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Schumer hammers out climate change, health care deal with recalcitrant Manchin

The bill funds the fight against global warming while aiming to slash the deficit by $300 billion over 10 years.

WASHINGTON (CN) — A climate change and health care package is primed to make its way through House goal posts, a stunning coup for the Biden administration after the Democratic majority leader of the Senate found middle ground this week with the coal-rooted Senator Joe Manchin.

Manchin, a centrist Democrat in the largely red state of West Virginia, told reporters the deal was not about fueling the party's goals but about backing policies he felt should be bipartisan interests.

"The best politics is good government. Let's do something for the country. This is not being Democrat, this is not being Republican. I didn't do anything to help either side," he said in a Zoom call with reporters Thursday.

Only a few weeks earlier, Manchin said he would not support a reconciliation package until additional data came out about the state of inflation. Manchin said the negotiations were not easy and that talks with the Senate's Democratic Majority Leader Chuck Schumer became tense after inflation numbers came in two weeks ago, reflecting a 9.1% surge in consumer prices over the past year.

"That 9.1 came in. 'I just can't I just can't do it. No,' I said. And then that's when Chuck got upset," Manchin recalled.

Manchin said the deal came together Tuesday evening.

"Inflation is not going to go away any time soon," Manchin acknowledged, but he said he is backing the legislation because it contains policies that he feels will provide some relief to economic woes.

Manchin's assertions that the federal government needs to reign in a burgeoning deficit put the senator at odds with party leaders and President Joe Biden for more than a year. The West Virginia Democrat contributed heavily to the collapse of Build Back Better, a $2 trillion climate and economic policy proposal that Manchin declared "dead" in February.

"All of you, I know, might be surprised," Manchin said Thursday. "But there should be no surprise because I've never walked away from anything in my life. I just felt there was an opportunity here to really give us an energy policy with security that we need for our nation, but also driving down the high price of gasoline. Driving down inflation was my No. 1 goal."

Manchin's stated goal is even reflected in the name of the bill, the Inflation Reduction Act of 2022, which otherwise tackles the Democratic Party's long-held goals of reducing carbon emissions and empowering Medicare to negotiate drug prices.

Coupled with a series of changes to tax and Medicare laws that will raise $739 billion in revenue over 10 years, paying for the cost of the package and lowering the national deficit by $300 billion, the deal includes $433 billion in new climate and health care spending.

The bill also includes a $369 billion investment in energy and climate change programs over 10 years. That alone is the largest investment in climate spending in American history.

"This is geopolitical, it's many things, but we think we can walk and chew gum at the same time and have a balanced approach, and have new investments in new clean technology," Manchin said.

Sen. Joe Manchin, D-W.Va., leaves his office on Dec. 13, 2021, after speaking with President Joe Biden about his long-stalled domestic agenda. Manchin is a pivotal Democratic vote on passage of the president's top legislative priority. (AP Photo/J. Scott Applewhite)

Another $65 billion will extend subsidies under former President Barack Obama's health care law, the Affordable Care Act, for people purchasing their own insurance. The aid program was set to expire this year, but will now be funded through 2025.

Biden said during a speech on Thursday that the subsidy program will save 13 million people an average of $800 a year on their health care costs.

Policies to generate revenue are laced throughout the new spending. One such provision would empower Medicare to negotiate prescription drug prices with pharmaceutical companies, a perennial goal of Democrats that will save an estimated $288 billion over 10 years.

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Because of the money-saving measure, the federal government will be able to cap out-of-pocket pharmacy drug costs for seniors at $2,000.

The bill also creates a 15% minimum corporate tax that is estimated to raise $313 billion. 

No one making less than $400,000 a year will see a tax increase because of the bill, Democrats insist, saying the new rules target corporations that evade paying taxes.

Additional provisions that would generate revenue include an increase to IRS tax enforcement and the closure of the carried investment loophole, which allows investment managers to pay lower taxes on portions of their income.

Biden and Democratic leaders are celebrating the hard-fought deal on the legislation.

“The work of the government can be slow and frustrating, and sometimes even infuriating," Biden said during a Thursday speech celebrating the legislation. "Then the hard work of hours, and days, and months for people who refuse to give up pays off, history is made, lives are changed. With this legislation, we're facing up to some of our biggest problems and we're taking a giant step forward as a nation."

Aspects of the legislation aimed at driving down carbon emissions include a new investment tax credit program for low-carbon electricity production, rebates for purchasing electric vehicles, and subsidies for households that purchase solar panels or electric water heaters.

Roughly $60 billion will go toward tax credits for clean energy production, and another $30 billion in tax credits will go specifically toward wind and solar.

The bill is not without its concessions, however, and it leaves several of Biden’s policy priorities on the cutting-room floor even while its size and scope come as a shock to many.

Democrats spent months pushing for free community college and free universal preschool programs, which are nowhere to be seen in the final bill. Plans to extend the child tax credit, a pandemic-era policy that provided monthly stipends to families and served as a lifeline to many, also did not make it into the final bill.

The legislation is promised to help lower carbon emissions — summaries of the bill from Democrats estimate carbon emission cuts of roughly 40% by 2030 — but one key portion mandates offshore oil drilling in Alaska and the Gulf of Mexico.

Manchin said he was focused on getting the deal announced ahead of the Senate recess in early August.

Senate Democrats plan to vote on the package next week, using reconciliation to skirt the filibuster and avoid Republican acrimony. All Senate Democrats would need to get on board for this to happen, however, and the Senate parliamentarian would have to approve as well.

Democratic wild-card Senator Kyrsten Sinema has not said whether she will support the legislation, and the party is also grappling with several member absences due to Covid-19, including Manchin himself.

Manchin said he has not talked to Sinema about the legislation, but noted it does not raise taxes on average Americans and empowers the federal government to negotiate drug prices — policies Sinema has supported.

"We didn't raise taxes, so she should be happy about that," Manchin told reporters.

Notably, Sinema has long opposed a policy taxing carried interest, which is included in the package.

The West Virginia senator said he is "not prepared" to cut the policy from the legislation.

Manchin and Schumer's deal became public after the Senate passed a massive bill to subsidize domestic manufacturing of semiconductors. 

Senate Republicans had threatened to hold up the manufacturing bill if Democrats were pushing for a climate and health care bill, but the strategic timing of the announcement after the manufacturing bill’s passage left Senate Minority Leader Mitch McConnell and his party with little leverage.

"There was no malice whatsoever," Manchin said Thursday of the timing of the bill's announcement.

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