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A new inflation number fuels anxiety about Democrats' $2T bill

WASHINGTON (AP), -- Friday's government reports about rising inflation and potential costs of President Joe Biden’s social-environment legislation raised new questions regarding the bill's fate. Both sides hoped the new numbers would have an impact on pivotal Senator Joe Manchin.

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A new inflation number fuels anxiety about Democrats' $2T bill

Manchin, D.W.Va., is a moderate Republican who has spent months pushing Democrats to reduce the 10-year, $2 Trillion package. He argued it was too costly and sometimes cited growing inflation as reasons to slow down work on the bill. Friday's Labor Department report showed that consumer prices increased at 6.8% last month, which is the highest rate in 39 years.

The nonpartisan Congressional Budget Office also reported that if the bill's temporary spending increases and tax cuts were made permanent it would cost $3 trillion more. This would increase the bill's 10-year cost by more than twice to $5 trillion. Democrats called projections from the Republican-requested study fictitious.

Manchin's aides didn't respond to requests for comment. In a short interview, Manchin stated that he wants to know where he stands in terms of inflation and the true cost of the bill. He also expressed concern.

Biden used some of his most powerful language to date in response to the latest inflation numbers. He told reporters at the White House that he believes this is the peak crisis. Despite the obvious political danger facing the administration, recent performance on financial markets indicates that investors don't view inflation as a long-term issue.

Friday's reports were published two weeks before Christmas. This is when Senate Majority Leader Chuck Schumer (D-N.Y.), hopes to end months worth of negotiations among Democrats and push through a compromise bill in the Senate. An initial version was approved by the House last month.

Manchin is still seeking cuts to a measure that originally cost $3.5 billion. The day's reports have at best increased his leverage in an already tortuous process that has seen many near-death moments due to Democratic infighting. Worst, the numbers raised concerns that Manchin might abandon this package and sink it.

Biden stated at the White House that he didn't know how to win Manchin's support. Biden said that he would talk to Manchin early next week.

Each Democrat in the 50-50 Chamber will need to support the bill to allow Vice President Kamala Harris to cast a tiebreaking vote to approve it.

Leaders of both parties attempted to manipulate the numbers to their advantage, showing the political sensitivity to inflation and its effect on the Democratic bill (a collection of family services and health care priorities).

Democrats claimed that the inflation report made it more urgent to approve the measure. They claimed that the spending and tax credits for education, health care, and children's costs would help families deal with rising prices. The bill's major component is funded by tax increases on the wealthy and large corporations.

Biden stated that the legislation will have an impact on "reducing costs for ordinary citizens".

Republicans claimed that the legislation's spending would feed inflation. Inflation has been caused by supply chain delays, making products less readily available, and spending triggered by a strong economy.

Senator Minority Leader Mitch McConnell (R-Ky.) stated that inflation meant "the average American has gotten pay cuts." He added, "It's unimaginable that Senate Democrats would attempt to respond to this report by ramming through yet another massive socialist spending package within a matter of days."

The political impact of Friday’s inflation numbers on Friday was possibly mitigated by the fact that they were anticipated and showed a slight increase from October's 6.2%.

Inflation could be worsened by any additional stimulus to the economy. The Democrats' additional fiscal stimulus for the next few years would be less than 1% of the total U.S. economy. This makes its potential inflationary impact moderate, according to the nonpartisan Committee for a Responsible Federal Budget.

To reduce the bill's cost, Democrats have limited the duration of several initiatives in their package. This includes the extension of child tax credit enhancements for one year, and universal pre-school free for six years.

This is an accounting maneuver both parties use to make their budget plans appear more affordable. They would prefer their proposals to be permanent, and some may be extended simply because they are popular. These phaseouts were used extensively by Republicans for their massive tax cuts in 2017 and 2001.

"If you think these programs will disappear after one, two, or three years, then you shouldn't hold a driver's licence," stated Sen. Lindsey Graham, a top Republican on Senate Budget Committee. He requested the CBO estimates. He stated that the bill's high price tag and rising inflation would mean Democrats' legislation would be "lethal for the economy and deadly to your paycheck."

Democrats claimed that the $3 trillion additional cost was absurd because they could propose savings to pay for future extensions to their initiatives if they wanted to.

As though they were sharing a script, Psaki called GOP claims "fundamentally dishonest", while Senate Majority Leader Chuck Schumer (D-N.Y.), said Republicans were using fake scores based upon mistruths. House Speaker Nancy Pelosi (D-Calif.) called the numbers "a false score of an imaginary bill."

If the programs were permanent, outside groups have provided similar estimates of the cost of the legislation. Because CBO numbers are impartial, they have more influence in Congress.

Many aspects of the legislation remain in flux. Manchin wants to end the paid family leave program. He also wants to reduce or eliminate tax incentives that encourage a shift towards cleaner energy. The measure was also cut by Kyrsten Sinema (D-Ariz.), a moderate senator.

There have been disagreements among Democrats over how to reduce federal tax deductions so that people can pay state and local taxes. The Senate parliamentarian will also have to decide whether certain provisions, including the top party priority of allowing millions of migrants to remain in the U.S., violate the chamber's rules.

It is unclear if Schumer will be in a position to meet his Christmas deadline.

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