Senate Majority Leader Charles Schumer (D-N.Y.) and centrist Sen. Joe Manchin (D-W.Va.) on Wednesday said they had struck a climate, health and tax package deal — weeks after Manchin seemingly had scuttled any chance of an agreement because of his worries over inflation.
The new package is a fraction of the more than $3 trillion deal once envisioned by liberal Democrats, but it still could give the party a big win ahead of midterm elections where House and Senate majorities are on the line.
The deal will be part of the budget reconciliation package that Senate Democrats plan to bring to the floor next week and pass on a party-line vote, circumventing a Republican filibuster under special Senate rules.
It would invest $369 billion in energy-focused climate programs over the next 10 years and $300 billion to reduce the deficit. It would be added to legislation to lower prescription drug prices and extend expiring health care subsidies.
“After many months of negotiations, we have finalized legislative text that will invest approximately $300 billion in deficit reduction and $369.75 billion in energy security and climate change programs over the next ten years,” Schumer and Manchin announced in a joint statement. “The investments will be fully paid for by closing tax loopholes on wealthy individuals and corporations.”
Manchin had come under a storm of criticism from Democrats after saying he could not agree to climate provisions because of his concerns over inflation. Democrats despaired that the party was missing an opportunity to take action at a time when the party held the White House and majorities in both chambers.
In their joint statement, Schumer and Manchin said the agreement will reduce emissions by roughly 40 percent by 2030.
It would raise $739 billion in new revenue through a variety of proposals, according to a one-page summary provided by the negotiators: $313 billion through a 15-percent corporate minimum tax, $288 billion from empowering Medicare to negotiate lower drug prices, $124 billion from strong IRS enforcement of tax law and $14 billion from closing the carried interest loophole for money managers.
It would spend $369 billion on energy security and climate change and $64 billion to extend health care subsidies under the Affordable Care Act.
And in a nod to Manchin, who represents a deep-red state easily won by former President Trump in the 2020 election, it would allocate $300 billion to reduce the deficit.
The announcement came as a surprise Wednesday after talks between Schumer and Manchin over tax reform and the energy and climate provisions of the package collapsed on July 14, shortly after the Bureau of Labor Statics reported that inflation hit 9.1 percent in June.
Manchin at the time said he wanted to wait to see the inflation data for July and hear more guidance from the Federal Reserve about future interest rate hikes before agreeing to any deal that might fuel inflation.
The timing of Manchin and Schumer’s announcement raised eyebrows for a few reasons.
A few hours earlier, the Federal Reserve voted to increase the central bank’s baseline interest rate by three-quarters of a percentage point in an effort to slow inflation.
And it came just after 17 Republicans joined Democrats in voting to pass a bill to spend $280 billion to help the domestic semiconductor industry and fund the National Science Foundation — a key priority that had been jeopardized by talk of a reconciliation bill earlier this month.
Senate Minority Leader Mitch McConnell (R-Ky.), who voted for the chips and science bill, had vowed to block the legislation if Democrats stuck to their plans to pass a reconciliation bill that raised taxes and spent hundreds of billions of dollars on climate-related programs.
Sen. John Cornyn (Texas), a member of the GOP leadership team who also voted for the chips bill, blasted Manchin’s deal with Schumer and his office accused the West Virginia senator of having “flip-flopped.”
“Senate Democrats can change the name of Build Back Broke as many times as they want, it won’t be any less devastating to American families and small businesses,” Cornyn said. “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.”
Senate Republicans appeared to retaliate Wednesday by defeating a motion to proceed to a $278 billion bill to help veterans suffering from toxic chemical exposure, which was expected to get enough votes to advance. The procedural motion failed 55-42, falling five votes short of the 60 needed.
A Senate GOP aide said Republican senators were upset they couldn’t get a deal on considering more of their amendments to that bill.
The newly crafted budget reconciliation deal is a fraction of the size of the $1.75 trillion framework that the White House unveiled in October with the belief that Manchin would support it.
Its price tag also falls far below the $3.5 trillion spending blueprint Senate Democrats passed as part of their budget resolution a year ago.
Manchin told a West Virginia radio station last week that he never seriously considered supporting President Biden’s full Build Back Better plan, which he called “a complete social realignment.” He said he told Biden directly such a grand spending bill “is going to change our country” for the worse.
Biden said Wednesday he spoke to both Schumer and Manchin “and offered my support for the agreement.”
“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,” he said.
Manchin on Wednesday said his new deal with Schumer would also help curb inflation by reducing the federal deficit.
“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,” he said in separate statement. “In practical terms, the Inflation Reduction Act of 2022 would dedicate hundreds of billions of dollars to deficit reduction by adopting a tax policy that protects small businesses and working-class Americans while ensuring large corporations and the ultra-wealthy pay their fair share in taxes.”
The West Virginia senator emphasized the deal does not include language to raise the cap on state and local tax deductions, something that was a top priority for Schumer and other Democrats from high-tax states.
In a win for Schumer and other Democrats, such as Senate Health, Education, Labor and Pensions Committee Chairwoman Patty Murray (Wash.), the deal will extend premium subsidies under the Affordable Care Act for three years, through 2025. Schumer and Manchin had previously discussed only a two-year extension.
Sen. Debbie Stabenow (D-Mich.) told reporters that Schumer and Manchin had reached a deal on electric vehicles but declined to share details.
Senators who urged Manchin all year to do something about the climate touted the announcement as a significant development.
“Democrats are about to take the biggest, most serious step in congressional history to lead our only plant to safety in the race against climate change,” said Sen. Sheldon Whitehouse (D-R.I.).
Sen. Brian Schatz (D-Hawaii) called it “the biggest climate action in human history.”
The revised legislative text will be considered by the full Senate next week, and Senate Finance Committee Chairman Ron Wyden (D-Ore.) said he expected it to pass. Wyden said Manchin and Schumer had agreed to many of the energy tax cuts in the deal two weeks ago.
“As I said two weeks ago, we are basically there in terms of clean energy tax credits,” he said. “We are going to be having other discussions later this evening.”
Updated at 7:27 p.m.