It has been called by many names but US President Joe Biden’s attempt to enact his economic agenda into an executive action has been facing intense scrutiny and resistance–with many believing it wouldn’t reach his desk for signature.
But the initiative has seen a new light after its former critic has now turned around to endorse the bill version of the agenda.
West Virginia Democratic Senator Joe Manchin, one of the moderate swing votes in the upper house, has come out to announce a deal reached with Senate Majority Leader Chuck Schumer, resulting in an endorsement of a watered-down version of Biden’s tax agenda and energy and health proposals.
The new version of the bill includes US$430 billion earmarked on energy, electric vehicle tax credits and health insurance investments–far from the original multi-trillion version from when it started. Now called the Inflation Reduction Act of 2022, the bill is set to “fight inflation and lower costs for American families.”
“This is the action the American people have been waiting for. This addresses the problems of today – high health care costs and overall inflation – as well as investments in our energy security for the future,” Biden said in a statement. “I want to thank Senator Schumer and Senator Manchin for the extraordinary effort that it took to reach this result.”
The bill expects to pay for itself by raising taxes as it aims to impose a 15% minimum tax on corporations with profits over US$1 billion, potentially generating around US$313 billion over a decade. In the former proposals, Biden has been pushing to raise corporate taxes to 28%, up from 21% since 2017 when it was lowered from 35% by the previous administration–but this proposal has been shot down.
It also aims to close the so-called carried interest loophole that allows investment managers to pay a 20% long-term capital gains tax rate instead of income tax rates of up to 37%.
Democrats also underscored that families making under US$400,000 annually will get no tax increases.
The bill, overall, aims to reduce US carbon emissions by roughly 40% by 2030 through tax credits and investments in the energy sector, amounting to approximately US$369 billion. While no specific details have been laid out, the bill is said to revive electric vehicle tax credits but now with lower income threshold for eligibility–a reconciliation with a tax credit-averse Manchin.
The legislative agenda also includes empowering Medicare to negotiate prices of drugs, starting with 10 drugs in 2026 up to 20 drugs annually for 2029 and beyond. It also aims to impose penalties on drug companies that will raise prices faster than inflation.
Manchin around
“For too long, the reconciliation debate in Washington has been defined by how it can help advance Democrats political agenda called Build Back Better. 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.
Biden’s agenda almost ran out of options as it faced fierce resistance from the Republicans and some Democrats, including Manchin. The West Virgina senator has previously said he would “unequivocally” not support the climate or tax provisions of the administration’s proposal.
But the reconciliation deal brokered by Schumer with Manchin threw a new lease on the president’s economic plans.
“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,” Manchin added.
He then further challenged his fellow senators “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.”
The bill is notable not only for its progressive stance on taxation and climate action, but because it has the chance to be passed months before the midterm elections when most Democrats are up for reelection.
“Contrary to foolish talk otherwise, America cannot spend its way out of debt or out of inflation. With respect to my position, I have never and will never walk away from solving the problems facing the nation we all love,” Machin further explained.
It’s not over
While this seems a big boost for the Democrats and for Biden who’s currently hurting his reelection chances, the bill is far from being enacted. With only weeks till Congress goes for a month-long recess, the legislative proposal still has to pass the lower house and reconciled back with the senate version before it reaches the president’s desk for signature.
As early as now, many Republicans are vowing to fight the bill from being passed, claiming the new reconciled version is still a rehash of the previous agenda.
While the renaming of the bill is good PR as the country heads to another midterm elections, the projected economic effects of the spending agenda and taxation proposals are up for debate in Congress. And Biden understands this, at least from a political standpoint.
Information for this briefing was found via CNN and Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
