U.S. Senate Majority Leader Chuck Schumer (D-NY) holds his weekly news conference after the Democratic caucus party luncheon at the U.S. Capitol in Washington, August 2, 2022.
Jonathan Ernst | Reuters
The $430 billion climate change, health-care and tax bill passed by the U.S. Senate on Saturday delivers a major win for Democrats, and will help reduce the carbon emissions that drive climate change while also cutting costs for the elderly.
Democrats hope the bill, which they pushed through the Senate over united Republican opposition, will boost their chances in the Nov. 8 midterm elections, when Republicans are favored to recapture the majority in at least one chamber of Congress.
The package, called the Inflation Reduction Act, is a dramatically scaled-back version of a prior bill backed by Democratic President Joe Biden that was blocked by maverick Senate Democrats Joe Manchin and Kyrsten Sinema as too expensive.
“It’s what the American people want,” Senate Majority Leader Chuck Schumer told reporters. “We’re prioritizing the middle class, working families, those struggling to get to the middle class, instead of what Republicans do: prioritize those at the very top.”
The Senate’s partisan 51-50 vote, with the tiebreaking vote coming from Vice President Kamala Harris, sends the legislation on to the Democratic-controlled House of Representatives, which is expected to pass it on Friday, after which Biden could sign it into law.
Republicans blasted the bill as a spending “wish list” that they argued would hurt an economy weighed down by inflation, saying it would kill jobs, raise energy costs and undermine growth at a time when the economy is facing a potential recession.
“Senate Democrats are misreading the American people’s outrage as a mandate for yet another reckless taxing-and-spending spree,” top Senate Republican Mitch McConnell said on Saturday. “Democrats want to ram through hundreds of billions of dollars in tax hikes and hundreds of billions of dollars in reckless spending — and for what?”
About half of Americans — some 49% — support the bill, including 69% of Democrats and 34% of Republicans, according to a Reuters/Ipsos poll conducted Aug. 3 and 4. The most popular element of the bill is giving Medicare the power to negotiate drug prices, which 71% of respondents support, including 68% of Republicans.
Economists, who say the legislation could help the Federal Reserve combat inflation, do not expect a sizeable impact on the economy in the coming months.
Climate focus
With $370 billion in climate-focused spending, it would become the most consequential climate change bill ever passed by Congress.
The bill offers businesses and families billions in incentives to encourage purchases of electric vehicles and energy-efficient appliances, as well as to spur new investments in wind and solar power that would double the amount of new, clean electricity-generating capacity coming online in the United States by 2024, according to modeling by the Repeat Project at Princeton University.
That would help put the U.S. on course to meet its pledge to slash its greenhouse gas emissions in half by 2030 below 2005 levels, made at last year’s Glasgow climate summit.
While environmental groups largely embraced the bill, they noted that compromises secured by Manchin, who represents coal-producing West Virginia, would prolong U.S. use of fossil fuels.
Those provisions include rules that would only allow the federal government to authorize new wind and solar energy developments on federal land when it is also auctioning rights to drill for oil and natural gas.
Drug costs
The legislation would lower drug costs for the government, employers and patients, said Juliette Cubanski, deputy director of the Medicare program at the Kaiser Family Foundation.
“Perhaps the biggest effect would be for people with prescription drug coverage through Medicare,” she said.
A key change is the provision allowing the federal Medicare health plan for older and disabled Americans to negotiate lower prescription drug prices.
The pharmaceutical industry says price negotiation would stifle innovation. Negotiated prices for 10 of the costliest drugs for Medicare would apply starting in 2026, with that number rising until it caps at 20 a year in 2029.
The nonpartisan Congressional Budget Office estimates Medicare would save $101.8 billion over 10 years by negotiating drug prices.
The provision also introduces a $2,000 annual cap on out-of-pocket costs for the elderly through the Medicare program.
Tac provisions
The bill also imposes a new excise tax on stock buybacks, a late change after Sinema raised objections over another provision that would have imposed new levies on carried interest, currently a tax loophole for hedge fund and private equity financiers. The provision was dropped.
The excise tax is expected to raise an additional $70 billion in tax revenue per year, lawmakers said. That is more than the carried interest provision had been forecast to raise.
A report by the nonpartisan Congressional Budget Office released prior to that last change estimated the measure would reduce the federal deficit by a net $101.5 billion over the next decade.
That was about one-third of the $300 billion in deficit reduction predicted by Senate Democrats, but excluded a projected $204 billion revenue gain from increased Internal Revenue Service enforcement.