Senate Democrats on Sunday passed sweeping legislation containing provisions to address climate change, health care and taxes, a huge step forward on the party’s agenda after more than a year of halting negotiations.
The bill dedicates more than $300 billion to green energy incentives and climate spending, putting the U.S. on course to significantly reduce its greenhouse gas emissions. It also extends Affordable Care Act subsidies for three years, avoiding a coverage-loss calamity, and lets Medicare negotiate down some prescription drug prices.
Named the Inflation Reduction Act of 2022, the bill would also raise more than $700 billion through provisions including a 15 percent minimum corporate tax on businesses making $1 billion or more, beefing up IRS enforcement of tax evaders, and a tax on stock buybacks. It would reduce the deficit by more than $100 billion, according to the Congressional Budget Office.
An earlier provision would have narrowed the carried interest tax loophole, which progressive groups and many Democrats have long sought to do away with entirely. Sen. Kyrsten Sinema (D-AZ) nixed that provision, part of a deal with Democratic leadership to win her support. The stock buyback tax was added to replace it.
Vice President Kamala Harris cast the tie-breaking vote in the evenly decided Senate.
The bill would be the largest investment in clean energy in U.S. history, and also includes spending to prepare the U.S. to grapple with the impact of climate change. While the Senate has periodically passed clean energy incentives, the bill is the most significant legislation explicitly focused on addressing climate change in at least a generation.
A Deal That Surprised Just About Everyone
The bill’s passage came after Democrats worked through the weekend, including an all-night amendment session from Saturday into Sunday, to send the Inflation Reduction Act to the House before the Senate’s August recess. It was a lightning-fast leap forward following more than a year in which President Joe Biden’s agenda seemed stalled.
While the bill is a far cry from Democrats’ original Build Back Better-sized ambitions, it’s an enormous victory compared to the nothing it looked like centrist holdouts Manchin and Sinema would allow to pass at various times over the last twelve months.
As recently as mid-July, it seemed as if Manchin had scuttled Democrats’ ambitions once and for all. Yet days later, he and Sen. Majority Leader Chuck Schumer (D-NY) announced that they had reached a deal with a new, almost comically on-the-nose name aimed at assuaging Americans’ concerns about high inflation.
The way in which it was announced also seemed to suggest some craftiness on Democrats’ part, which made the announcement all the sweeter for constituents demoralized and cynical after months of Manchin promising cooperation only to pull the rug out from under the talks at the last minute.
Senate Minority Leader Mitch McConnell (R-KY), eager to disincentivize reconciliation dealing, had promised to sink a bipartisan bill centered on computer chips if Democrats didn’t stop negotiating on the vestiges of Build Back Better. Soon after, Manchin said that he would not support the deal he and Schumer had been working on for months, citing high inflation numbers.
Amid a flood of often very personal recriminations from Manchin’s Democratic colleagues, the Senate passed the chips bill. Immediately afterward, Manchin (and then Manchin and Schumer together) announced that they’d come to an agreement on a version of the old bill that had come back to life.
Republicans wailed and gnashed their teeth.
But even after Schumer achieved the impossible-seeming feat of getting Manchin on board, there were other tempestuous Democrats to secure.
Sinema (D-AZ) was reportedly “frustrated” and “totally shocked” after not having been feted like Manchin was in the crafting of the deal. Late last week, however, she signed on, accepting the removal of the carried interest provision and a few other tweaks — including a last-minute tax carveout for private equity firms — in exchange for her vote.
Significant Victories At A Significant Time
Democrats may still mourn dreams they thought earlier this year could become reality: the Clean Electricity Performance Program to revolutionize and green the electricity grid; the enhanced child tax credit, which drastically improved the plight of the millions of children living in poverty following its introduction in 2021; universal free pre-kindergarten. At the last minute, Republicans used Senate rules to knock a $35 price cap on the cost of insulin in the commercial insurance market out of the bill.
But the Inflation Reduction Act will let Democrats campaign on lowering drug prices, on sticking it to the rich and to corporations, on keeping health care coverage affordable and within reach for middle- and lower-income people.
Equally important, the bill is a significant step forward on climate change as global efforts to reduce emissions through the UN have faltered. The Biden administration has set the goal of reducing the U.S.’s greenhouse gas emissions 50 percent by 2030. According to an analysis released Friday by Princeton University’s REPEAT Project, the Inflation Reduction Act does not in itself put the U.S. on track to meet the 2030 target, but brings it within reach before 2035 — and sooner, if executive branch agencies, state and local governments, and private sector companies take further action.
As is, the legislation would speed the deployment of electric vehicles and other clean energy technologies, putting the U.S. on a path to cut its climate change-causing emissions by about 42 percent from 2005 levels by 2030, according to the REPEAT analysis. Another estimate from the Rhodium Group found the bill would put the U.S. on course for about a 40 percent reduction by 2030.
Compared to the nonexistent reconciliation package Democrats have had to brag about since Manchin unceremoniously slayed BBB last winter, it’s nothing short of a miracle.