President Biden came into office with an ambitious agenda. He wanted an FDR-sized presidency, one that would dramatically bolster America’s social safety net. But with the thinnest possible majority in the Senate, he faced daunting obstacles to enacting his big plans, and that’s putting it mildly. Two senators from his own party — Joe Manchin of West Virginia and Kyrsten Sinema of Arizona — shot down effort after effort to pass a budget reconciliation package that would have included new taxes on the wealthy, social programs to combat poverty, and crucial tools to address climate change. What would have been the president’s signature legislation was thought to be dead.
But wait. In a stunning development last week, Manchin announced that he had struck a deal with Senate Majority Leader Chuck Schumer on a major new bill that would tackle health care, climate change, and inflation. And after some negotiating, Sinema committed to voting for the bill too, clearing its path in the Senate.
Not only would this be a big win for Biden, but it would also show that this Democratic Congress, even with its internal differences and minuscule majority, can govern effectively. That should give voters a clear choice in the midterms: One party is working to meet the challenges of today and tomorrow, while the other party wants to turn back time.
The Democrats are calling this bill the Inflation Reduction Act — a slightly misleading name. Yes its policies would reduce the deficit, lower health care costs, and thereby fight inflation. But the name undersells the bill’s chief component: It would be among the most significant breakthroughs in climate legislation in American history, putting the United States on a path to cut emissions by 40 percent by the end of the decade.
Let’s start with what many Democrats view as the main selling point of this legislation: reducing inflation. There are many things driving inflation, from boosted demand to high energy prices to supply shortages, and this bill will not, on its own, solve all of those woes. It does, however, help.
The bill, for example, would raise more money than it would spend by imposing a minimum corporate tax rate of 15 percent and strengthening the Internal Revenue Service’s enforcement mechanisms so that it can collect already-existing taxes. And while Sinema is unfortunately insisting on taking out a provision that would have closed the carried interest loophole, which currently allows many of the wealthiest Americans — that is, private equity managers — to pay a far lower tax rate on their salaries than almost everyone else, the bill would still raise enough revenue to reduce the deficit. And so if the legislation passes, it would be inherently disinflationary.
It also eases inflationary pressures on Americans by lowering health care costs, which are a big financial burden on many households. That would be done by extending Affordable Care Act subsidies to low- and middle-income households that were set to expire this year, and by allowing Medicare to negotiate prescription-drug prices. According to a Congressional Budget Office estimate, that would save Medicare nearly $300 billion over 10 years. These are long overdue policies that will undoubtedly deliver financial relief for hard-pressed families.
Then there are the climate provisions. While they also reduce inflationary pressures by lowering energy costs and pushing Americans away from the volatile prices of fossil fuels in the long term, the bill would be a pathbreaking accomplishment when it comes to addressing climate change. It would put the United States within reach of its carbon emission targets set by the Paris Accords, by building up clean energy technologies and creating incentives for corporations and individuals to transition to more environmentally friendly practices.
One provision would greatly expand tax credits for electric vehicles, including by providing, for the first time, rebates for used cars. That would help lower- and middle-income households buy electric cars, which would eventually reduce not only their carbon footprint but also their monthly expenses on gas. A transition away from gas-powered cars is critical to meeting climate targets, and Congress should make the cost benefits of electric vehicles available to everyone.
With Democrats running out of time before the midterms, when they appear likely to lose their control of Congress, the Inflation Reduction Act might just be the last opportunity to revive key parts of Biden’s domestic agenda. Manchin, no stranger to drama, understood this when he reportedly said that this deal “would be like hitting a homer in the bottom of the ninth.”
But the bill’s passage is not guaranteed. The Senate parliamentarian, for example, could declare that some of its provisions can’t pass through the budget reconciliation process. But whatever happens, Democrats have to stay united. If they want to achieve meaningful progress on climate change, then they have no choice but to pass this legislation. There is no 10th inning in this game.
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