Manchin, Schumer in Surprise Deal on Health, Energy, Taxes

In a startling turnabout, Senate Majority Leader Chuck Schumer and Sen. Joe Manchin announced an expansive agreement Wednesday that had eluded them for months addressing health care and climate, raising taxes on high earners and large corporations and reducing federal debt.

The two Democrats said the Senate would vote on the wide-ranging measure next week, setting up President Joe Biden and Democrats for an unexpected victory in the runup to November elections in which their congressional control is in peril. A House vote would follow, perhaps later in August, with unanimous Republican opposition in both chambers seemingly certain.

Just hours earlier, Schumer, D-N.Y., and Manchin, D-W.Va., seemed at loggerheads and headed toward a far narrower package limited — at Manchin's insistence — to curbing pharmaceutical prices and extending federal health care subsidies. Earlier Wednesday, numerous Democrats said they were all but resigned to the more modest legislation.

The reversal was stunning, and there was no immediate explanation for Manchin's abrupt willingness to back a bolder, broader measure. Since last year, he has used his pivotal vote in the 50-50 Senate to force Biden and Democrats to abandon far more ambitious, expensive versions. He dragged them through months of negotiations in which leaders' concessions to shrink the legislation proved fruitless, antagonizing the White House and most congressional Democrats.

“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," Biden said in a statement. He urged lawmakers to approve the legislation quickly.

Tellingly, Democrats called the 725-page measure “The Inflation Reduction Act of 2022” because of provisions aimed at helping Americans cope with this year's dramatically rising consumer costs. Polls show that inflation, embodied by gasoline prices that surpassed $5 per gallon before easing, has been voters’ chief concern. For months, Manchin’s opposition to larger proposals has been partly premised on his worry that they would fuel inflation.

Besides inflation, the measure seemed to offer something for many Democratic voters.

It dangled tax hikes on the wealthy and big corporations and environmental initiatives for progressives. And Manchin, an advocate for the fossil fuels his state produces, said the bill would invest in technologies for carbon-based and clean energy while also reducing methane and carbon emissions.

“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,” Manchin said.

Schumer called the bill Congress' “greatest pro-climate legislation.” He said it would also cut pharmaceutical prices and “ensure the wealthiest corporations and individuals pay their fair share in taxes.”

The measure would reduce carbon emissions by around 40% by 2030, Schumer and Manchin said. While that would miss Biden's 50% goal, that reduction, the measure's climate spending and the jobs it would create are “a big deal," said Sen. Jeff Merkley, D-Ore., an environmental advocate who had been upset with the absence of those provisions until now.

The overall proposal is far less aspirational than the $3.5 trillion package Biden asked Democrats to push through Congress last year, and the pared-down, roughly $2 trillion version the House approved last November after Manchin insisted on shrinking it. Even then, Manchin shot down that smaller measure the following month, asserting it would fuel inflation and was loaded with budget gimmicks.

In summaries that provided scant detail, Democrats said their proposal would raise $739 billion over the decade in new revenue, including $313 billion from a 15% corporate minimum tax. They said that would affect around 200 of the country's largest corporations, with profits exceeding $1 billion, that currently pay under the current 21% corporate rate.

The agreement also contains $288 billion the government would save from curbing pharmaceutical prices. Those provisions would also require Medicare to begin negotiating prices on a modest number of drugs, pay rebates to Medicare if their price increases exceed inflation and limit that program's beneficiaries to $2,000 annual out-of-pocket expenses.

The deal also claims to gain $124 billion from beefing up IRS tax enforcement, and $14 billion from taxing some “carried interest” profits earned by partners in entities like private equity or hedge funds.

The measure would spend $369 billion on energy and climate change initiatives. These include consumer tax credits and rebates for buying clean-energy vehicles and encouraging home energy efficiency; tax credits for solar panel manufacturers; $30 billion in grants and loans for utilities and states to gradually convert to clean energy; and $27 billion to reduce emissions, especially in lower-income areas.

It would also aim $64 billion at extending federal subsidies for three more years for some people buying private health insurance. Those subsidies, which lower people's premiums, would otherwise expire at year's end.

That would leave $306 billion for debt reduction, an effort Manchin has demanded. While a substantial sum, that's a small fraction of the trillions in cumulative deficits the government is projected to amass over the coming decade.

Sen. Kyrsten Sinema, D-Ariz., was still reviewing the agreement, said spokeswoman Hannah Hurley. Sinema backed Manchin last year in insisting on making the legislation less expensive but objected to proposals to raise tax rates, and the spokeswoman referred a reporter to her comments last year supporting a corporate minimum tax.

Sen. John Cornyn, R-Texas, said the Democratic agreement would be “devastating to American families and small businesses. 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.”

But if Democrats can hold their troops together, GOP opposition would not matter. Democrats can prevail if they lose no more than four votes in the House and remain solidly united in the 50-50 Senate, where Vice President Kamala Harris can cast the tie-breaking vote.

“This agreement is a victory for America’s families and for protecting our planet," said House Speaker Nancy Pelosi, D-Calif. “In light of the discussions of the past year, this agreement is a remarkable achievement."

The bill lacks increased tax deductions for state and local taxes, which some Democrats from high-tax states have demanded as the price for their support. A spokesperson for Rep. Josh Gottheimer, D-N.J., a leader of that group, did not immediately return a message seeking comment.

In the Senate, Democrats are using a special process that will let them pass the bill without reaching the 60 votes required for most legislation there. To use that, the chamber's parliamentarian must verify that the bill doesn't violate the chamber's budget procedures, a review now underway.

Schumer and Manchin said leaders committed to revamp permitting procedures this fall to help infrastructure like pipelines and export facilities “be efficiently and responsibly built to deliver energy safely around the country and to our allies.”

Sierra Club Legislative Director Melinda Pierce said her group wanted to read the agreement's details but was glad Biden and Schumer "remained resolute in finding a path to pass once-in-a-generation investments in our communities, our economy, and our future.”

Manchin just last week said he would only agree to far more limited legislation this month on prescription drugs and health care subsidies. He said he was open to considering a broader compromise on environment and tax issues after Congress returned from a summer recess in September, an offer that many Democrats considered dubious because of lawmakers' abbreviated pre-election schedule.

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AP reporters Matthew Daly, Will Weissert, Kevin Freking and Seung Min Kim contributed to this report.