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In the biggest legislative surprise in recent memory, Senator Joe Manchin announced a sweeping deal with Democratic leaders on energy, climate, prescription drugs, health care, and taxes, titled the “Inflation Reduction Act of 2022.”
The deal came out of nowhere, even to many Democratic Senators, a true rarity in Washington.
It almost had the feel of a trick football play: The news broke on Wednesday just hours after the Senate had passed a $280 bipartisan bill on science, tech, and manufacturing that Mitch McConnell had threatened to tank if Democrats pursued a bill precisely along these lines. It left Democrats stunned, and Republicans fuming.
The bill is not 100% certain to pass — Senator Kyrsten Sinema, D-Ariz. could balk at a tax increase on private equity managers, among other hurdles — but it’s a huge step to a final vote and we’ll likely know the answer within days.
The terms of negotiations are also now totally changed. Democrats had little leverage over Manchin in deep red West Virginia, but any Democrat who derailed a bill now would almost guarantee a brutal primary challenge. And a “no” from Sinema would likely mean leaving the party, one way or another.
So what’s in it? Let’s review:
$739 billion in revenue:
- 15% Corporate Minimum Tax, $313 billion.
- Prescription Drug Reform, $288 billion.
- IRS Tax Enforcement, $124 billion.
- Close Carried Interest Loophole, $14 billion.
$433 billion in spending:
- Energy and Climate, $369 billion.
- Affordable Care Act Subsidies $64 billion (Notably a three-year extension, up from two in the last deal. That takes it past the 2024 election).
Substantively, it’s far less ambitious than the original $3.5 trillion Build Back Better plan or the $2 trillion bill that passed the House last year. Programs like universal pre-k and child care, free community college, expanded Medicare benefits, closing the Medicaid gap, home care for the elderly and disabled, child tax credits, new investments in affordable housing, as well as taxes on ultra-rich investors to pay for it, all fell out of talks long ago.
Now that Manchin turned out to be a gettable vote, Democrats are going to look back on those failed talks from last year and wonder if they might have gone another way if they'd offered him more concessions earlier.
But what made it into the final bill is still extremely significant, especially on climate, where Democrats and environmental groups were despondent before Wednesday about their path to meeting America’s emissions goals without a bill. Senate Democrats claimed the new legislation would put the US on track to cut emissions to 40% of 2005 levels by 2030, 80% of the way to Biden’s target.
Experts and activists who had been tracking the process found lots to like as they read the bill text Wednesday night, even as it contained some concessions to Manchin on fossil fuels. It even included tax incentives for electric vehicles, an area where Democrats had been especially pessimistic Manchin could be brought around.
Politically, Biden’s approval had been scraping the bottom of the barrel and the last eight months of Democratic finger-pointing over who killed his once-ambitious agenda were not helping.
But raising taxes on big business to invest in health care and climate is a concrete win for the coalition that elected him on priorities Democrats have campaigned on for decades. Add them to the pandemic stimulus (with an inflation asterisk), the bipartisan infrastructure bill, the bipartisan bill on guns, the bipartisan bill on manufacturing and technology, and you can see the outlines of a coherent re-election argument.
The symbolic value is also extremely important. One parallel to keep in mind might be President Trump, whose approval ratings and political capital within his party rebounded from a similar low point after he signed his tax cuts into law. Those cuts themselves weren’t especially popular, but they went a long way toward convincing Republicans he wasn’t a failed president. That’s a zone Biden has drifted dangerously close to with his base in recent weeks.
We’ll see if this is a turning point or a brief respite for Democrats, but if this bill passes (still a big "if") Biden could leave office with a clear legacy to point to no matter what happens next.