Democrats Start to Sketch Out Revived Build Back Better Package

House Speaker Nancy Pelosi (D., Calif.) on Thursday said that Democrats wouldn’t seek to pass multiple pieces of legislation because of the procedural problems it could pose. But the party will likely have to further scale back its ambitions, she said.

“What the president calls ‘chunks’, I would hope would be a major bill going forward; it may be more limited, but it is still significant,” she said. She added that Democrats might have to change the name of the legislation, currently known as the Build Back Better Act.

Still, Democrats on Capitol Hill said Mr. Biden’s remarks more definitively showed that the White House would be willing to make major changes to the economic package in hopes of moving toward a deal. Mr. Biden, White House aides and Democrats on Capitol Hill have started to identify priorities for a revamped package: roughly $500 billion in incentives for reducing carbon emissions, which Mr. Manchin has said he supports, as well as measures aimed at lowering healthcare costs and expanded child-care programs.

The healthcare provisions would likely include extending subsidies for insurance premiums and empowering the government to negotiate the price of some prescription drugs, according to lawmakers and aides. Democrats also see a universal prekindergarten program, along with subsidies for child-care costs, as part of a resurrected effort.

Such a package could leave out programs from the House-passed version of the plan, including funding for housing and expanding Medicare to cover hearing. Democrats have already abandoned a host of proposals, including the creation of a 12-week paid-leave program and the offer of free community college, as they tried to tailor the bill to centrist demands.

All of the early discussions among Democrats are premised on trying to win the support of Mr. Manchin, who on Thursday said the party would have to totally restart their monthslong effort on the bill.

“I’m hoping to talk to everybody and start with a clean sheet of paper,” Mr. Manchin said. “We’ll just be starting from scratch whenever we start.”

He also again raised concerns about inflation, which he has said could be exacerbated by a major spending package.

“The main thing we need to do is take care of the inflation, get your financial house in order, get a tax code that works, take care of the pharmaceuticals gouging people with high prices, we can fix that. We can do a lot of good things,” he said.

Democrats are using a process called reconciliation to pursue the package. Reconciliation allows lawmakers to approve tax-and-spending measures with a simple majority in the Senate and skirt the 60-vote threshold required of other bills. But the procedure also comes with a number of limitations, including on how often it can be used, which would largely preclude Democrats from trying to pass multiple bills through the process.

In comments Friday, White House press secretary Jen Psaki said Democrats are focused on a bill that could pass through reconciliation, rather than trying to split off items and pass them with 10 Republican votes.

“We’re going to get as much…as we can of the Build Back Better agenda that we can get 50 votes for,” she said.

When he came out in opposition to the legislation in December, Mr. Manchin argued against Democrats’ plan to fund myriad programs for the short term in hopes of extending them later, saying that disguised the potential cost. Democrats are now working to choose a smaller core of initiatives to fund for the long term, while keeping the price tag in the range of $1.75 trillion. Mr. Manchin previously signaled he could support roughly that much spending.

“We need to get as much as we can across the finish line,” Sen. Elizabeth Warren (D., Mass.) said. “That’s hard because we have the skinniest possible majority and that means it takes every vote and so that means we have to do what it takes to get every vote.”

Democrats will face a particularly fraught choice on the expanded child tax credit, a central component of the House-passed plan and a subject of regular criticism by Mr. Manchin. The party had been hoping to continue offering a more-generous child tax credit to a larger group of Americans in monthly cash installments.

That expansion expired at the end of 2021, and Democrats have started sketching out how they could revive a pared-back version that might draw Mr. Manchin’s support. In a blow to some Democrats on Capitol Hill, Mr. Biden said Wednesday that Democrats might not be able to include any expansion of the child tax credit in the legislation.

Rep. Richard Neal (D., Mass.), the chairman of the Ways and Means Committee, said he would seek to alter the expansion in a way that was palatable to Mr. Manchin.

“I think that the child credit is very popular in the Democratic caucus,” he said. “We need to determine what Joe Manchin is in favor of.”

On the revenue side of the equation, Democrats expect their proposed tax increases to win the support of their caucus, though Mr. Manchin has expressed frustration that the party moved away from increases in the top rates for corporations and individual income. The party dropped those tax increases from the package to address the concerns of Sen. Kyrsten Sinema (D., Ariz.).

The party will also still have to grapple with demands to lift the $10,000 cap on the state and local tax deduction. Democrats from high-tax states such as New York and New Jersey have made lifting the cap, which Republicans put into place in their 2017 tax law, a priority in the bill. Other Democrats have said lifting the cap primarily benefits high-income Americans.

A group of three House Democrats said again Thursday that any deal would need to include measures addressing the state and local tax, known as SALT, deduction.

“We support the President’s agenda, and if there are any efforts that include a change in the tax code, then a SALT fix must be part of it. No SALT, no deal,” Reps. Tom Suozzi (D., N.Y.), Mikie Sherrill (D., N.J.) and Josh Gottheimer (D., N.J.) said.

Write to Andrew Duehren at andrew.duehren@wsj.com