What you need to know about the Manchin-Schumer deal on climate, taxes, health care

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In a surprise reversal late Wednesday afternoon, Sen. Joe Manchin, D-W.Va., announced he had reached a deal with Senate Majority Leader Chuck Schumer on legislation that would address climate change, lower prescription drug prices and institute a mandatory minimum tax on corporations.

Manchin, who recently tested positive for COVID-19 and had suggested delaying any major legislative action until later in the year, said in a lengthy statement that he and Schumer had struck a deal on the 725-page, $739 billion proposal.

“From here forward, the debate over a future reconciliation bill or any targeted legislation must focus on supporting the everyday hardworking Americans we have been elected to serve,” Manchin said. “I support the Inflation Reduction Act of 2022 because it provides a responsible path forward that is laser focused on solving our nation’s major economic, energy and climate problems. The question for my colleagues is whether they are willing to put their election politics aside and embrace the commonsense approach that the overwhelming majority of the American people support and will best serve the future of this nation.”

Sen. Joe Manchin.
Sen. Joe Manchin, D-W.Va., on July 19. (Shutterstock)

The senator, representing a state that former President Donald Trump won by nearly 40 points in 2020, has been one of the highest-profile roadblocks for the Democratic agenda. Just two weeks ago, Manchin had said he couldn’t support a bill with the climate and tax provisions until he saw additional data on inflation.

“It’s like two brothers from different mothers, I guess. He gets pissed off, I get pissed off, and we’ll go back and forth. He basically put out statements, and the dogs came after me again,” Manchin told Politico of his discussions with Schumer. “I didn’t know if it could come to fruition. I really didn’t know, OK, so why talk about something, again, build people’s hopes up? I got the ire of everybody.”

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President Biden gave remarks from the White House Thursday afternoon touting the benefits of the bill and thanking Schumer and Manchin for the "extraordinary effort it took to reach this result."

"This bill is far from perfect," Biden said. "It's a compromise, but that's often how progress is made, by compromises, and the fact is my message to Congress is this: This is the strongest bill you can pass to lower inflation, cut the deficit, reduce health care costs, tackle the climate crisis and promote energy security, all the time while reducing the burdens facing working class and middle class families. So, pass it."

What would the bill do?

The bill would address two major Democratic priorities: climate change and reducing prescription drug prices. It would invest $369 billion in clean energy, with the goal of reducing carbon emissions by 40% by 2030. This includes tax credits to spur the manufacturing of equipment like solar panels and wind turbines and the purchase of electric vehicles. The bill also includes funding for research and state programs as well as for reducing pollution and preserving forests and coastal habitats. The announcement comes as parts of the nation and the world are hit by heat waves.

Wind turbines silhouetted against the setting sun as they produce electricity near Beaumont, Kansas.
Wind turbines near Beaumont, Kan. (Charlie Riedel/AP)

“By a wide margin, this legislation will be the greatest pro-climate legislation that has ever been passed by Congress,” Schumer said in a statement. “This legislation fights the climate crisis with the urgency the situation demands and puts the U.S. on a path to roughly 40% emissions reductions by 2030, all while creating new good-paying jobs in the near and long-term.”

If passed, the legislation would also allow Medicare to directly negotiate with prescription drug companies, lowering the cost of medications and capping out-of-pocket drug costs for older Americans. It would also provide subsidies for Obamacare premiums set to expire, keeping health care costs down for many Americans.

The bill doesn’t contain a number of provisions previously considered by Democrats that would roll back much of the Trump tax cuts that disproportionately benefited corporations and the wealthiest Americans, but it would impose a minimum 15% corporate tax rate on businesses that earn more than $1 billion annually and would tweak the “carried interest loophole,” which allows private equity and hedge fund managers to pay lower taxes on much of their compensation. The bill would also boost IRS enforcement on tax cheats as a means of raising revenue and would maintain Biden’s promise of not raising taxes on families making under $400,000 per year.

In all, the proposed bill is a compromise that falls between the president’s initial proposal, which would have significantly expanded social programs, and the framework many Democrats had come to accept earlier this month that would have only addressed prescription drug pricing and the health care subsidies.

Is the bill’s passage a sure thing?

Sen. Kyrsten Sinema of Arizona.
Sen. Kyrsten Sinema, D-Ariz., in May. (Tom Brenner/Reuters)

No. Because the bill is unlikely to get any Republican support, it needs all 50 members of the Democratic caucus to vote yes in order to pass the Senate through the process of reconciliation. Getting Manchin to sign off is a big step, but there are still holdouts. Sen. Kyrsten Sinema, D-Ariz., had opposed plans to tax high-income Americans and corporations last fall and seemed to be unaware of the details of the agreement when Manchin and Schumer announced the deal on Wednesday, with her office saying she “will need to review the text.” Sinema is up for reelection in 2024 and is likely to face a primary challenger.

In addition to Sinema, Sen. Bob Menendez, D-N.J., told Axios Wednesday evening that there were “issues” with the deal, citing the lack of removing the cap on the state and local tax (SALT) deduction that affects only some of the highest-income Americans. This could also be an issue in the House, where Speaker Nancy Pelosi has such a thin majority that she can afford only a few Democratic defections if the bill is to pass. A number of centrists there, including Democratic Rep. Josh Gottheimer, who also represents New Jersey, also want the SALT cap removed and were reportedly considering demanding no new taxes in the deal earlier this month.

There is also still a chance the Senate parliamentarian, who holds an advisory position that the Democrats could choose to ignore, rules that some of the provisions Schumer hopes to include in the bill are not eligible.

“I expect that the remaining work with the parliamentarian will be completed in the coming days and the Senate will vote on this transformative legislation next week,” Schumer said in a statement.

Why are Republicans unhappy?

Senate Minority Leader Mitch McConnell walks through the Capitol Rotunda.
Senate Minority Leader Mitch McConnell in the Capitol Rotunda on Wednesday. (Nathan Howard/Getty Images)

Hours before Manchin and Schumer announced their agreement, 17 Republicans voted with all present Democrats to pass the $280 billion Chips and Science Act, meant to boost American semiconductor production and battle China. GOP leadership felt those votes meant that the prospect of Democrats unifying to pass a bill addressing climate change and raising taxes on corporations was dead.

“Let me be perfectly clear: there will be no bipartisan USICA [U.S. Innovation and Competition Act] as long as Democrats are pursuing a partisan reconciliation bill,” Senate Minority Leader Mitch McConnell tweeted on June 30.

Republicans had hoped that by passing a smaller bipartisan infrastructure deal last year, they could stall the rest of Biden’s broader agenda, a strategy that appeared to be working until the announcement by Manchin and Schumer. Speaking with Fox News’ Laura Ingraham on Wednesday evening, Sen. Tom Cotton, R-Ark., said the deal “was obviously a double cross” by Manchin. Cotton noted that the deal was still not sure to pass, citing Sinema, whom Republicans have courted in the past.

On Thursday morning, Sen. John Kennedy, R-La., told Fox News, “Democrats basically sucked my Republican votes up like a Hoover Deluxe and then got their votes and then, bam, announced their new tax increase. There aren’t very many coincidences here on Capitol Hill. I think the timing was exquisite. We look like a bunch of ... well, I’m not going to say what we look like.”


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