WASHINGTON — Following a worse-than-expected report on June inflation, Sen. Joe Manchin (D-W.Va.) said Wednesday that more government spending would only drive prices even higher and that “leaders in Washington” needed to heed his warnings.
Manchin’s concern with more spending is nothing new — he killed the initial version of President Joe Biden’s “Build Back Better” proposal last year, complaining about its size and scope. But his willingness to support a much smaller package Democrats are trying to revive this summer could dwindle as well, with last month’s inflation hitting a 40-year high.
“No matter what spending aspirations some in Congress may have, it is clear to anyone who visits a grocery store or a gas station that we cannot add any more fuel to this inflation fire,” Manchin said in a statement.
Manchin has been negotiating with Senate Majority Leader Chuck Schumer (D-N.Y.) on a scaled-back domestic spending package totaling about $1 trillion, half of which would go toward deficit reduction. The two have made some progress — agreeing to a proposal to lower prescription drug prices, for example. But they’re still far off on other items like energy and climate investments, as well as a provision to lower health care insurance premiums.
Schumer is aiming for a deal before the Senate’s annual August recess.
The Bureau of Labor Statistics reported Wednesday that the consumer price index showed prices rose 9.1% in June, compared with 8.6% in May, meaning inflation that was already the worst since the early 1980s surged even higher.
Inflation results from a mismatch between supply and demand. Consumers have had strong spending power coming out of the COVID-19 pandemic, thanks partly to stimulus checks and extra unemployment benefits Congress enacted in 2020 and 2021. All that cash has collided with unusual supply chain problems driven by things like COVID-19 lockdowns in China and Russia’s war on Ukraine.
The Federal Reserve has been trying to squelch price increases by raising interest rates, basically chilling the economy by making it harder to borrow money. Congress, meanwhile, is watching from the sidelines.
Biden on Wednesday called the latest consumer price data “unacceptably high,” but also “out of date” because gas prices have fallen in recent weeks.
Manchin did seem to give Democrats a sliver of hope for a deal on a domestic spending bill ahead of the November midterm elections. Democrats, he said in his statement, should work together to get “unnecessary spending under control, produce more energy at home and take more active and serious steps” to address inflation.
That’s exactly why Democratic lawmakers are framing their proposals as needed steps to bring costs down, especially for basics like prescription drugs, gasoline and health care. But it’s not clear they’ll get much more than that. Other items on their agenda, like child care, affordable housing and free community college, seem to have fallen by the wayside.
Still, getting Manchin to a yes will be difficult if inflation continues to skyrocket. He told reporters on Wednesday that “everything needs to be scrubbed” from the spending package that adds to inflation.
Manchin is only one obstacle toward reviving a slimmed-down Build Back Better bill this year. A group of moderate Democrats in the House might oppose higher taxes on corporations and the wealthy.
The general outline of the deal Manchin and Schumer are cobbling together would include tax increases on corporations and the wealthy amounting to double the cost of any new spending.
Taxing the rich is incredibly popular with voters, but presents problems for some Democrats who represent wealthy areas. Last year, the Democratic House moderates said they wouldn’t support a final bill if it didn’t cut taxes for high-income homeowners, for instance.
“I’m concerned because we have seen those inflation numbers that we don’t raise taxes on anyone in my district,” Rep. Mikie Sherrill (D-N.J.), who represents one of the country’s most affluent districts, said at a press conference Wednesday.
Democrats hold a very slim majority in the House, so it only takes a few members to derail legislation. But no faction of House lawmakers has as much leverage as Manchin, since it’s basically up to him what Democrats in the evenly divided Senate can pass.
“This place has a way of making people eat ultimatums,” Rep. Jared Huffman (D-Calif.) told HuffPost.
Sen. Ron Wyden (D-Ore.), who chairs the Senate Finance Committee, similarly downplayed the renewed demands from Democratic moderates in the House.
“If we pass the kind of package that we’re working on in terms of holding down health care costs and laying out a transformative energy future, I think the House is going to pick up on it,” Wyden said.