Manchin and Schumer Surprised Everyone With the Inflation Reduction Act—Even Democrats Themselves

The Build Back Better Act is dead; long live the Inflation Reduction Act.

Senate Majority Leader Chuck Schumer and West Virginia Senator Joe Manchin surprised everyone—including many members of their own party—on Wednesday, when they announced a new deal to cut the deficit and invest in climate spending, health care, and more.

Manchin had previously watered down, and then killed, the bill known as the Build Back Better Act, President Joe Biden’s massive social spending, climate, and tax policy legislation. But Wednesday’s deal has revived Democratic hopes of passing legislation that addresses some of their biggest priorities ahead of the midterm elections.

The Inflation Reduction Act is a narrower version of the Build Back Better Act—despite Manchin emphatically referring to Build Back Better as “dead” in a Wednesday statement—raising $740 billion and spending $433 billion on climate, energy, and Obamacare provisions, compared to the earlier bill’s roughly $3 trillion price tag. But Democrats are still taking the legislation as a victory, touting the bill’s focus on cutting the deficit, extending Affordable Care Act subsidies, empowering Medicare to negotiate prescription drug prices, boosting domestic energy production, and addressing climate change. The bill would also impose a 15 percent minimum tax on big corporations and close the carried interest loophole, priorities of progressives such as Senator Elizabeth Warren, who approvingly noted its inclusion to reporters on Tuesday.

Despite his opposition to earlier iterations of the bill, Manchin said on Wednesday that he had seen an opportunity to address inflation and energy security that propelled him to keep the negotiations going. “All of you might be surprised, but there should be no surprise, because I’ve never walked away from anything in my life,” Manchin, who is currently quarantining with a case of Covid-19, told reporters in a press call Thursday morning.

But despite Manchin’s claims, there was more than a fair bit of surprise at the news on Capitol Hill. When informed that a deal had been reached on Wednesday, Senate Majority Whip Dick Durbin—who is ostensibly responsible for counting votes—told reporters that the agreement was “news to me.”

“Clearly, there’s a bit of whiplash going on in Congress right now, that we thought it was going to fail, and now it’s popping,” Senator Cory Booker told The New Republic after a caucus meeting on Thursday morning.

Just as notable as what is included in the bill is what has been left out. There is no extension of the expanded child tax credit, which lifted 3.7 million children out of poverty in December. There are also no childcare provisions, despite rising costs, and no paid parental or medical leave, even though the United States is the only developed country in the world without a national paid leave program. There is nothing on affordable housing, universal pre-kindergarten, or free community college.

The prevailing sentiment among Democrats in the wake of this agreement appears to be acceptance, with varying degrees of enthusiasm. “We’re at a point where the things that are in it are positive steps forward. It’s hard to vote against something because of what’s not in it,” said Representative Dan Kildee.

Representative Don Beyer, who has long been supportive of the corporate minimum tax, seemed to embody much of the Democratic thinking on the deal: “If Joe Manchin’s for it, it’s enough.”

“There’s a lot of really good stuff in there. I think it’s big progress. Obviously, there’s things that we didn’t get in there,” said Representative Pramila Jayapal, the chair of the Congressional Progressive Caucus. “But I think the most important thing is to get this thing done as quickly as possible.”

Representative Jamaal Bowman, another progressive, told reporters on Thursday that he was “very disappointed and actually pretty angry that the childcare provisions were taken out.” But he was circumspect about most Democrats being left out of the final negotiating process. “They’re senators, you know; one is the Senate majority leader, and one has been a gatekeeper of so many policies throughout this term, and that’s the power of the Senate,” he said. Representative Raul Grijalva agreed: “This occurring was surprising, and lacking in other input, but it’s not by any stretch of the imagination anything new.”

Perhaps because the process has taken so long, with various twists and turns, Democrats are just relieved to have any bill at all. “It’s not ideal, but it’s how the sausage gets made, right? I try not to go to the sausage factory,” Senator Tim Kaine told The New Republic about the two-person negotiations.

“I’m not going to talk about what’s not in it, because those stories can go on and on and on,” said Senator Sherrod Brown, who has made the expanded child tax credit a personal priority for years. “I will always fight for the child tax credit, and we’re going to make it happen.” (Brown noted that the credit was opposed by all Republicans, although it was crucially also opposed by Manchin.)

Booker, another strong proponent of the expanded child tax credit in the Senate, argued to The New Republic that the bill still made significant investment in children. “This will be one of the most significant and consequential bills passed in a generation. So I want to celebrate the victories here, and there are tremendous victories for children,” he said. He specifically pointed to the segments of the bill related to environmental justice, like block grant funding to aid communities disproportionately harmed by climate change and pollution.

There will also be plenty of opportunities for Democrats to attempt to add amendments to the bill. To avoid a filibuster, the legislation must pass through reconciliation, which allows certain bills to pass with a simple majority. Both Democrats and Republicans can look forward to the “vote-a-rama,” a feature of the reconciliation process, in which senators take back-to-back votes on amendments for hours at a time. Kaine, who recently introduced a childcare proposal along with Senator Patty Murray with the hopes of getting it included in the reconciliation bill, noted to reporters that there would be an amendment process, during which he could try to get childcare included.

“I would say, it’s not everything that I wanted, but it’s more than I expected,” Kaine said. He pointed to a provision in the deal that would permanently extend an excise tax that funds a program to aid disabled coal miners—a priority both of his and of Manchin’s—saying that he was pleasantly surprised by its inclusion.

But despite the Democratic victory laps, the reconciliation agreement is not a done deal. All 50 Senate Democrats need to be on board with the measure, and there’s at least one unknown: Senator Kyrsten Sinema, the iconoclastic Democrat from Arizona who has previously balked at raising corporate taxes. In characteristic fashion, Sinema has remained tight-lipped about her position on the bill. She did not attend a Democratic caucus meeting on Thursday morning.

Manchin told reporters that he had not spoken to Sinema about the legislation but “would hope she would be receptive.” “We didn’t raise taxes, so she should be happy with that,” he said. He also said he was unwilling to drop taxation on carried interest, which Sinema has previously opposed.

Some Democrats from high-income states had threatened not to support a reconciliation package unless it lifted a $10,000 cap on the state and local tax deduction—something that Manchin opposes. But in the House, at least, the lack of change to the SALT deduction may not be a dealbreaker.

“A lot of us said we needed to see SALT in any bill that … had other tax impacts on our middle-class constituents. This doesn’t do that. This is a bill on a completely different set of issues,” argued Representative Tom Malinowski of New Jersey, who has been vocal on the SALT deduction cap in the past. “It’s consistent with my values and my priorities, and with a lot of the things that my constituents sent me here to fight for.”

But Senator Bob Menendez of New Jersey gave a more ambiguous response when asked how the lack of a SALT deduction change would affect his vote. “I don’t make decisions like that, gentlemen, ladies. I look at the totality of it,” he told reporters. “Anybody can be Joe Manchin. I can be Joe Manchin right now.”