US Senate Majority Leader Chuck Schumer (D-NY) holds his weekly press conference after the Democratic Caucus luncheon at the US Capitol in Washington, August 2, 2022.
Jonathan Ernst | Reuters
The $430 billion climate change, healthcare and tax bill passed by the US Senate on Saturday was a big win for Democrats, and will help reduce the carbon emissions that drive climate change while also lowering costs for seniors.
Democrats hope the bill, which they pushed in the Senate because of united Republican opposition, will boost their chances in the November 8 midterm elections, when Republicans would prefer to regain a majority in at least one House of Congress.
The package, called the Inflation Reduction Act, is a heavily discounted version of an earlier bill backed by Democratic President Joe Biden that was blocked by dissident Senate Democrats Joe Manchin and Kirsten Senema as being too expensive.
“That’s what the American people want,” Senate Majority Leader Chuck Schumer told reporters. “We prioritize the middle class, working families, and those struggling to get to the middle class, rather than what Republicans do: prioritize those at the top.”
A partisan vote in the Senate of 51 to 50, with a tie vote from Vice President Kamala Harris, forwards the legislation to the Democratic-controlled House, which is expected to pass Friday, after which Biden can sign it into law.
Republicans have criticized the bill as a spending “wishlist” they say will hurt an inflation-stricken economy, saying it will kill jobs, raise energy costs and undermine growth at a time when the economy is facing a potential recession.
Senior Senate Republican Mitch McConnell said Saturday that Senate Democrats are misreading the American people’s anger as a mandate for another reckless tax and spending spree. “Democrats want hundreds of billions of dollars in tax increases and hundreds of billions of dollars in reckless spending – and why?”
About half of Americans — about 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 component of the bill is to give Medicare. The authority to negotiate drug prices, which 71% of respondents support, of whom 68% are Republicans.
Economists, who say the legislation could help the Federal Reserve fight inflation, do not expect a significant impact on the economy in the coming months.
With $370 billion spent on climate, it will become the most important climate change bill ever passed by Congress.
The bill offers billions of dollars in incentives to businesses and households to encourage purchases of electric vehicles and energy-efficient appliances, as well as spur new investments in wind and solar power that would double the amount of clean new energy for online electricity generation in the United States by 2024, according to Project Repeat modeling in Princeton University.
That would help put the United States on the right track to deliver on its pledge to halve greenhouse gas emissions by 2030 below 2005 levels, made at the Glasgow Climate Summit last year.
While environmental groups have largely embraced the bill, they note that concessions won by Manchin, which represents coal-producing West Virginia, will extend US fossil fuel use.
These provisions include rules that would only allow the federal government to authorize new wind and solar developments on federal lands when it is also auctioning off oil and natural gas exploration rights.
Juliet Kobansky, deputy director of the Medicare program at the Kaiser Family Foundation, said the legislation would lower drug costs for the government, employers and patients.
“Perhaps the biggest impact is for people who have coverage for prescription drugs through Medicare,” she said.
The main change is a provision that allows the federal health care plan for elderly and disabled Americans to negotiate prescription drug prices.
The pharmaceutical industry says price negotiation would stifle innovation. Negotiated prices for ten of Medicare’s most expensive drugs will apply from 2026, with that number rising to 20 in 2029.
The nonpartisan Congressional Budget Office estimates that Medicare will save $101.8 billion over 10 years by negotiating drug prices.
The ruling also introduces an annual cap of $2,000 in out-of-pocket costs for seniors through Medicare.
The bill also introduces a new selective tax on share buybacks, a belated change after Sinema raised objections to another provision that would have imposed new charges on carry-over interest, currently a tax loophole for hedge funds and private equity financiers. The sentence was overturned.
Lawmakers said the selective tax is expected to collect an additional $70 billion in tax revenue annually. This is more than was expected to increase the carry-on interest provision.
A report by the nonpartisan Congressional Budget Office released before this latest change estimated that the measure would reduce the federal deficit by a net $101.5 billion over the next decade.
That was about a third of the $300 billion shortfall reduction that Senate Democrats had predicted, but it ruled out a projected $204 billion revenue increase from the Internal Revenue Service’s increased enforcement.