wages, building new facilities, training teachers and subsidizing low- and middle-income families’ cost of care. After three years, the entitlement will expand to cover nearly all families. Families making less than 250% of their state’s median income would see a cap of 7% of their income on child care while families making less than 75% of their state’s median income would pay nothing. The program ends in 2027. The BBB also extends the increased amounts for the child tax credit through 2023 for most families and makes the refundability of the credit permanent. The estimated cost of this provision is $185 billion. The COVID-stimulus related expansion of the earned-income tax credit is also being extended for a year at a cost of $13 billion. Despite Manchin stating that he doesn’t favor including paid leave in the reconciliation bill, the House included the $200+ billion plan in the bill. The bill guarantees four weeks of paid leave to all workers who are new parents, managing their own serious medical condition or have to care for a family member. The program would be enacted in one of three ways:
- All public and private employees, part time and self-employed individuals could access the program via the Social Security Administration
- For employees with access to an existing “legacy state” paid leave program that provides benefits equivalent to, or better than, the federal benefit, the federal government would reimburse the state for amounts up to what it would have cost to cover those workers in the federal program.
- For employers who voluntarily choose to offer 100% of employees paid leave equal to or better than the public benefit and also provide job reinstatement protection (even if the leave is not FMLA eligible), the employer would be reimbursed for the lesser of 90% of the national average cost of paid leave benefits or 90% of their insurance premium.
Open to all Americans, the payments would be income-dependent with the payments capped at $814 a week. The average payments would be about 2/3 of salary with the lowest income Americans receiving 90%. The program would start in 2024. The bill also includes $18 billion to create a universal pre-kindergarten program. In the fourth year, the program would be 90% funded by the federal government and 10% by states, dropping to 75%-25% in year five and 60%-40% year six, when the program sunsets.
New spending on climate initiatives makes up more than 25% of the bill’s total, at $555 billion across several new programs, including:
- $320 billion in 10-year expanded tax credits for residential and utility-scale renewable energy, transmission, electric vehicles and clean-energy manufacturing;
- $105 billion for addressing response to climate change impacts like wildfires and droughts;
- $110 billion to grow U.S. supply chains for renewable energy technology; and
- $20 billion to motivate the government to purchase cutting-edge energy technologies.
A $150 billion program that was previously in the legislation to incentivize utilities to move to using clean energy sources instead of fossil fuels was removed due to opposition from Manchin. However, despite this reluctance from Manchin and some House Democrats, the bill does still include a fee on methane emissions along with funds targeted at reducing methane emissions.
Supply Chain and Small Business Provisions
In light of ongoing supply chain issues, the bill includes $5 billion for the Department of Commerce to identify and monitor critical vulnerabilities in the manufacturing supply chain including $500 million for the Federal Trade Commission to create and operate a new bureau dedicated to stopping unfair and deceptive acts and practices related to privacy violations, data security incidents, identity theft and other data abuses. The legislation also provides about $5 billion in small business-related funding:
- About $2 billion over 10 years in new funding for SBA loans to the smallest businesses and nearly $1 billion in immediate, direct fee relief for new borrowers of the SBA 7(a) and 504 loans, waiving fees on loans under $2 million.
- $275.9 million to enhance and improve the Community Advantage program and also provide the SBA with authority to partner with not-for-profit lenders to deliver capital through the 7(a) loan program.
- $100 million to establish a pilot program for providing capital for cooperatives.
- $1 billion over the next 10 years to create a new network of “uplift incubators” to spur economic development in underrepresented communities.
- $200 million in cash grants of at least $100,000 for growth accelerators to expand their ability to help small businesses focused on technology.
Finally, the bill provides $24 billion for new workforce development grants, including worker training, employment services, re-entry programs, apprenticeships, industry partnerships and other programs, including those related to “climate resilience.”
Healthcare and Elder Care
The bill extends current Affordable Care Act subsidies through 2027. These subsidies were previously expiring at the end of 2022. The legislation would also expand the pool of eligible recipients by about 4 million by including residents in the 12 states that haven’t expanded Medicaid; however, the uncompensated care pool would be cut by $35 billion in exchange. These changes come at a cost of about $130 billion. For Medicare recipients, the program would cover hearing care for the first time, along with vastly improving the drug benefit, capping the total amount anyone would pay to $2,000 a year starting in 2024. The passed legislation dropped similar expansions of vision and dental care. The Medicare program would also be given new abilities to negotiate prices for drugs and limit price increases.
The bill also includes $150 billion in new spending for state Medicaid programs to expand access to home health aides and other alternatives to nursing homes.
KJK will continue to monitor developments pertaining to the Build Back Better Act, changes in tax law and spending packages.