(CNN) Senate Majority Leader Chuck Schumer and Sen. Joe Manchin on Wednesday announced a deal on an energy and health care bill that represents a breakthrough after more than a year of negotiations that repeatedly collapsed Is.
But it will face fierce opposition from the GOP.
The deal is a big turnaround for Manchin, and the health and climate bill stands a serious chance of becoming law as soon as August – assuming Democrats can pass the bill in the House and Senate lawmakers to allow it. pass muster with. The budget must be approved along straight party lines in the process.
While Munchkin rejected President Joe Biden’s Build Back Better bill, the final deal includes several provisions that West Virginia’s liberals scoffed at privately, representing a significant reversal from earlier this month. This includes provisions addressing the climate crisis.
The agreement includes many of the Democrats’ goals. While many details have not been disclosed, the measure will invest $369 billion in energy and climate change programs, according to a one-page fact sheet, with a goal of reducing carbon emissions by 40% by 2030. For the first time, Medicare would be given the right to negotiate the prices of certain drugs, and this would be an out-of-pocket cost at $2,000 for those enrolled in Medicare drug plans. It will also extend the Enhanced Subsidy for Affordable Care Act coverage for three years.
The announcement comes at a crucial time for Congress, as the Senate is a little more than a week away from launching a month-long recess, when many Democrats will campaign for re-election. The news comes hours after the Senate passed a separate bill to invest $52 billion in US manufacturing of semiconductors, sending it to the House for consideration as soon as this week.
Notably, Senate Minority Leader Mitch McConnell had previously vowed to try to halt passage of the semiconductor bill if Democrats continued to pursue their party-line bill on climate and drug prices.
Manchin’s agreement represents a reversal
Munchkin’s endorsement is notable given his stance earlier this month that he would “obviously” not support the climate or tax provisions of the Democratic economic package, which appears to torpedo any hope that Democrats will get a near-term victory. Laws have to be passed to fight climate change in the future.
But Schumer and Manchin have been negotiating again since July 18 and closed a deal Wednesday, according to a source familiar with the matter. Manchin had thrown cold water at making tax and energy provisioning as part of the deal but eventually agreed to it.
The White House has signed the deal, Biden said in a statement.
The deal still faces several hurdles before it can make it to Biden’s table, including lawmakers, and has to pass both chambers of Congress, where practically any Democrat can sideline. or delay the passage.
Climate provisions ‘could be a huge win’
In a statement, Schumer’s office said the bill would reduce US carbon emissions by about 40% by 2030. The clean energy tax credit would drive the majority of those emissions cuts, a Democratic aide said.
Two weeks ago, Schumer and Manchin were about to sign a $375 billion deal for the bill’s climate and energy provisions; The top limit for the climate announced tonight is $6 billion less than the original figure.
Still, a senior Democratic aide told CNN they are happy with the $369 billion figure on spending on the climate and energy portion of the bill, adding that it was more money than expected to come out of a deal.
Tax credits for electric vehicles made it into the new deal, according to two Senate Democratic aides. The electric vehicle tax credit will continue at its current levels, up to $4,000 for a used electric vehicle and up to $7,500 for a new EV. However, there will be a lower income limit for those who can use the tax credit – a major demand for Munchkin. Munchkin has been vehemently opposed to the electric vehicle tax credit during the talks.
Tina Smith, a Democratic Senator of Minnesota, told CNN she was presiding over the Senate Wednesday evening when Schumer called to tell her he had reached an agreement with Manchin on the climate and energy bill. As Smith was presiding, his phone kept ringing off the hook with an unlisted number that Schumer was calling. In the end, he answered it.
“I knew it was Chuck; I did a complete no-no and answered the phone,” Smith told CNN. “He said ‘40% emissions reduction by 2030, that’s a big f—ing deal’!”
Senate climate hawk Smith told CNN she had reached an agreement with Manchin after several ups and downs.
She said the agreement is “the most important action ever taken on climate and clean energy.”
Everyone is very excited. I’m shocked but in a good way,” Smith said.
The leaders of two major climate groups also told CNN that the latest development was unexpected.
“It’s not what one was hoping for, but we’re very excited that it’s back,” Tiernan Sittenfeld, senior vice president for government affairs at the League of Conservation Voters, told CNN. “Obviously it’s not coming soon as families grapple with the scorching heat around the world and across the country.”
Advocates were waiting for more details on the climate provisions, expected to be released Wednesday evening.
“We need to see the details of this deal, especially if the reclamation and development of fossil fuels is allowed,” Jamal Raad, co-founder of Evergreen Action, told CNN. “We will have to see modeling on this law in the days to come.”
But if the package actually achieves the emissions reductions Schumer is promising, Raad said it would be a hugely important step.
“If this package does so in a bold manner, it could put us on the path to reaching our goals and be a big win,” he said.
Medicare drug price negotiation provisions remain in the bill
The deal maintains changes to the prices of drugs that Manchin had previously agreed upon, including empowering Medicare to negotiate the price of certain expensive drugs administered at doctors’ offices or purchased at a pharmacy. . The Secretary of Health and Human Services will negotiate the prices of 10 drugs in 2026 and another 15 drugs in 2027 and again in 2028. This number will increase to 20 drugs a year for 2029 and beyond.
It would also redesign Medicare’s Part D drug plans so that seniors and people with disabilities pay no more than $2,000 per year for a drug purchased at a pharmacy. And, the deal would require drug companies to pay a rebate if they raise their prices faster than inflation in the Medicare and private insurance markets.
Overall, drug price provisions would reduce the deficit by $288 billion over a decade, according to the Congressional Budget Office.
The agreement also calls for extending the Enhanced Affordable Care Act subsidy for three years. An earlier deal would have continued beefed-up subsidies for two years, meaning they would have expired just after the 2024 presidential election – a scenario Congressional Democrats did not want to face.
The subsidy was expanded through this year as part of Democrats’ $1.9 trillion coronavirus relief package known as the US Rescue Plan, enacted in March 2021. They have made health care coverage more affordable on Obamacare exchanges, leading to record enrollments. year.
Enrollees pay no more than 8.5% of their income for coverage, which is less than about 10%. And low-income policyholders receive subsidies that eliminate their premiums entirely. Also, for the first time ever, those earning more than 400% of the federal poverty level are eligible for assistance.
According to the CBO, the increased subsidies would cost $64 billion over a decade.
Paying for the bill
To increase revenue, the bill would impose a 15% minimum tax on corporations, which would raise $313 billion over a decade. While details on the current deal are scant, the House version of the Build Back Better package would have taxed the corporate profits that large companies report to shareholders, not the Internal Revenue Service. It would have applied to companies with more than $1 billion in profits and would have achieved a similar revenue-raising figure.
The current deal aims to address the interest loophole, which allows investment managers to treat their compensation as capital gains and pay a 20% long-term capital gains tax rate instead of income tax rates of up to 37%. . Eliminating the loophole, which would raise $14 billion over a decade, has been a long-standing goal of congressional Democrats.
The package also calls for the IRS to provide more funding for tax enforcement, raising $124 billion.
Democrats say households earning less than $400,000 per year will not be affected, in line with Biden’s pledge. Also, there will be no new tax on small businessmen.
Manchin said in a statement that the deal would ensure that “large corporations and the ultra-wealthy pay their fair share in taxes,” although it does not include the tax rate hikes on wealthy Americans and large companies, which Democrats initially wanted. wanted to join. Budget reconciliation package before being shot down by Democratic Sen. Kirsten Cinema of Arizona.
In particular, Manchin threw cold water at one of Schumer’s priorities — addressing the $10,000 cap on state and local tax cuts, known as SALT, that was part of the GOP tax cut package in 2017. It was part of and affects several states in the Northeast and on. Western coast.
Howard Glickman, a senior fellow at the Center for Nonpartisan Tax Policy, said many details of the current deal remain to be worked out, which could delay or worsen it.
Overall, Democrats say the deal will reduce the deficit by more than $300 billion.
“Rather than risking more inflation with trillions in new spending, this bill will cut US inflation taxes, lower the cost of health insurance and prescription drugs, and ensure that our country invests in energy security and climate change solutions. Do what we need to remain a global superpower through innovation rather than eradication,” Manchin said in his statement on Wednesday afternoon.
This story has been updated with additional development on Wednesday.