Reconciliation Bill Compromise Reached Between Schumer and Manchin

by Wall Street Rebel - Michael London | 07/28/2022 8:11 AM
Reconciliation Bill Compromise Reached Between Schumer and Manchin

Senator Joe Manchin of West Virginia, a key liberal Democrat, announced Wednesday that he had agreed to include hundreds of billions of dollars for climate and energy programs and tax increases in a package to subsidize health care and lower prescription drug costs, less than two weeks after abruptly ending hopes for such an agreement this summer.

 

A Reconciliation the package agreed to on Wednesday would set aside $369 billion for climate and energy proposals, which would be the most ambitious climate action ever taken by Congress. It would also raise an estimated $451 billion in new tax revenue over the course of a decade while cutting federal spending on prescription drugs by $288 billion.

It is the result of a deal announced by Mr. Manchin and Senator Chuck Schumer, a Democrat from New York and the leader of the majority in the Senate. If passed, it would cut the federal deficit by approximately $300 billion while simultaneously aiming to reduce the cost of health care, prescription medicines, and electricity.

However, Democrats, looking ahead to midterm elections likely to be shaped by voters' concerns about rising costs, pitched it as a targeted attack on the rapid price increases that have socked American consumers in the wallet this year, with inflation running at a 40-year high. Although the plan falls far short of the ambitious domestic policy and tax package that President Biden proposed last year, Democrats pitched it as a targeted attack on the rapid price increases that have socked American consumers in the wallet this year.

The announcement gave the impression that Democrats might take steps in the following days to save a significant part of their domestic agenda, which appeared to be hopeless only a few weeks ago due to Mr. Manchin's refusal to sign on to the agenda item quickly. Leading Democrats introduced the legislation on Wednesday evening to hold votes as soon as the following week.

In a statement, Vice President Joe Biden said, "This is the action the American people have been waiting for." He then urged both chambers of Congress to pass the measure swiftly. This not only addresses the issues that we face in the here and now, such as rising health care costs and general inflation, but it also makes investments in our nation's energy security for the years to come.

It was unclear what had changed Mr. Manchin's mind since he stated not even two weeks ago that he could not support such a package until he saw the inflation numbers for July, which are not scheduled to be issued for two more weeks after this sentence was written. However, it was not clear what had changed Mr. Manchin's mind. But in recent days, it seems that Mr. Manchin, Mr. Schumer, and their respective staffs have resumed conducting quiet negotiations, according to a person familiar with the talks.

The sudden announcement occurred only hours after the passage of a massive industrial policy bill to bolster American competitiveness with China. Senator Mitch McConnell, a Republican from Kentucky and the leader of the minority party, had previously stated that he would never support the bill as long as Democrats continued their efforts to push through their marquee domestic policy bill despite opposition from the G.O.P. The abrupt announcement took place only hours after the bill's passage. But before that legislation can become law, it must pass through the House, where Republican leaders have indicated that they will instruct their members to vote against it after hearing about the deal.

Due to the fact that the Senate is currently tied at 50 votes apiece and that Republicans are united in their opposition to the plan, Democrats require the support of every single member of their party in addition to the vote-breaking assistance of Vice President Kamala Harris to pass the plan under the special rules that exempt specific budget bills from the possibility of being filibustered. The resistance of Mr. Manchin has been the primary obstacle in the way of doing so from the very beginning. This has given him adequate veto power over the bill's contents and the final say over whether any measure could pass the Senate.

After hearing about the deal for the first time on Wednesday evening, a number of senators chose not to comment on it until they had more information about it. This included Senator Kyrsten Sinema, a Democrat from Arizona who has been an additional holdout on the domestic policy measure proposed by her party. (According to a spokeswoman for the senator's office, the law needed to be reviewed.) Even though he supported the plan, that did not ensure it would be implemented.

However, by the evening, a number of prominent liberal Democrats had come out in support of the plan.

In a separate statement, Mr. Schumer thanked Mr. Manchin for "his willingness to engage and his commitment to reaching an agreement," declaring that "by a wide margin, this legislation will be the greatest pro-climate legislation that Congress has ever passed." "By a wide margin, this legislation will be the greatest pro-climate legislation ever passed by Congress," Mr. Schumer said.

The agreement would impose most tax increases on multinational corporations and private equity firms. In addition, there would be a greater emphasis placed on cracking down on high-earning individuals and businesses attempting to evade paying the taxes they are legally obligated to pay.

One possible clue as to why Mr. Manchin changed his mind came in a line of his joint announcement with Mr. Schumer. They stated that they had secured a commitment from both Mr. Biden and Speaker Nancy Pelosi of California that Congress would approve a separate measure to address the permitting of energy infrastructure, potentially including natural gas pipelines, before the end of the fiscal year on September 30. This announcement line is one possible clue as to why Mr. Manchin changed his mind.

This could pave the way for Mr. Manchin's pet project, the Mountain Valley Pipeline, which would run from West Virginia to Virginia and transport shale gas from the Appalachians. Mr. Manchin has taken a personal interest in the project.

Even though there are still a number of parliamentary and procedural hurdles to overcome, Democrats have suggested that the Senate could take up the legislation as early as the following week. Due to the fact that Democrats intend to move it through an obscure budget process known as reconciliation, which enables particular fiscal measures to be passed with only a simple majority vote, it must adhere to stringent budgetary rules.

In their joint statement, Mr. Manchin and Mr. Schumer said that the legislation "will make a historic down payment on deficit reduction to fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40 percent by 2030." In addition, the two senators said, "we urge every member of the United States Senate to support this important legislation."

The announcement was met with resistance from Republicans, who reiterated their opposition to the plan proposed by Democrats.

Mr. McConnell stated this on his Twitter account: "Democrats have already crushed American families with historical inflation." "Now they want to pile on massive tax hikes that will hit workers hard and eliminate many thousands of jobs in the United States. First, they destroy the financial stability of your family. Now they want to stop your position as well.

Lindsey Graham, a Republican representing South Carolina in the Senate, voiced his incredulity at the notion that Joe Manchin would "agree to a massive tax increase in the name of climate change when our economy is in a recession."

He continued, saying, "I hope that common sense will eventually win the day." What I have been told about the conditions of this most recent attempt at reconciliation makes no sense to me.

However, in a separate statement, Mr. Manchin expressed his support for the agreement, praising it as beneficial to the economy, the environment, and the people's wallets.

"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. "This bill will also ensure our country invests in the energy security and climate change solutions we need to remain a global superpower through innovation rather than elimination."

He pointed out that the bill is called the Inflation Reduction Act of 2022, drawing a distinct line between it and the ambitious domestic policy plan that Mr. Biden had proposed and that Democrats in Congress had spent the majority of the previous year working to pass.

According to him, "Build Back Better is dead," and now "we have the opportunity to make our country stronger by bringing Americans together."

Mr. Manchin further stated that "our tax code should not favor red state or blue state elites with loopholes like SALT," which was a preemptive response to a lingering demand from some House Democrats to lift the cap on the deduction for state and local taxes as part of the final package.

The agreement falls far short of Mr. Biden's initial proposals to significantly expand social safety net programs and pay for them by taxing corporations and high earners. Specifically, the agreement will not increase taxes on high earners or corporations. But it is significantly larger than a package aimed at lowering prescription drug costs and extending expanded Affordable Care Act subsidies. Democrats had reluctantly concluded that this was the most they could hope to pass this summer after Mr. Manchin privately told party leaders this month that he would not support any climate or tax proposals in the short term. However, this new proposal aims to lower the cost of prescription drugs and extend expanded Affordable Care Act subsidies.

The two pieces of legislation pertaining to healthcare would begin in 2023, making it possible for Medicare to regulate prescription drug prices for the first time directly. It would also extend through 2025 an expansion of premium subsidies that Democrats first pushed through in 2021 as part of their $1.9 trillion pandemic aid bill, preventing a lapse at the end of the year. This would take effect immediately if the bill were passed.

The plan would raise the majority of its new tax revenue, an estimated $313 billion, by imposing a minimum tax on the so-called book income of large corporations such as Amazon and FedEx that currently use tax credits and other maneuvers to reduce their tax rates below the 21 percent corporate income tax rate in the United States. The current corporate income tax rate in the United States is 21 percent.

It has been a goal of the Democrats for a very long time to reduce the preferential tax treatment given to income earned by venture capitalists and private equity firms. This would raise an additional $14 billion for the government.

It invests $30 billion in production tax credits for solar panels, wind turbines, batteries, and the processing of critical minerals; $10 billion in tax credits to build manufacturing facilities for clean technology; and $500 million to be used through the Defense Production Act for heat pumps and the processing of critical minerals.

According to a summary of the package, the deal also includes a tax credit of $7,500 for new electric vehicles that are subject to a means test to make them more affordable, as well as a tax credit of $4,000 for used electric vehicles. Customers with low and moderate incomes will be the only ones eligible for these credits.

In addition, the measure will impose a methane tax beginning in 2025.

Also included will be $60 billion to address the disproportionate burden of pollution on low-income communities and communities of color, $27 billion for a "green bank" that is aimed at delivering financial support to clean energy projects, and $20 billion for programs that can cut emissions in the agriculture sector. All this money will come from the American Clean Energy and Security Act (ACESA), which was signed into law in December 2015.

The deal's announcement was shocking to those who advocate for the environment.

Samuel Ricketts, the co-founder of Evergreen Action and senior adviser to the organization, said, "I honestly don't know what to say." Evergreen Action is an environmental advocacy group. "Obviously, we're going to need to see the details in order to make a decision, but many people have been working really hard to try to save this deal. This has the potential to be a monumental step forward for the cause of reducing greenhouse gas emissions.

According to Mr. Manchin, the plan incorporates a "realistic energy and climate policy" that will "allow us to decarbonize while simultaneously ensuring that American energy is affordable, reliable, clean, and secure."

Mr. Manchin said in a statement that investments should be made not only in renewable power sources but also in fossil fuel energy and that "it is vital we do not undermine our superpower status by removing dependable and affordable fossil fuel energy before new technologies are ready to carry the load reliably." The statement highlighted investments in both fossil fuel energy and renewable power sources.

A goal that scientists say is essential to help keep the increase in global temperatures to 1.5 degrees Celsius by the end of this century has been pledged by Vice President Joe Biden to reduce U.S. emissions by approximately 50 percent before the end of this decade. According to scientific research, the risk of catastrophic heat waves, fires, and floods increases when temperatures rise above that threshold.

According to a synopsis of the deal that Democrats distributed, if the package is passed into law, it has the potential to bring the United States closer to Mr. Biden's goal.

 

             Manchin backs climate bill in a sudden reversal

 

 

 

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