Senate Majority Leader Chuck Schumer (D–N.Y.) has reportedly brokered a deal with Sen. Joe Manchin (D–W.Va.) to pass a slimmed-down version of President Joe Biden's spending plan—now to be marketed as an attempt to curb inflation.
In a statement on Wednesday evening, Manchin announced The Inflation Reduction Act of 2022, a bill that the swing-vote senator says will be built around "paying down our national debt, lowering energy costs and lowering healthcare costs."
Though Manchin's statement is light on specifics about the bill, subsequent reporting by Politico and other outlets quickly fleshed out the proposal. The bill will include $370 billion in new spending on climate change initiatives and green energy projects—a linchpin of Biden's Build Back Better plan through its many, many interactions over the past year—and would dedicate about $300 billion of revenue toward reducing the deficit, which has been Manchin's top priority.
The bill also reportedly includes a three-year extension of the expanded Affordable Care Act (ACA) subsidies originally passed as a temporary measure during the early days of the COVID-19 pandemic, as well as changes to how federal health insurance programs price prescription drugs. Though pitched as a way to cut costs for households, the extension of those ACA subsidies could actually worsen inflation, as Reason's Peter Suderman has explained.
The spending and deficit-reduction items will be funded with a series of proposed tax increases. Politico reports that the bill would impose a 15 percent corporate minimum tax, expand the IRS' enforcement division (a questionable means for generating revenue, it should be noted), and close a commonly used business tax break for carried interest. The tax changes would generate about $739 billion over the next decade, according to The Washington Post.
"It is past time for America to begin paying down our $30 trillion national debt and get serious about the record inflation that is crushing the wages of American workers," Manchin said in his statement on the bill. He said the bill's provisions would protect "small businesses and working-class Americans while ensuring that large corporations and the ultra-wealthy pay their fair share in taxes."
At first glance, it appears like Manchin's months-long opposition to the Build Back Better plan's trillion-dollar price tag has forced Schumer (and perhaps the White House) to accept the West Virginian senator's point of view. Manchin was stressing the need for deficit reduction as a way to cool inflation back when the Biden administration was still promising that price increases were transitory, and the intervening months have proven that Manchin was right to resist dumping even more money into an overheated economy.
With inflation still surging, a plan to reduce the deficit and ease consumer costs "may be exactly what the doctor ordered," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonprofit that advocates for lower deficits, in a statement. Though she was "encouraged" by the framework unveiled Wednesday night, MacGuineas said she was awaiting details on the specifics of the plan.
That seems wise. Earlier versions of the Build Back Better plan were loaded up with gimmicks that in some cases hid as much as half of the package's overall cost. Manchin was not shy about the fact that his opposition to Biden's proposal had a lot to do with those gimmicks, so it might be fair to assume that his support for this new deal is contingent on it being a clean bill. Even so, an inflation-combatting, deficit-reducing bill that doesn't combat inflation or reduce the deficit would be about par for the congressional course.
Politically, the announcement of this new framework kicks off the next round of questions about whether it can actually pass. After months of being in the spotlight for opposing his party's legislation, Manchin might get a nice break. Now, the focus will shift to the Senate's most left-leaning members, like Sens. Bernie Sanders (I–Vt.) and Elizabeth Warren (D–Mass.), who had previously championed the larger version of the bill that included huge subsidies for child care and far more money for environmental programs.
There's also the question of whether Democrats have the stomach to hike taxes—even if not in a broad-based way—during a recessionary period, on the brink of a potential recession, and just months before a midterm election in which they already seem likely to lose seats.
For today, at least, Joe Manchin seems to have gotten his way.