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Joe Manchin has reached a deal with fellow Senate Democrats on a tax, climate and social spending bill following an abrupt U-turn that paves the way for a major legislative victory for US president Joe Biden ahead of the midterm elections.
The agreement includes some of the most significant climate legislation in US history. It comes after Manchin, a conservative Democrat from West Virginia — and a frequent critic of the Biden administration — balked at previous iterations of the president’s flagship economic and social spending plans.
Manchin said on Wednesday that the new bill would not be called “Build Back Better” — the Biden administration’s name for its ill-fated multitrillion-dollar spending spree — but rather the “Inflation Reduction Act of 2022”.
He added it would address “record inflation by paying down our national debt, lowering energy costs and lowering healthcare costs”.
The bill includes $300bn in deficit reduction, paid for by a new 15 per cent corporate minimum tax and closing the tax loophole on carried interest — the share of investment profits that hedge fund and private equity managers are paid as an incentive to hit higher returns.
The new tax revenue, which will be raised over a decade, will be accompanied by $369bn of spending on climate and energy reforms and $64bn to shore up the Affordable Care Act.
“Build Back Better is dead, and instead we have the opportunity to make our country stronger by bringing Americans together,” Manchin said in a statement.
The legislation will allow Medicare to negotiate lower prescription drug prices, reducing annual health insurance costs for about 13mn Americans by an average of $800 a year. Manchin also cited investments in new technologies to reduce domestic methane and carbon emissions.
The bill earmarks $9bn to help people make their homes energy efficient and 10 years of tax credits designed to convert homes to clean energy. It includes $7,500 in tax credits to buy new “clean” vehicles and $4,000 to buy used ones.
About $10bn in investment tax credits will be issued to clean technology manufacturing facilities, including factories making electric vehicles, wind turbines and solar panels.
The deal could pass as soon as next week, assuming it gets sufficient support from lawmakers, before the Senate departs for the August recess. If it does, it would represent an eleventh-hour win for the Biden administration, which has been criticised by Democrats for failing to achieve some of the president’s central campaign promises.
“This is the action the American people have been waiting for,” Biden said in a statement released by the White House. “This addresses the problems of today — high healthcare costs and overall inflation — as well as investments in our energy security for the future.”
Senate Democrats and climate activists expressed shock at the last-minute deal, which had all but been ruled out.
“Holy shit,” Senator Tina Smith, a Democrat from Minnesota, wrote on Twitter. “Stunned, but in a good way.”
Manchin said his agreement included a commitment from Senate majority leader Chuck Schumer and Speaker of the House of Representatives Nancy Pelosi to move forward “a suite of common sense permitting reforms”, smoothing the way for gas pipeline projects.
The commitment to fossil fuel infrastructure is likely to draw opposition from environmental and climate groups, who broadly welcomed the announcement but called on Democrats to oppose such expansion.
“Political pressure has finally brought Senator Manchin back to the table on climate,” said Erich Pica, president of Friends of the Earth. “Now political pressure needs to safeguard our bedrock environmental laws.”
Wenonah Hauter, executive director at Food & Water Action, said the agreement promoted “false climate solutions”.
He added: “Streamlining permitting for natural gas pipelines and exports is not climate action, it is the opposite.”
However, the Sierra Club, a US climate group, said it was “encouraged” by the possibility of the Senate passing bold climate action.
Lori Lodes, executive director of Climate Power, an environmental group, said, the bill, if passed, would “put the United States on a path to lowering emissions in half by 2030”.
“Congress needs to seize on this opening and pass the strongest clean energy and climate provisions possible as soon as possible.”
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