Mish Shedlock: Guaranteed Basic Income for Kids, New Trillion Dollar Entitlements, Republicans on Board

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Child Tax Credits have morphed into another massive entitlement program and Republicans are silent. What’s going on?

President Biden and the Progressives are on a full court press for the Child Tax Credit feature of Biden’s American Rescue Plan.

The American Rescue Plan increased the Child Tax Credit from $2,000 per child to $3,000 per child for children over the age of six and from $2,000 to $3,600 for children under the age of six, and raised the age limit from 16 to 17. All working families will get the full credit if they make up to $150,000 for a couple or $112,500 for a family with a single parent (also called Head of Household).

Guaranteed Basic Income for Kids

What started as a $500 child tax credit in the 1990’s has morphed into The New Government Basic Income

In March as part of their Covid relief bill, Democrats expanded the credit for 2021 to $3,600 for children under age six and $3,000 for older dependents. That’s up from the $2,000 Republicans offered as part of tax reform in 2017, which was an increase from $1,000.

The Democratic budget reconciliation bill would extend these provisions through 2025, and the political expectation is that they will be extended after that and never be repealed. That’s a safe bet. Democrats would also keep the full credit “refundable,” which means it is paid in a check to those who don’t owe any income tax.

Before the expansion, the average child credit for a family below 100% of the poverty line was about $975, according to estimates from the Congressional Research Service. Now it’s $5,421. That comes on top of other transfer programs such as food stamps and the earned-income tax credit.

The original tax-credit rationale was to defray the costs of raising young children, but the Democratic bill also creates new entitlements for a separate child-care program plus paid family leave and universal pre-K education.

Republicans have been missing in action on this seismic policy change, in part because their big government wing has been pushing the family subsidy as well.

How Much Can Manchin Stand?

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This all comes down to how much Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona can stand.

Manchin wants a package closer to $1.5 Trillion, Bernie Sanders wants $6.0 trillion and the alleged compromise is the $3.5 trillion that Biden seeks.

Biden Pressed Manchin for a Price Tag

Biden called the so-called moderate senators to the White House separately on Wednesday.

At the meeting Biden Pressed Manchin for a Price Tag that Manchin could support.

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Manchin, a key vote in the Senate, was part of a group of House and Senate moderates who met with Biden on Wednesday afternoon as Democrats try to figure out a way to bridge their divides on the $3.5 trillion package.

“He just basically said find a number you’re comfortable with,” Manchin said, adding that Biden’s message was to “please just work on it. Give me a number.”

Manchin told reporters that he didn’t give Biden a number he could get behind and that Biden didn’t give him a hard deadline for when moderates needed to turn over that number.

House and Senate Democrats approved a budget resolution earlier this year that allows them to pass a bill of up to $3.5 trillion without GOP support in the Senate.

But that price tag has run into hurdles from moderates, including Manchin and Sen. Kyrsten Sinema (D-Ariz.), who have said they can’t support a bill of that size.

But progressives are loath to go lower. Senate Budget Committee Chairman Bernie Sanders (I-Vt.) told reporters after the meeting that “the top line has come down. It started at $6 trillion.”

Manchin, speaking to reporters, warned progressives against holding the Senate-passed infrastructure bill “hostage.” Manchin was a part of the Senate bipartisan group that negotiated the bill in August.

“It’s still a shame, it truly is a shame, that they’re using that as a hostage toward this,” Manchin said. “To hold up a bill that every part of this country needs doesn’t make any sense at all,” Manchin said, adding that Biden “would love to see that bill to move forward.”

Still No Outline

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And so, here we are. There is still no reconciliation spending outline, and Progressives still threaten to sink the whole thing.

Sanders moans the starting point was $6 trillion. Perhaps he should have started at $100 trillion so he could moan about giving up 94% of what he asked.

Best Possible Outcome

The best possible outcome is if AOC and the Progressives do kill the whole deal because the county cannot afford another massive entitlement program when Social Security, Medicare, and Medicaid are all insolvent.

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