Here’s How Democrats’ Big Domestic Agenda Bill Has Shrunk

WASHINGTON — Call it the incredible shrinking domestic policy initiative.

As Democrats toil to salvage pieces of President Biden’s sweeping social policy, climate change and tax package this summer, their negotiations have highlighted how substantially they have had to curb their ambitions in bowing to political reality and economic shifts.

What was once a transformational cradle-to-grave social safety net plan that some liberals said they envisioned would spend as much as $6 trillion — with free preschool, affordable child care, national paid leave and major new programs to curb climate change — is now emerging as a roughly $1 trillion proposal with few of those components.

Even the prospects for a package of that size are in doubt as Senators Chuck Schumer, Democrat of New York and the majority leader, and Joe Manchin III, Democrat of West Virginia, haggle over the details of revamped legislation that is so far aimed at lowering the cost of prescription drugs and reducing the national debt.

Talks continue over whether to incorporate other longtime Democratic priorities, including tax increases, some climate and energy provisions and an extension of expanded Affordable Care Act subsidies.

The dramatic scaling back has been driven by the party’s razor-thin majorities and the refusal of Mr. Manchin to embrace some of his colleagues’ most costly plans. But it also reflects the demise of a brief but powerful political consensus that emerged at the start of the coronavirus pandemic in favor of unfettered domestic federal spending and a muscular role for the government in confronting the nation’s problems. With inflation and other economic concerns on the rise ahead of midterm elections, Democrats are poised to set aside their desire to enact huge new federal initiatives this year for a narrow package.

Here’s a look at how and where the Democrats’ domestic legislation has shrunk.

Health care

How it started: In his budget last year, Mr. Biden proposed expanding Medicare to cover hearing, vision and dental benefits, a proposal estimated to cost roughly $350 billion over a decade, and some progressive Democrats hoped to go even further, lowering the eligibility age to 60 from 65 in a change that would have cost $200 billion.

How it shrank: When the House passed its $2.2 trillion version of the bill in the fall, it included $165 billion to cover hearing for Medicare, to reduce health care premiums for people who are covered through the Affordable Care Act and to provide insurance for an additional four million people through Medicaid.

Where it stands now: Talks have now focused on whether to include an extension of expanded Affordable Care Act subsidies, which were enacted in March 2021 as part of the $1.9 trillion pandemic relief plan and are set to expire at the end of the year.

Democrats also released a plan aimed at lowering the cost of prescription drugs that would for the first time allow Medicare to regulate the prices of prescription drugs directly, according to a draft submitted to top Senate rules officials this month. It would cap the out-of-pocket amount that Medicare patients can be asked to pay for prescription drugs at $2,000 each year and restrict how much drug companies can increase prices.

Climate

How it started: President Biden, who pledged that the United States would cut its emissions at least 50 percent below 2005 levels by the end of the decade, called for a variety of climate proposals, including prohibitions on offshore drilling and the establishment of a Civilian Climate Corps.

How it shrank: Mr. Manchin, a conservative-leaning Democrat from one of the nation’s top oil- and gas-producing states, balked at many of the climate provisions, including the most significant measure, a program that would have replaced coal- and gas-fired power plants with wind and solar power. The House-passed plan set aside $555 billion for programs designed to curb fossil fuel emissions.

Where it stands now: Democrats are discussing a smaller climate and energy package. If enacted, it could still be the largest single action ever taken by the United States to address climate change. It would likely focus on about $300 billion in tax incentives for buyers and producers of wind, solar and nuclear power. The largest amount previously set aside to combat climate change at one time was about $80 billion, as part of the 2009 stimulus package.

Negotiators are also discussing tax incentives for purchasing electric vehicles and a provision to curb emissions of methane, a powerful planet-warming pollutant that leaks from oil and gas wells. Mr. Manchin has also expressed concerns with those proposals.

Families, education and jobs

How it started: The House-passed legislation included proposals to provide up to four weeks of federal paid family and medical leave and universal prekindergarten, as well as billions of dollars for college financial aid, child care and housing support. It also included an extension of expanded monthly payments to families with children, which lapsed at the end of 2021.

How it shrank: Mr. Manchin was opposed to many of the programs and indicated privately to Mr. Schumer in a memo last summer outlining his stance on the multitrillion-dollar package that, at the very least, he wanted to “means-test” them — limiting them only to Americans who needed them most.

Where it stands now: With Democrats looking to limit the spending to no more than half of the emerging $1 trillion plan, it is unlikely that any of those proposals will be included.

Tax increases

How it started: Democrats had grand ambitions about using the package not just to generate revenue for domestic spending, but also to make the tax code more fair, vastly increasing taxes on the wealthy. The House-passed package would have been paid for by substantial tax increases on high earners and corporations, which were estimated to bring in nearly $1.5 trillion over 10 years. And Democrats had initially envisioned rolling back key components of the tax cuts Republicans pushed through in 2017.

How it shrank: Senator Kyrsten Sinema, the centrist Democrat from Arizona, resisted the plan to increase most tax rates for the wealthiest corporations and people. (Ms. Sinema backed other tax-raising ideas, though some were met with pushback from other senators.)

Where it stands now: Senate Democrats have coalesced around one plan to raise taxes on some high-earning Americans by imposing an additional 3.8 percent tax on income earned from owning a piece of what is known as a pass-through business, such as a law firm or medical practice. The money would then be steered toward extending the solvency of the Medicare trust fund that pays for hospital care — currently set to begin running out of money in 2028 — until 2031, officials said.

Negotiators are also discussing shoring up the Internal Revenue Service’s enforcement ability as a way to raise billions of dollars, as well as some minimum taxes on corporations as they finalize the remaining proposals. But the revenue portion of the package has been one of the most challenging pieces to negotiate for Democrats, and officials cautioned that the contours could still change.

Some rank-and-file Democrats have begun to express consternation about raising taxes at all, facing a series of Republican attacks that the proposals would jeopardize small businesses and middle-class Americans already reeling from inflation.

A small group of Democrats — largely from high-income communities in states like New York and New Jersey — has also renewed a push to include an expensive proposal that would increase the federal tax deduction for state and local taxes. The House plan raised the so-called SALT cap set in the 2017 tax law, from $10,000 a year to $80,000, though its cost is likely to prevent its inclusion.