Cooperation in Congress: Surprise deal promises $739 billion bill

Sen. Joe Manchin and Democratic leaders in the Senate have finally found a compromise on major legislation. Senator Manchin announced on July 27 that he would back a $739 billion bill that could net Democrats a victory ahead of the midterms.

First Look

In a startling turnabout, Senate Majority Leader Chuck Schumer and Sen. Joe Manchin announced an expansive agreement Wednesday that had eluded them for months addressing health care and climate, raising taxes on high earners and large corporations and reducing federal debt.

The two Democrats said the Senate would vote on the wide-ranging measure next week, setting up President Joe Biden and Democrats for an unexpected victory in the runup to November elections in which their congressional control is in peril. A House vote would follow, perhaps later in August, with unanimous Republican opposition in both chambers seemingly certain.

Just hours earlier, Senator Schumer, D-N.Y., and Senator Manchin, D-W.Va., seemed at loggerheads and headed toward a far narrower package limited – at Mr. Manchin’s insistence – to curbing pharmaceutical prices and extending federal health care subsidies. Earlier Wednesday, numerous Democrats said they were all but resigned to the more modest legislation.

The reversal was stunning, and there was no immediate explanation for Mr. Manchin’s abrupt willingness to back a bolder, broader measure. Since last year, he has used his pivotal vote in the 50-50 Senate to force Mr. Biden and Democrats to abandon far more ambitious, expensive versions, antagonizing the White House and most congressional Democrats.

“This is the action the American people have been waiting for. This addresses the problems of today – high health care costs and overall inflation – as well as investments in our energy security for the future,” Mr. Biden said in a statement. He urged lawmakers to approve the legislation quickly.

Tellingly, Democrats called the 725-page measure “The Inflation Reduction Act of 2022” because of provisions aimed at helping Americans cope with this year’s dramatically rising consumer costs. Polls show that inflation, embodied by gasoline prices that surpassed $5 per gallon before easing, has been voters’ chief concern. For months, Mr. Manchin’s opposition to larger proposals has been partly premised on his worry that they would fuel inflation.

Besides inflation, the measure seemed to offer something for many Democratic voters.

It dangled tax hikes on the wealthy and big corporations and environmental initiatives for progressives. And Mr. Manchin, an advocate for the fossil fuels his state produces, said the bill would invest in technologies for carbon-based and clean energy while also reducing methane and carbon emissions.

“Rather than risking more inflation with trillions in new spending, this bill will cut the inflation taxes Americans are paying, lower the cost of health insurance and prescription drugs, and ensure our country invests in the energy security and climate change solutions we need to remain a global superpower through innovation rather than elimination,” Mr. Manchin said.

Mr. Schumer called the bill Congress’ “greatest pro-climate legislation.” He said it would also cut pharmaceutical prices and “ensure the wealthiest corporations and individuals pay their fair share in taxes.”

The measure would reduce carbon emissions by around 40% by 2030, Mr. Schumer and Mr. Manchin said. While that would miss Mr. Biden’s 50% goal, that reduction, the measure’s climate spending and the jobs it would create are “a big deal,” said Sen. Jeff Merkley, D-Ore., an environmental advocate who had been upset with the absence of those provisions until now.

The overall proposal is far less aspirational than the $3.5 trillion package Mr. Biden asked Democrats to push through Congress last year, and the pared-down, roughly $2 trillion version the House approved last November after Mr. Manchin insisted on shrinking it. Even then, Mr. Manchin shot down that smaller measure the following month.

In summaries that provided scant detail, Democrats said their proposal would raise $739 billion over the decade in new revenue, including $313 billion from a 15% corporate minimum tax. They said that would affect around 200 of the country’s largest corporations, with profits exceeding $1 billion, that currently pay under the current 21% corporate rate.

The agreement also contains $288 billion the government would save from curbing pharmaceutical prices. Those provisions would also require Medicare to begin negotiating prices on a modest number of drugs, pay rebates to Medicare if their price increases exceed inflation and limit that program’s beneficiaries to $2,000 annual out-of-pocket expenses.

The measure would spend $369 billion on energy and climate change initiatives. These include consumer tax credits and rebates for buying clean-energy vehicles and encouraging home energy efficiency; tax credits for solar panel manufacturers; $30 billion in grants and loans for utilities and states to gradually convert to clean energy; and $27 billion to reduce emissions, especially in lower-income areas.

It would also aim $64 billion at extending federal subsidies for three more years for some people buying private health insurance. Those subsidies, which lower people’s premiums, would otherwise expire at year’s end.

The biggest revenue-raiser in the bill is a new 15% minimum tax on corporations that earn more than $1 billion in annual profits.

The deal also claims to bring in money by boosting the IRS to go after tax cheats, with an $80 billion investment in taxpayer services, enforcement, and modernization that is projected to raise $203 billion in new revenue over the decade.

The bill sticks with Mr. Biden’s original pledge not to raise taxes on families or businesses making less than $400,000 a year.

That would leave $306 billion for debt reduction, an effort Mr. Manchin has demanded. While a substantial sum, that’s a small fraction of the trillions in cumulative deficits the government is projected to amass over the coming decade.

Sen. Kyrsten Sinema, D-Ariz., was still reviewing the agreement, said spokeswoman Hannah Hurley. Senator Sinema backed Mr. Manchin last year in insisting on making the legislation less expensive but objected to proposals to raise tax rates.

Sen. John Cornyn, R-Texas, said the Democratic agreement would be “devastating to American families and small businesses. Raising taxes on job creators, crushing energy producers with new regulations, and stifling innovators looking for new cures will only make this recession worse, not better.”

But if Democrats can hold their troops together, GOP opposition would not matter. Democrats can prevail if they lose no more than four votes in the House and remain solidly united in the 50-50 Senate, where Vice President Kamala Harris can cast the tie-breaking vote.

“This agreement is a victory for America’s families and for protecting our planet,” said House Speaker Nancy Pelosi, D-Calif. “In light of the discussions of the past year, this agreement is a remarkable achievement.”

In the Senate, Democrats are using a special process that will let them pass the bill without reaching the 60 votes required for most legislation there. To use that, the chamber’s parliamentarian must verify that the bill doesn’t violate the chamber’s budget procedures, a review now underway.

Mr. Schumer and Mr. Manchin said leaders committed to revamp permitting procedures this fall to help infrastructure like pipelines and export facilities “be efficiently and responsibly built to deliver energy safely around the country and to our allies.”

This latest package after 18 months of start-stop negotiations leaves behind many of Mr. Biden’s more ambitious goals. 

Among them, a continuation of a $300 monthly child tax credit that was sending money directly to families during the pandemic and is believed to have widely reduced child poverty.

Also gone, for now, are plans for free pre-kindergarten and free community college, as well as the nation’s first paid family leave program that would have provided up to $4,000 a month for births, deaths, and other pivotal needs.

This story was reported by The Associated Press. AP reporters Lisa Mascaro, Matthew Daly, Will Weissert, Kevin Freking, and Seung Min Kim contributed to this report.