Democratic Budget Reconciliation Plan: Senate Passes the Inflation Reduction Act

Democrats capped a series of legislative victories over the past couple of weeks with the passage of the Inflation Reduction Act, Sen. Joe Manchin’s substitute for the Build Back Better bill passed earlier in the House.

The Daily Beast reports, Senate Dems Finally Pass Sweeping Spending Bill After Chaotic ‘Vote-a-Rama’:

After more than a year of painstaking and dramatic negotiations, Democrats on Capitol Hill finally passed a sweeping climate, tax, and health care bill Sunday afternoon.

It wasn’t quite as sweeping as most Democrats had wanted. What was once supposed to be a $5 trillion bill—and then a $3.5 trillion, and then $3 trillion, and then $1.5 trillion, and then $1 trillion—ended up as a $400 billion measure, spread over the next 10 years, that would actually decrease deficits by more than $300 billion over that time period by closing tax loopholes.

It’s hardly the package President Joe Biden and the vast majority of Democrats had aimed for, but it’s the one Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) would allow them to have. And even if Democrats had hoped for more, they were ecstatic to cap off one of Biden’s best weeks in office with passage of the legislation.

The Senate approved the bill Sunday afternoon 50-50, with all Democrats voting for the bill and all Republicans voting against it. Vice President Kamala Harris broke the tie and approved the bill thanks to the legislative process called reconciliation, which eliminates the Senate’s 60-vote threshold for bills that meet certain conditions.

The legislation now heads to the U.S. House, where there are no serious concerns that the Democratic majority there will sink the legislation that finally got unanimous Senate Democratic support.

In a reflection of their biggest political challenge right now, Democrats branded the bill as the “Inflation Reduction Act,” packed with a grab-bag of various policy priorities on climate change, health care, and tax reform.

Biden and Democrats spent much of 2021 trying to get the multi-trillion dollar Build Back Better package across the finish line. But Manchin balked at spending such a sum given rising inflation—and opposed many of the key climate measures—while Sinema killed proposals to raise the money to pay for the bill by modifying a tax code that is structured to benefit Wall Street and big business.

As the November midterms drew nearer, most observers assumed the chances of Democrats using the reconciliation process to pass a party-line bill had essentially vanished. But Manchin shocked the Capitol in late July, when he and Majority Leader Chuck Schumer (D-NY) announced they’d struck a deal on the broad contours of the bill.

While much smaller than Build Back Better, the legislation contains proposals that most Democrats see as huge achievements.

It devotes $300 billion to climate change measures that aim to cut U.S. greenhouse gas emissions 40 percent by 2030, something seen near-universally among Democrats as a massive win. It contains one of the party’s most long-awaited reforms: allowing Medicare to negotiate lower prescription drug prices. And it also institutes a minimum tax on corporations of 15 percent, which could raise hundreds of billions of dollars to pay for the programs in the bill and pay down the deficit.

[P]redictably, Sinema became the last roadblock, and spent a week publicly silent on the bill while raising objections that leaked later to the press. Ultimately, the Arizona senator extracted her concessions—which included eliminating a tax loophole that benefits big finance—and gave her sign-off to the bill.

Progressives who were eager to leverage unified Democratic control of Washington to finally pass long-awaited priorities were disappointed. Before the Senate advanced the bill, Sen. Bernie Sanders (I-VT), called it an “extremely modest” piece of legislation.

“We are living a moment of unprecedented crises,” Sanders said. “This bill does virtually nothing to address any of them.”

Still, Senate passage of the bill caps off one of Biden’s very best stretches during his nearly two years in office.

In the last 10 days, Biden saw the House and Senate pass a high-tech manufacturing measure, Manchin reach agreement with Schumer on the reconciliation bill, Republicans take heat for voting down veterans legislation (only to then reverse themselves and pass the legislation when they realized their political blunder), gas prices hit a summer low, the U.S. military take out a top Al Qaeda leader, voters give Democrats new hope by overwhelmingly and surprisingly rejecting a ballot measure to ban abortion in Kansas, unemployment match a 50-year low, and the U.S. report that more than 500,000 jobs were added in July—a strong indication that the economy is not in a recession.

The bill now heads to the House, which will come back into session on Friday. If it passes, it will be sent to President Biden for his signature.

UPDATE: Politico Playbook excerpt:

MEANWHILE, the president is about to make history.

Passage of the Inflation Reduction Act will make Biden one of the most legislatively successful presidents of the modern era. We once noted that the mismatch between the size of Biden’s ambitions and his margins in Congress made it seem like he was trying to pass a Rhinoceros through a garden hose. It ended up being more like a pony, but it’s still pretty impressive.

To wit:

— American Recovery Act: $1.9 trillion

— Infrastructure Investment and Jobs Act: $550 billion

— Chips and Science Act: $280 billion

— Inflation Reduction Act: ≈$700 billion

That’s a nearly $3.5 trillion agenda. The scope of the issues addressed is notable: the pandemic and its economic fallout, highways, bridges, broadband, rail, manufacturing, science, prescription drug prices, health insurance, climate change, deficit reduction and tax equity.

He also expanded NATO, passed a new gun safety law and passed a bill to address the effects of vets exposed to toxic burn pits. Five out of seven of these laws — all but the two biggies, the ARP and IRA — received significant Republican support.

There’s not much debate anymore over whether Biden has been a consequential president. In the long run, his first two years may be remembered as akin to LBJ when it comes to moving his agenda through Congress.

Elect more Democrats to Congress with larger majorities and imagine how much Democrats can deliver for the American people. Those things that were blocked by Sens. “Machinema” and 50 Republicans in the Senate will now become possible.

4 thoughts on “Democratic Budget Reconciliation Plan: Senate Passes the Inflation Reduction Act”

  1. This is a good point by Nina Turner. The skeletal remains of Build Back Better (renamed the Inflation Reduction Act) was watered down (with a fire hose) to satisfy Democrats, not to be bipartisan.

    The damage done by Manchin and Sinema is incalculable, but I suppose some math genius could figure it out. Even so, we can imagine what could have been done for the American people and won’t be for years to come, if ever.

    I refuse to get excited about the Senate Democrats finally passing something out of the ashes of BBB in time for the midterms. They had a window of two years to make good on their 2020 campaign promises and the window has now closed. They’ve accomplished the bare minimum, which admittedly is huge compared to what Trump did, but it’s still the bare minimum, if that. And it’s a small fraction of what they ran on in 2020.

    I don’t believe in HELL anymore. I did when I was a kid in Catholic school. But wouldn’t it be a great place for Sinema and Manchin to spend the afterlife?

    Nina Turner

    Joe Manchin watered down Build Back Better to because he wanted the bill to be bipartisan.

    He watered it down to 1/10th the size Progressives wanted it and called it the Inflation Reduction Act.

    It still got 0 Republican votes.

    8:29 AM · Aug 7, 2022·Twitter for iPhone

    • It may be “1/10th the size Progressives wanted” but “The Senate just passed one of the biggest bills to fight climate change, ever”,

      The bill contains $369 billion in funding for clean energy and electric vehicle tax breaks, domestic manufacturing of batteries and solar panels, and pollution reduction. It is the single most important step the US has ever taken to combat the climate crisis. And arguably, it’s one of the single biggest investments ever made on climate in the world.

      The bill uses tax credits to incentivize consumers to buy electric cars, electric HVAC systems, and other forms of cleaner technology, leading to less emissions from cars and electricity generation, and includes incentives for companies to manufacture that technology in the United States. It also includes money for a host of other climate priorities, like investing in forest and coastal restoration and in resilient agriculture.

      If the bill’s policies work as intended, it would push American consumers and industry away from reliance on fossil fuels, penalize fossil fuel companies for excess emissions of methane, and inject needed funds into pollution cleanup.

      These investments, spread out over the next decade, are likely to cut pollution by around 40 percent below 2005 levels by 2030, according to three separate analyses by economic modelers at Rhodium Group, Energy Innovation, and Princeton University. The legislation helps move the US a little closer to its stated goal of cutting pollution in half within the decade.

      The main climate change components of the Inflation Reduction Act look surprisingly similar to the version the House passed last fall, a measure widely celebrated by climate activists — although it’s smaller than the $2 trillion Biden once envisioned.

      [E]ven with these concessions [to Joe Manchin], a climate agreement that preserves tens of billions of dollars for clean energy and pollution cleanup was unimaginable just weeks ago.

      “Total game changer” for the climate was how Leah Stokes — a political scientist at UC Santa Barbara who has advised Democrats on the reconciliation package — put it.

      [T]he deal retains most of the key programs of the House’s Build Back Better Act, including consumer tax credits for solar panels and electric vehicles and funding for domestic clean energy manufacturing.

      Clean energy and electric vehicles: There is a large mix of tax breaks intended to bring down the costs of solar, wind, batteries, cars, heat pumps, and other clean technology. The idea is to drive as much renewable development as possible in the heaviest-polluting parts of the economy: transportation and electricity generation.

      One type of tax credit would be aimed at clean energy companies to deploy more solar, wind, and batteries on the grid, extending existing credits another 10 years.

      The second type would seek to drive more consumption of renewables, offering Americans incentives for installing heat pumps, adopting solar, and buying electric cars.

      On electric cars, for example, consumers would get $7,500 per new vehicle and about $4,000 for a used vehicle until 2032, but with some new restrictions on where the batteries were manufactured and income limits (explored in depth on Twitter by Bloomberg’s Tom Randall).

      Some of these programs specifically help low-income people, like a $9 billion home energy rebate program to focus on retrofits and electrifying home appliances; an additional $1 billion helps make public housing more energy-efficient.

      The bill also seeds $27 billion to create a National Green Bank, a program that would help leverage private funding for clean projects, including in lower-income communities.

      Fossil fuels: The bill makes some strides on the second-most problematic climate pollutant, methane. Methane is 86 times more powerful a greenhouse gas than carbon over a 20-year period, and it’s also an incredibly leaky gas that is emitted at any point in oil and gas production — drilling at the wellhead, compressor stations, and liquefied natural gas terminals. For the first time, Congress would set some industry-wide limits on methane leakage. Oil and gas companies that emit above a certain level of methane across all operations trigger a fee that will escalate over time. There’s also a new royalty fee on all methane extracted from public lands, including the common practice of venting and flaring. And to enforce all this, there is additional funding for monitoring methane leaks for oil operators and the Environmental Protection Agency.

      There are some changes to the fees the oil industry pays to produce on public lands and water as well. The bill raises royalty rates for the oil industry and raises minimum bids (from $2 an acre to $10). The environmental group Center for Western Priorities noted, though, that the bill also includes some new incentives for oil leasing, like requiring the Department of Interior to expand offshore oil offerings.

      Pollution reduction and environmental justice: There’s $60 billion for overall environmental justice priorities: $15 billion of that funding goes to a host of priorities like clean energy and emissions reductions specifically for low-income and disadvantaged communities. Community groups, governments, and tribes can also qualify for $3 billion in block grants for programs like cleaning up abandoned mines, monitoring air quality, and improving extreme weather resilience. And the bill contains $3 billion to restore and reconnect communities that are divided by highways.

      Industrial pollution: Right now, industry is the US’s third-most polluting sector, after transportation and power. By 2030, it could be the most-polluting sector. While cleaner cars and renewables are off-the-shelf technologies that have to be adopted at a wider scale to make these sectors cleaner, heavy industry still relies on fossil fuels because of the high heat that’s needed to produce raw materials. So the bill helps in this sector by incentivizing energy efficiency at industrial sites to cut their footprint.

      Domestic manufacturing of clean energy: There’s another $60 billion in incentives and financing for boosting domestic manufacturing of clean energy technologies.

      Most of those incentives will go to accelerating US manufacturing of solar panels, wind turbines, batteries, and critical minerals, and to help build the facilities that would make electric vehicles.

      The inclusion of $500 million for heat pumps and critical minerals is new, providing funding for Biden’s use of the Defense Authorization Act to boost manufacturing for the energy-efficient technology.

      Jason Walsh, executive director of the environment- and labor-focused BlueGreen Alliance, explained why the domestic manufacturing for batteries, solar, and offshore wind is so important. “Those are big investments, and they’re risky investments. And if we expect manufacturers to make them in the United States, they’re going to need to have some long-term policy certainty and support,” he said.

      The bigger picture for US climate action

      The news that climate was back on the table came as a relief to advocates who have spent 18 months fighting for a climate deal’s passage.

      Without any new action from Congress or the president, economic modelers at Rhodium Group estimated that climate emissions are on track to be, by 2030, somewhere between 24 percent and 35 percent lower than they were in 2005, the peak year for carbon emissions. That’s not a lot, even if it sounds like it: Biden had set a target under the Paris climate agreement of slashing those 2005 levels in half by the end of the decade.

      The Inflation Reduction Act doesn’t necessarily get the US all the way there. Federal regulations for power plants, car pollution, and methane will still be important to make up the rest of that gap.

      Still, this is a long way from the bleak picture when it looked as though Biden would have few limited regulatory options left for tackling climate change. While Biden has faced pressure from the left to declare a climate emergency, his powers and lasting impact would be far more limited than anything Congress could do.

      Though imperfect, Democrats have hailed the bill as as a major step forward to combatting the climate crisis. Sen. Brian Schatz (D-HI) last week called it “both historic and only a down payment.” On Sunday, Schatz left the Senate chamber in tears, according to the New York Times. “Now I can look my kids in the eye and say we’re really doing something about climate,” he said.

      -You take your wins where you can find them. Accentuate the positive.

      • AZBlue, that’s a good article.

        Undeniably, passing a climate change bill is huge for the Democrats and I’m as pleased as anyone that it’s getting done. And I hope it helps to elect Democrats in November because I’m not looking forward to living in a theocracy run by white Christian nationalists.

        The climate crisis is well underway. Biden was under pressure from environmentalists and others to declare it a national emergency which it most definitely is. But it’s better for federal action and leadership on climate change to be legislated by Congress, and it’s a notable achievement for the Democrats.

        But with respect to climate change, we have lacked visionary leaders for decades and there were four years of stagnation under Trump that we could ill afford. This climate bill is addressing a national emergency, a crisis, it is reactive, it is literally our last chance.

        It’s tragic and shortsighted that the climate crisis is the only piece of Build Back Better that will be passed as originally intended and in reasonably robust form.

        The gap between BBB and the Inflation Reduction Act is enormous. And no one knows if progressive policies will ever be attempted again, assuming we save the Republic.

        Progressives are grieving this loss, and rightfully so.

      • I agree with Liza and with AZ.

        I’m tired of people saying the party in power loses seats in the midterms, and then going on the defensive to save as many seats as they can, instead of fighting for wins.

        Dems should scream as loud as they can about what they accomplished, what it means for people, and scream even louder about the GQP being useless cartoonish trolls.

        Don’t run from accomplishments (like Dems did the ACA in 2010 and no, I will never get over that) no matter how the right spins them.

        Play offense 100% of the time and never back down.

        Be meaner than they are.

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