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Sweeping budget package could give Senate Democrats a midterm boost

The Senate headed into recess having passed a massive climate and health care bill that few saw getting done this session.

WASHINGTON (CN) — After months of interparty wrangling, tense backroom negotiations and a marathon weekend session to get the legislation across the Senate finish line, Democrats sent a climate and health care bill over to the House that fulfills a longstanding campaign promise of President Joe Biden and could boost the party's prospects as November midterms draw ever-nearer.

It was a strict party-line vote on Sunday afternoon as all Senate Democrats, with the tie-breaking support of Vice President Kamala Harris, voted to pass the Inflation Reduction Act, a massive reconciliation bill that empowers Medicare to negotiate prescription drug prices and includes the largest federal investment in green energy and emissions reductions in U.S. history, paid for through changes to corporate tax laws and robust funding for the IRS.

Democrats say those revisions to tax law and increased funding for the IRS to go after tax evaders will pay for the law while also cutting a burgeoning deficit by $300 billion over the next decade, though the nonpartisan Congressional Budget Office puts that number closer to $100 billion.

The bill itself was a surprise to many. Democrats had spent the better part of a year fighting for party unity in the Senate over some version of what once was the $2 trillion social safety net legislation known as the Build Back Better Act. That bill included some of the hallmark items of Biden's presidential campaign, including climate change investments, free universal preschool and monthly child tax credits.

Senator Joe Manchin, a Democrat from West Virginia and key vote in the party, put the nail in Build Back Better's coffin earlier this year. But it was also Manchin who worked with Senate Majority Leader Chuck Schumer to draft a new bill and eventually put his seal of approval on the legislation now known as the Inflation Reduction Act.

"Build Back Better has been described by some Democrats as the right bill at the wrong time, just given the inflationary environment that we're living in. But I think if you're a Democratic partisan or a staffer, or you’re Senator Schumer, or even in the White House, you have to be absolutely thrilled over what happened this weekend," Carlos Algara, associate professor of political science at Claremont Graduate University, said in an interview.

Some of the provisions being celebrated include a $369 billion investment in energy and climate change programs over 10 years, a cap on monthly insulin prices for people who use Medicare and an extension of subsidies under 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.

"What the exclamation mark is is that Democrats were able to do all of this over completely unified Republican opposition. And the thing that surprises me the most, frankly, is Senator Schumer got the best of Senator McConnell. In many cases in this Senate it's a little unclear who runs, strategically, the show," Algara said. "And the fact that McConnell got caught so flat-footed and that [Republicans] truly believed that Senator Manchin was a hard no on any reconciliation bill was really surprising."

In order to get Arizona Democrat Kyrsten Sinema on board with the surprise deal, negotiators agreed to axe a provision that would have targeted a tax loophole used by hedge funds and add new funding for drought resiliency. That funding will direct the Bureau of Reclamation to conserve water resources and build up climate change efforts as Western states, including Sinema’s home state of Arizona, grapple with a historic drought.

Manchin's support of the bill came with its own concessions, including mandates for oil and gas leases in Alaska and the Gulf of Mexico that appear in conflict with the incentives for offshore wind, electric vehicles and other clean energy infrastructure.

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These provisions drew ire from many environmental activists, as well as Independent Senator Bernie Sanders of Vermont who pushed for the fossil fuel policies to be cut from the bill.

"There are some sort of overblown reactions about some of the fossil provisions. Many of them are prospective kinds of things like leasing," Paasha Mahdavi, political science professor and environmental politics researcher at University of California Santa Barbara, said in an interview, noting that many leasable acres are never actually used for oil and gas drilling. "So it's really a much smaller footprint from an emissions standpoint than most people realize."

Several popular provisions once lauded by Democrats as critical policies, particularly in the pandemic economy, including the monthly child tax credit and universal paid family leave, didn't make it into the bill

"The real elephant in the room is the absence of a child tax credit. And they couldn't get that because Manchin thought it was too expensive, and he didn't want to incur any more deficit spending, and that's something that would have affected people right away if they had put it in there," Todd Belt, professor and director of the political management program at George Washington University, said in an interview. "The problem with the other provisions in the bill, is that they're very much you know, forward. Effects are very much the future and certainly, certainly past Election Day."

Medicare won't be able to begin negotiating drug prices with pharmaceutical companies until 2026 and the effects of policies aimed at climate change are directed at the long-term, with the goal of cutting carbon emission cuts of roughly 40% by 2030.

"Democrats don't have the ability to say, 'Look at your pocket books, we are making things better.' They have to say, 'Trust us, we've done things that are going to make things better.' That's a much more difficult sell during midterm elections. But they do get to say, 'Look, we're doing something on the environment that we promised to do.' And that is a big issue for Gen Zers, who pretty much handed the White House to Joe Biden," Belt said.

For many, the package is heralded as a legislative win for Democrats, particularly for the senators hitting the campaign trail and looking to hold on to power in the November midterms.

"It certainly gives Democratic senators something to talk about on the campaign trail. It gives the party a win and puts Republicans in a position to come up with an argument as to why you would oppose, say, capping insulin prices, which is very, very popular," Algara said. "In terms of whether it's going to fundamentally change the campaign after Labor Day, I'm a little bit skeptical. And the reason why is we're still in this broader inflationary [context], that's taking a toll on President Biden's approval rating."

The president's party traditionally loses seats in Congress during midterm elections, a concerning trend for Democrats who have few seats to spare without losing their majority.

"I think Democrats are virtually guaranteed to lose the House. But I think the Senate is a toss up," Algara said.

Belt said Republicans may have handed Democrats even more of a win by unilaterally voting against the legislation.

"I think they're helped out a little bit by the Republicans in complete opposition to it. I think that helps the Democratic messaging. If you're just against everything, then what are you for?" he said.

While the November election is still months away, the fact that the Senate stayed in session an extra weekend and the House will return from recess on Friday to pass a bill few saw getting done this month could be a useful tool for Democrats.

"There are lots of things that will affect how the midterms shake out in November, but one concern that Democrats had was that their base voters would be sort of demoralized by a lack of legislative action. And one of the things that we've seen over the past several weeks is actually a pretty active Congress. And this bill's probably kind of going to be the capstone to that," Molly Reynolds, a senior fellow in governance studies at the Brookings Institution, said in an interview.

The bill capped off a productive last few weeks before lawmakers hit the road for the August recess, following votes passing legislation to bolster domestic production of semiconductor manufacturing and funding for veterans medically impacted by toxic burn pit exposure.

"If you write the story of the 117th Senate, it will be a story of 'Oh my goodness, when the pivotal vote is a Democratic senator from West Virginia, it is remarkable they were able to get so much done,'" Algara said.

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