After more than a year of 50 Senate Democrats struggling among themselves to achieve unanimity in support of a drastically reduced version of President Joe Biden’s Build Back Better proposal, the agreement finally came together last week, leading to Senate passage of the bill Sunday by a bare 51-50 margin, with Vice President Kamala Harris exercising her Constitutional prerogative to cast the tie-breaking voter.
Final passage of the same measure by Democrats in the House, who will briefly returned to Washington from a summer recess this week for that purpose, was a foregone conclusion, as is President Biden’s signature turning the legislation into law. The bill’s passage guarantees that Democrat candidates running for office in this November’s midterm election will be able to boast of at least on major legislative accomplishment to their voters, who have largely abandoned their previous support for President Biden.
The so-called Inflation Reduction Act of 2022, which was mostly fashioned during secret negotiations this summer between Senate Majority Leader Chuck Schumer and West Virginia’s Senate Democrat Joe Manchin, carries a $740 billion price tag over the next decade, $300 billion of which is earmarked for deficit reduction. The remaining spending represents about one-tenth the cost of Biden’s original $3.5 trillion proposal which was introduced by the White House last year with only Democrat support.
FOCUS ON ENERGY AND HEALTH
The largest single expenditure in the package of proposals passed by the Senate Sunday is $369 billion in energy-related spending. Most of that consists of a variety of federal incentives and tax credits to reduce carbon emissions and develop green energy sources, and subsidies for the purchase of domestically-produced electric vehicles — all to help meet President Biden’s ambitious 2030 goals to combat climate change. The energy package also includes certain measures requested by Manchin to protect West Virginia’s coal-based economy, as well as continued drilling on federal lands that would enable further development of domestic fossil fuel resources.
The health measures in the package would enable Medicare to negotiate down the cost of some of the most expensive prescription drugs covered in its Part D program, starting in 2026. It would limit increases in the current prices of prescription drugs purchased under Medicare to the rate of inflation, and require drug companies to pay “rebates” to the federal government if their prices exceeded that limit. Starting in 2025, it would cap the annual out-of-pocket drug costs for Medicare recipients at $2,000 a year.
At a cost of $64 billion, the bill also extends through 2025 Obamacare monthly insurance premium subsidies for middle income families that were provided in Biden’s $1.9 trillion Covid relief bill, and which were set to expire on September 30, at the end of this 2022 fiscal year. Without that extension, about 13 million middle income Americans who buy their health coverage through Obamacare state and federal exchanges would have seen an immediate, substantial increase in their monthly insurance premiums.
The single largest revenue raising item in the measure is the imposition of a new 15% alternative minimum tax on all corporations declaring at least $1 billion in yearly profits, which is expected to generate about $300 billion in tax revenue over the next decade.
The cost savings to Medicare from negotiating the price of the most expensive prescription drugs over the same period are expected to be $288 billion. The bill also authorizes $80 billion to vastly expand the staff of the IRS. Their job will be to extract back taxes from income tax cheaters, creating a projected net increase of $124 billion in tax revenues over the next decade.
To win the vote of Arizona Democrat Senator Kyrsten Sinema for the bill, Schumer and Manchin agreed to make certain modifications to the original version of the Inflation Reduction Act which they introduced two weeks ago. The most important of these was a modification in the proposed 15% minimum tax on business profits that would enable manufacturers to continue to immediately write off 100% of their costs for investing in new equipment. Sinema also insisted on the elimination of a proposed tightening of the tax loophole for carried interest which benefits hedge fund and private equity managers, and which would have generated $14 billion.
Sinema demanded yet another concession, at the last minute, for the benefit of private equity firms and the companies in their portfolios. It required Democrats to carve out an exception for them from the 15% minimum tax to retain her support.
Sinema has established a reputation for protecting corporate profits and the interests of wealthy investors. During last year’s negotiations over earlier versions of Biden’s Build Back Better proposal, Sinema let it be known that she could not vote in favor of it unless a proposed increase of the corporate tax rate from 21% to 28% was dropped.
To make up for the lost tax revenues in satisfying Sinema’s demands for the version of the bill which was passed Sunday, a 1% new federal tax on all corporate stock buybacks was added. Sinema’s objections had been the last major obstacle standing in the way of Senate passage of the bill.
Over the weekend, there were additional small modifications made to the bill before its final passage. The most significant was a demand by the Senate parliamentarian that a measure in the bill which caps the cost of insulin at $35 a month be limited to Medicare recipients, to meet the requirements of the Senate’s budget reconciliation rules which made the measure immune to being blocked by a GOP filibuster.
Final efforts by Senate Republicans to introduce “poison pill” amendments to the bill during a so-called “Voterama” met a mostly united resistance from all 50 Senate Democrats, and left the Republicans powerless to prevent the bill’s Senate passage.
THE SALT DEDUCTION CAP DRAMA
One of the amendments sponsored by Republican Senator John Thune did manage to pass, with the support of seven Democrats, including Sinema. It might have caused trouble for the bill once it reached the House. The amendment met Sinema’s demand for the creation of a carve-out from the 15% corporate minimum tax for private equity companies. The political problem was the way the amendment proposed to make up for the lost tax revenue due to the carve-out — by extending the $10,000 SALT tax deduction cap for state and local taxes, which was due to expire at the end of 2025, for an additional year.
The SALT deduction cap was introduced by Republicans to help pay for Trump’s 2017 business tax cut. It limited the ability of middle-class homeowners in highly-taxed states and local jurisdictions, such as New York, New Jersey, and California, from being able to fully deduct their real estate and other state and local taxes from their federal tax returns, because in many of those jurisdictions, just the annual property taxes alone can often exceed the $10,000 limit.
Last year, a group of blue state Democrats, led by Congressmen Josh Gottheimer, Tom Suozzi and Mikie Sherrill, threatened to vote down Biden’s Build Back Better bill in the House unless it included relief for those homeowners by enabling them to write off more state and local tax payments. Democrat leaders had to take that threat seriously because their majority in the House is so thin that they could lose the vote if as few as five House Democrats defected.
Therefore, a version of the Biden bill passed by the House last year raised the deduction cap to $80,000 per household, which prompted some liberals, such as Senator Bernie Sanders, to condemn the measure as a tax break for the rich. In the end, the increase in the cap was one of the measures stripped out of the bill to satisfy the demands of Manchin and Sinema to lower its overall cost.
AVOIDING TROUBLE FROM MODERATE DEMOCRATS IN THE HOUSE
There had been some concern that the same “No SALT, no deal” group of House Democrats might block passage of the Senate’s Inflation Reduction Act, because it did not contain any relief from the SALT cap. However, leaders of the group said that because the Inflation Reduction Act does not contain any tax increases on households, and does contain other measures that will lower costs for middle class families, they would vote in favor of it, assuring its House passage, while renewing their demands that relief from the SALT cap be included in any future bill that would increase taxes on households.
However, Democrat leaders were afraid that if the amendment extending the SALT cap for a year were allowed to stand, the “No SALT, no deal” group might withdraw their concession and carry out their previous threats to vote the bill down in the House. Democrat leaders therefore acted quickly to pass a second amendment which replaced the problematic extension of the SALT cap with a different tax raising measure, which restricts certain business pass-through deductions. As a result, House passage of the Inflation Reduction Act once again became a certainty.
These last-minute adjustments demonstrated just how fragile the Democrat working majorities in the House and Senate are, leaving Democrat party leaders almost no room for error in shepherding their partisan bills through Congress without any Republican support.
In fact, the only thing which prevented earlier Senate passage of much larger earlier versions of Biden’s Build Back Better proposal was months of bitter Democrat infighting between progressives and the relatively few remaining Democrat moderates.
MANCHIN’S FOCUS ON SPENDING CUTS
For example, Senator Joe Manchin insisted that the amount of spending in the earlier versions of the bill had to be cut back substantially to avoid adding to the growing inflation problem. To meet Manchin’s demands to reduce the cost of the bill, Democrats had to jettison several liberal spending programs and new federal entitlements featured in the original proposal, including universal free pre-kindergarten education, subsidized child care, free community college tuition, and paid family and medical leave for all workers.
Democrats also tried to camouflage the real cost of some of the liberal proposals that remained, by including funding for them in the bill for a limited period of time, even though they expected that funding to be renewed at the end of that period. Manchin recognized and condemned the tactic as a cynical accounting trick, and refused to accept the artificially lowered cost estimates.
THE DEAL THAT REFUSED TO DIE
Back in December, Manchin singlehandedly scuttled a $2.2 trillion version of the bill which had already been tailored to meet his objections and which had been passed by the House. At that point, the Biden White House thought it had a deal in place for Manchin’s support, and the public, bitter mutual recriminations which followed angered both sides.
Biden then turned the negotiations with the West Virginia senator over to Senator Schumer, which continued on and off, mostly out of public sight, until their final agreement was announced two weeks ago. Those talks hit another crisis in mid-July when Manchin became concerned about the July 9.1% inflation figure, and announced that he could not go forward with the almost finished deal until he saw evidence that inflation had peaked and that the nation was not on the brink of a deep recession.
All of Washington believed that the widely expected deal between Schumer and Manchin was dead, and that Democrat candidates would be forced to go into the midterm election campaign with no significant legislative accomplishment to run on. But they were wrong. Manchin and Schumer quickly resumed their negotiations, but this time under a thick veil of secrecy, adding to the drama of their announcement two weeks ago that their deal had been finalized.
MANCHIN’S RESCUE PLAN FOR FOSSIL FUELS
In the negotiations with Schumer, Manchin had also insisted that the nation’s fossil fuel industry had to be protected from new taxes and excessive climate change-inspired regulations that were main features in earlier versions of the bill. However, the final version of the bill passed by the Senate did contain a provision that imposes a relatively small 16.4 cent per barrel tax on imported petroleum products and crude oil refined in the United States.
To win Manchin’s approval, Schumer also agreed to add several provisions that would specifically benefit West Virginia’s fossil-fuel based economy, included the establishment of an excise tax on coal to fund the Black Lung Disability Trust Fund, which benefits coal miners disabled by black lung disease as well as their dependents and survivors.
The energy provisions in the bill are also not limited to renewable sources. Within its $369 billion energy allocation, there is some money to support the development of clean coal and carbon capture technologies, which are vital to enabling coal burning plants to meet future EPA carbon emission standards. There is even some money to provide small subsidies to enable this nation’s remaining nuclear power plants, our most reliable source of safe, zero-emission electricity, to continue operating in the face of stiff competition from much more heavily subsidized solar and wind power sources.
WILL PROGRESSIVES ALLOW SCHUMER TO KEEP HIS PROMISE?
Schumer also promised Manchin that Democrats would pass separate legislation before the end of September that would reform the permitting process for vital infrastructure projects which are now routinely being subjected to years of delay by frivolous legal challenges brought mostly by liberal environmental and climate change activists. One of those projects is a long-stalled pipeline which would bring natural gas from shale deposits in West Virginia to markets in the east.
Some have questioned whether the large number of radical Democrat progressives in the House, who hate fossil fuels, will enable Schumer to keep that promise to Manchin, and how Manchin would react if that promise were broken.
WHERE IS THE INFLATION REDUCTION?
Another cosmetic change made to satisfy Manchin was a change in the name of the legislation to the Inflation Reduction Act of 2022. Contrary to the clear implications of its name, the legislation would authorize the biggest burst of spending in US history to tackle global warming, but it would not directly lower any prices until 2026, when Medicare recipients would start to see a reduction in the cost of some of their more expensive prescription drugs.
Conservative economists and commentators have challenged the vehement claims by Manchin and the Democrats that their bill will not increase the tax burden on American families and effectively reduce the rate of inflation. Even though the authors of the bill assigned $300 billion of the revenue it would raise to deficit reduction, the bill will also increase the level of federal spending by more than $400 billion, resulting in a net inflationary effect. That deficit reduction figure should also be taken with a grain of salt. Much of it relies on the questionable expectation that flooding the IRS with additional money and manpower will result in a substantial reduction in the amount of government revenue being lost to tax cheats.
Analysis of the bill using a widely respected economic forecasting model at the University of Pennsylvania predicts that it will have no measurable effect on inflation.
Even liberal economist Mark Zandi of Moody’s Analytics, who has been one of the media cheerleaders for Biden’s economic policies, concedes that at best, nine years from now, the legislation might reduce the rate of inflation by a paltry one-third of one percent.
YES, IT DOES RAISE TAXES ON EVERYONE
While the bill does not impose any direct tax increases on American families, the indirect impact of its new taxes on business, including the imposition of 15% minimum alternative tax on corporations making a billion dollars a year or more, will quickly be passed along by those companies to its customers, in the form of higher prices, and to its shareholders in the form of lower dividends and stock prices.
The employees of the company will also suffer, because there will be less money available to provide wage increases or to invest in expansion and new equipment.
According to an analysis by the Tax Foundation, the minimum tax pass-through will result in an effective tax increase for everyone associated with that company, at every income level, from entry-level employees to major shareholders, and slow the company’s economic growth.
THE HIGH COST OF DRUG SAVINGS
One of the most popular features of the bill is its promise to put a cap on Medicare prescription drug prices, and force price reductions on some of the most expensive and effective new drugs.
But the restrictions on the profits that drug companies can make on their most successful drugs will reduce their incentive to continue investing about $100 billion a year in research and development for new lifesaving medications.
Thanks to that investment, the US drug industry has produced the majority of the world’s 40 most effective recent wonder drugs, saving countless hundreds of thousands or millions of lives. But if the drug industry’s profit incentive is substantially reduced, eventually, according to researchers at the University of Chicago, it will result in fewer new lifesaving medications, and a much higher ultimate cost in terms of the lives that will be lost that could have been saved by those drugs if they had been developed.
WHAT HAVE WE GOTTEN FROM OUR CLEAN ENERGY INVESTMENTS?
Experience also raises questions about the wisdom of the bill dedicating $369 billion in new spending to develop cleaner alternative sources of energy.
Writing in the Washington Times, columnist Michael McKenna points out, “Since 2005, the federal government has spent about $850 billion on alternative energy. Here are the results: In 2005, the United States relied on coal, oil, and natural gas to produce about 80% of its primary energy. Last year, after all that money was spent, the United States [still] relied on coal, oil, and natural gas to produce about 80% of its primary energy.”
Another feature of the bill is the renewal of a $7,500 federal tax credit for the purchasers of new electric vehicles, and a $4,000 credit for the purchasers of used electric vehicles. But along with the tax credits come specific limits on the income of those eligible for the tax credits, and the maximum sale price of both new and used electric cars that qualify.
WHY ELECTRIC VEHICLE TAX CREDITS ARE A MIRAGE
Recent articles in the New York Times and the Wall Street Journal quote complaints about those restrictions from auto industry executives, who point out that the most of the electric vehicles on the market today exceed the $55,000 price limit on new cars and the $25,000 price limit on used electric vehicles.
According to the Kelley Blue Book auto pricing guide, the average sticker price of an electric vehicle rose by 14% last year to $66,000, and is likely to increase further due to predicted shortages of lithium, which is the major component in their batteries, and other raw materials that go into their manufacture. Most of the cheaper new electric vehicles are totally sold out, for months in advance. Meanwhile, new car manufacturers are prioritizing their production of more expensive and profitable models designed for wealthier buyers, which are still in high demand.
According to the New York Times, “advertised prices for electric vehicles tend to start around $40,000… Good luck finding an electric car at that semi-affordable price…
“Hyundai advertises that its electric Ioniq 5 starts at about $40,000. But the cheapest models available from dealers in the New York area, based on a search of the company’s website, were around $49,000 before taxes.
“Tesla’s Model 3, which the company began producing in 2017, was supposed to be an electric car for average folks, with a base price of $35,000. But Tesla has since raised the price for the cheapest version to $47,000.”
To qualify for the tax credits, a new car must meet minimum standards set in the bill for how much of its battery must be made in North America with raw materials that do not come from China. But most of the American battery factories are still on the drawing boards, and it will take years before many of them will be up and running.
Carla Bailo, the president of the Center for Automotive Research, told the New York Times, “Right now with our lack of capacity for materials, I don’t think there is any product that will meet [the bill’s country of origin requirements for the tax rebates] today. Tesla is probably close, but the rest of the manufacturers, no way.”
While the electric car buyer tax credits sound enticing, their strict eligibility requirements — and the current price and availability situation in the electric car market — make them effectively unavailable to most consumers today and likely for some years to come.
SCHUMER’S VCTORY AND MCCONNELL’S FAILURES
But Democrats are paying little attention to the many faults in the bill they just passed, and are basking in the glory of having finally pushed a major piece of new liberal legislation through the 50-50 Senate.
In an interview shortly before the final Senate vote Sunday, Schumer declared, “This is one of the most significant pieces of legislation passed in a decade. Things that Americans have longed for, and couldn’t get done.”
On the other side of the aisle, many Republicans felt that Schumer succeeded in badly outmaneuvering Senate Minority Leader McConnell. Schumer had waited until after McConnell allowed the popular CHIPS and Science Act to pass the Senate with a large bipartisan majority before announcing his previously secret agreement with Manchin on the Inflation Reduction Act. Having prematurely sacrificed his ability to hold Senate passage of the CHIPS bill hostage, McConnell was left without any legislative leverage to halt the rapid progress of the Inflation Reduction Act through the Senate after Schumer and Manchin revealed their agreement.
Clearly embarrassed and angry, McConnell then overreacted by asking GOP senators to block a badly needed measure to support veterans’ health. That measure soon passed anyway, making McConnell and Senate Republicans, who had been successfully holding Senate Democrats at bay for more than a year, suddenly look weak and confused.
In the wake of the Senate vote approving the Inflation Reduction Act, former President Donald Trump blasted McConnell in a posting on Trump’s new Truth Social platform.
“Mitch McConnell got played like a fiddle with the vote today by the Senate Democrats,” Trump wrote. “First he gave them the fake Infrastructure Bill, then Guns, never used the Debt Ceiling for negotiating purposes (gave it away for NOTHING!), and now this. Mitch doesn’t have a clue — he is so bad for the Republican Party!”
DEMOCRATS REJECT A LAST-MINUTE CALL FROM SANDERS
In the final hours of the overnight amendment debate, before the decisive vote, progressive leader Senator Bernie Sanders tried unsuccessfully to restore some of the previous proposals in Biden’s Build Back Better plan which had been jettisoned because of Manchin’s objections to their cost. In addition to a broad range of social welfare proposals, they also included a significant expansion of Medicare to provide dental, vision, and hearing coverage to the elderly. In fiery speeches, Sanders implored his Senate colleagues to improve the Manchin-approved bill that he said “does nothing” to address the greatest financial challenges facing families.
As the chairman of the Senate Budget Committee, Sanders was in charge of drawing up the initial Senate version of Biden’s Build Back Better plan last year. The result was a bill so full of new liberal spending and entitlement programs that it was initially estimated to cost $6 trillion.
Senate Democrats rejected the Sanders amendments, even though they had once supported the measures he was proposing. To assure passage of the bill, Democrats refused to approve any further significant changes in amendments to the final version of the bill, out of fear that they would disturb its fragile combination of delicate political compromises.
Many Democrats emphasized the need to overlook the painful compromises and savor the significant political gains in a legislative package whose passage had seemed out of reach just a few weeks earlier.
“This is not Bernie’s bill. I understand that,” Manchin told reporters Sunday. “But it’s a piece of legislation that’s a tremendous piece of legislation. It’s a balanced approach.”
Republicans, meanwhile, lambasted their Democratic counterparts for the drug pricing program, massive climate spending, and new tax policies. During nearly 19 hours of debate before the final Senate vote, GOP lawmakers alleged that the measure would worsen inflation at a time when prices already are rising at the fastest rate in four decades. They painted the new business tax provisions, in particular, as a threat to workers and their wages.
“It does nothing to bring the economy out of stagnation and recession. But rather, the Inflation Reduction Act of 2022 gives us higher taxes, more spending, higher prices — and an army of IRS agents,” said Senator Mike Crapo of Idaho, the top Republican on the tax-focused Senate Finance Committee.
WILL BIDEN WEAPONIZE THE EXPANDED IRS?
Congressman Tom Emmer of Minnesota, chairman of the National Republican Congressional Committee (NRCC), warned in a statement to Fox News that President Biden is likely to use the “army” of 87,000 new IRS agents to be hired under the bill’s provision “to harass and bully the middle class. It’s something that should concern every American taxpayer. The IRS targeted conservatives during the Obama Administration, so it’s fair to wonder whether Joe Biden will use his new IRS Army to attack conservatives.”
Emmer was referring to a campaign led by mid-level IRS bureaucrat Lois Lerner to single out conservative organizations applying for nonprofit IRS status to extra scrutiny, delaying their approval to prevent them from taking a more active role in election campaigns. There is some evidence that the campaign was carried out with the knowledge and approval of the Obama-appointed commissioner of the IRS, as well as some White House officials, but after an FBI investigation, the Justice Department declined to seek any criminal charges in the case and Lerner was allowed to retire with her full pension.
Even before the vote was final, Democrat lawmakers began celebrating their victory on the Senate floor, cheering, shaking hands, and hugging, as their Republican counterparts glumly cast their votes and headed home for a month-long summer break. Manchin made a beeline for Schumer’s desk, as the two men leaned in and clasped hands.
A RARE DEMOCRAT WINNING STREAK
For Senate Democrats, passage of the Inflation Reduction Act was the latest victory in a spate of legislative accomplishments, including a modest bipartisan effort to rethink federal gun laws, improvements in veterans’ health care, and the passage of a $284 billion CHIPS Act to boost America’s domestic manufacturing capacity for high-tech computer chips and make the US a world leader in basic scientific research once again.
The Senate vote also came just two days after a federal labor report showed the US economy had generated an unexpectedly strong 500,000 new jobs in July, completing the recovery of all the jobs it had lost since the start of the coronavirus pandemic.
In a statement, President Biden hailed the outcome of the Senate vote and praised Democrats for having “sided with American families over special interests.” Acknowledging the “many compromises” that led to the vote, he encouraged the House to vote on it swiftly so that he could sign it into law.
But Democrats did not accomplish everything they had sought from the bill. An attempt to lower and cap the price of insulin to $35 a month, for example, was foiled by a ruling by the Senate parliamentarian that it could only be applied to Medicare recipients. It will require separate legislation to apply to everyone else.
The $369 billion set aside in the bill for energy and climate change-related projects include a bevy of tax credits to incentivize further development of wind, solar, and other renewable power sources.
ARE NEW RESTRICTIONS ON METHANE NECESSARY?
The bill also creates a $1.5 billion program that includes new payments for companies that succeed in cutting their emissions of methane, which is more potent greenhouse gas than carbon dioxide. Methane is one of the main components of natural gas. It is also produced as a waste product of the digestive system of farm animals, and by the natural decomposition of plants and in garbage dumps.
Fossil fuel company executives argue that the new penalties on methane emissions in the bill are unnecessary, because the high market price for natural gas has already given them a powerful financial incentive to capture and sell as fuel any methane that may be leaking into the atmosphere from their pipelines, tanks, and wells.
On the positive side, the methane in natural gas is the cleanest burning of the fossil fuels. The production in recent years of large quantities of low-cost natural gas in domestic shale fields made possible the wholesale substitution of natural gas for coal as the fuel burned for the generation of electricity. That was, in turn, responsible for an estimated 30% reduction of carbon dioxide emissions in this country between 2005 and 2019, without the need for government regulation or intervention. It is also why some climate change activists have accepted the continued burning of natural gas as the preferred fuel in the gradual transition of our electrical grid to green energy sources.
The bill provides $20 billion to dispense to “green banks” across the country. They are nonprofit institutions that give homeowners, small businesses, and others low-cost financing to purchase energy-efficient products, such as heat pump-based air conditioning systems, insulated windows, solar panels, building insulation, and electric-vehicle charging stations.
MANCHIN’S LIFELINE FOR FOSSIL FUELS
Democrats also reluctantly agreed to include the pro-fossil fuel measures that Manchin had demanded as the price for his crucial 50th vote, without which the bill could not have passed the Senate. They included a requirement that the Biden administration issue new oil and gas drilling leases covering at least two million acres a year on federal lands, as well as offshore in the Gulf of Mexico and the Cook Inlet in Alaska. Party leaders also committed to pursue a separate bill in the coming months that makes it easier for developers to override some environmental objections. That proposal could greatly benefit a long-stalled pipeline in Manchin’s home state, a trade-off that some Democrats described as an uncomfortable necessity.
“We made a deal with Joe Manchin, so there was always going to be something for fossil,” said Hawaii Senator Brian Schatz, a liberal known for his strong advocacy of climate change measures. Schatz emphasized that the bill contains far more benefits to protect the environment and fight global warming than concessions to the fossil fuel industry. Overall, it is expected to reduce carbon emissions by an estimated 40% by 2030, coming close to President Biden’s announced goal of a 50% reduction by that time.
At the same time, Schatz admitted, “It also has stuff I don’t like, but that’s the nature of getting a bill done that all of us can support.”
THE BATTLE BETWEEN DEMOCRAT PROGRESSIVES AND MODERATES
The Senate’s budget reconciliation rules, which was the only way for Democrats to sidestep the united GOP opposition by getting around the normal 60-vote minimum requirement to get past a Senate filibuster, required all 50 Democrats to unite, without exception. That gave the Democrat moderates, Manchin and Sinema, the upper hand in their negotiations with the rest of their party over the contents of the bill. Over the past year, they repeatedly rejected more ambitious and expensive versions of the bill, with Manchin in particular not hesitating to exercise his effective veto over versions of measures that did not meet his specifications.
After their victory in the 2020 presidential election gave Biden and his liberal supporters the White House and majority control over both the House and the Senate, they filled the initial versions of the Build Back Better proposal with a vast array of new social welfare benefits and government entitlement programs, while ignoring their costs. Senator Bernie Sanders, an avowed socialist now widely regarded as the leader of the dominant progressive wing of the Democrat party, saw Biden’s Build Back Better proposal as a unique opportunity to pass the most ambitious package of liberal legislation since President Franklin D. Roosevelt’s passed the New Deal as an emergency response to the Great Depression.
Biden and his fellow Democrats, with the notable exception of Senator Manchin, justified the enormous expense of Biden’s Covid relief package, followed by his Build Back Better proposal, by pointing out that the US economy had been largely shut down by the pandemic. Because it was in a deep recession, Biden and Treasury Secretary Janet Yellen argued that the economy needed all the spending stimulus it could get to hasten its recovery.
At the same time, they ignored public warnings issued by Republicans — and even by respected liberal economist Larry Summers — that putting so much government money into the hands of consumers during a time of critical product shortages and supply chain issues could unleash a serious inflation problem for the first time in the past 40 years.
Manchin never supported the sky-high price tag of Biden’s proposals, arguing that it might worsen the country’s fiscal health at a moment of great economic and political uncertainty.
Reflecting with 20-20 hindsight on what went wrong with the early versions of Biden’s Build Back Better proposal, Virginia’s Democrat Senator Mark Warner recently admitted, “We were probably too aggressive. The idea we were going to solve virtually every issue in one bill … was probably a bridge too far.”
By January, Democrats, at Biden’s direction, began rethinking the package, a set of negotiations led by Schumer. At times, they seemed on the verge of collapse — especially after Manchin said in July that he could not support a bill that raised taxes and spent money on climate change. Though he had supported some of those aims, Manchin cited the rising cost of groceries, gas, and other goods as reason for his opposition.
Schumer and Manchin ultimately worked out their differences, solidified an agreement, and sold it to a caucus that had hoped for something more robust. And after a year of failure and countless hours of bickering — and with an election less than three months away — Democrats were eager to take it.
There has been a lot of speculation about the reasons behind the successful passage of the bill after so many months of failure due to Democrat infighting, finger-pointing, and a stubborn refusal to give in to the demands of Manchin and Sinema, whose votes were always essential.
Some say that much of the credit belongs to Schumer, who refused to give up on his negotiations with Manchin, despite the many setbacks since that process began.
THE SUCCESS OF THE PRAGMATIC APPROACH
Others say that the credit belongs to the Democrat leaders who made the pragmatic decision to concentrate on those aspects of the bill that Manchin and Sinema were most likely to accept, setting aside the rest for another day, and a willingness to limit the scope of the bill’s provisions, limit its costs, avoid unnecessary controversy, and at least give the impression of ideological balance.
That was especially true of the energy provisions in the bill, which did not fully satisfy anyone, but were accepted as an attractive and reasonable compromise by both the liberal climate change activists and advocates for the fossil fuel industry.
Republican opponents of the bill expressed their disappointment that the fossil fuel industry did not launch a major effort to defeat this version bill. Manchin was surprised that most energy industry executives did not congratulate him on the concessions he got from the Biden administration enabling the future development of fossil fuel sources in this country.
WHY THE FOSSIL FUEL INDUSTRY DIDN’T TAKE SIDES
The most probable explanation for the relative silence of the industry on the bill’s energy provisions was the recognition by its executives that Manchin had probably extracted the maximum number of concessions from the Biden administration on fossil fuels that were available. But they also did not want to antagonize either the Republicans or the White House by taking a partisan position on the bill, in view of the fact that Biden still has two more years in the White House while the Republicans are expected to gain control of the House, and possibly the Senate, in November’s midterm election.
As for the Democrats, their motivation for finally agreeing to fully meet the demands of Manchin and Sinema is likely their growing panic over facing their voters in November’s midterm election with no significant legislative accomplishments, and weighed down by the political burden of President Joe Biden’s disastrously low job approval numbers.
WHY IT TOOK SO LONG FOR DEMOCRATS TO COME TOGETHER
Many Democrat incumbents up for reelection knew they were probably facing the end of their political careers, and were willing to pay almost any political price to survive in office. Democrat party leaders also realized that their ranks, especially among moderates in the House, would be decimated — leaving the progressives, most of whom are running for reelection in safe districts, to pick up the pieces after the election and complete their takeover of the national party.
The most surprising fact about last weekend’s Democrat victory in the Senate is that it took so long to accomplish. From the day that Democrats added their control over the 50-50 divided Senate to their existing majority in the House, they had the ability, using the Senate’s reconciliation procedures, to pass most of their legislative agenda without the support of a single Republican. The only thing that could stop the Senate Democrats was themselves. To succeed, they needed unanimity, and to achieve that, they needed a willingness to compromise their personal policy preferences to build the necessary consensus.
That willingness had not been there for Democrats over the past year of self-imposed legislative gridlock. However, the prospect of looming annihilation at the polls in November focused their minds on resolving their differences — which did not turn out to be so difficult, given sufficient motivation.