Washington — Senate Majority Leader Chuck Schumer and Sen. Joe Manchin, a moderate Democrat from West Virginia, surprised Washington this week with their announcement of a deal on a spending package that aims to address health care costs, combat climate change and tackle the deficit.
An agreement on the plan has evaded Democrats for months, with negotiations coming in fits and starts as Manchin expressed concerns about new federal spending amid rising consumer prices. But a breakthrough emerged Wednesday with the Inflation Reduction Act, breathing new life into President Biden’s domestic policy agenda.
While more narrow than the sweeping social spending proposal put forth by Mr. Biden last year, the president on Wednesday threw his support behind the deal from Schumer and Manchin, saying in a statement it will address high health care costs and inflation, and invest in the nation’s energy security.
Senate Democrats are using an expedited legislative process called budget reconciliation to move the plan through the upper chamber, which allows it to pass with a simple majority. But with Democrats controlling 50 seats, support — and attendance — from all of their members is crucial in order for the measure’s passage. It’s unclear whether Sen. Kyrsten Sinema, a moderate Democrat from Arizona, backs the measure, and she was absent from a Democratic caucus meeting Thursday.
Schumer and Manchin said in a statement Wednesday the legislative text would be submitted to the Senate parliamentarian for review to ensure it complies with the rules of the budget reconciliation process, and the full Senate could consider the legislation next week before departing for the monthlong August break.
But COVID-19 infections could complicate that plan. Sen. Dick Durbin, a Democrat from Illinois, announced Thursday he tested positive and would work remotely, while Sen. Patrick Leahy, a Democrat from Vermont, has been sidelined by surgery after fracturing his hip last month.
Still, Mr. Biden is urging swift passage of the plan by the Senate, followed by approval from the Democrat-led House.
Here is what’s in the new health care, tax and energy package:
Tax Revenue
Democrats’ tax revenue proposal has two components: a 15% corporate minimum tax imposed on the nation’s largest corporations, which would raise an estimated $313 billion, and nearly $80 billion needed for tax enforcement and compliance by the Internal Revenue Service.
The increased tax enforcement will bring in an estimated $124 billion, according to the Congressional Budget Office.
Democrats predict their new package will reduce the deficit by roughly $300 billion, and they stressed the tax provisions will not affect families making $400,000 or less, which follows a promise from Mr. Biden.
Health Care
The new legislation includes a policy that allows Medicare to negotiate for the price of prescription drugs starting in 2023 and sets an annual cap of $2,000 on out-of-pocket costs for Medicare patients enrolled in drug plans, according to a summary from Senate Democrats’.
The prescription drug pricing provisions are estimated to bring in $288 billion, according to the Congressional Budget Office.
Under Democrats’ proposal, enhanced Affordable Care Act subsidies would also be extended through 2025. The premium subsidies were included in the $1.9 trillion COVID-19 relief package enacted last year and were set to lapse at the end of the year.
According to the Congressional Budget Office, the extension of the subsidies will cost $64 billion over 10 years.
Climate and Energy
The legislation invests $369 billion in energy security and climate change proposals and reduces carbon emissions by approximately 40% by 2030, Democrats said in a summary of the provisons.
Senate Democrats herald the plans to combat climate change as representing the “single biggest climate investment in U.S. history.”
To incentivize consumers to purchase technologies to lower emissions and energy prices, the bill includes $9 billion in consumer home energy rebate programs, a $4,000 consumer tax credit to purchase used electric vehicles and a $7,500 tax credit to buy new clean vehicles, both of which are available only to lower and middle income individuals.
The bill’s energy section invests $30 billion in production tax credits to speed U.S. production of solar panels, wind turbines, batters and critical minerals processing; $10 billion in tax credits to build clean technology manufacturing facilities, such as those that make electric vehicles and and solar panels; and $500 million through the Defense Production Act for heat pumps and critical minerals processing.
It also calls for $2 billion in grants to shift existing auto manufacturing facilities to make clean vehicles and up to $20 billion in loans to construct new clean vehicle plants, according to the outline from Senate Democrats.
For rural communities, the plan invests more than $20 billion for “climate-smart agriculture practices,” $5 billion in grants for fire-resilient forests, forest conservation and urban tree planting, and $2.6 billion in grants for conservation and restoration of coastal habitats, Democrats said.
