Divided we stand, United we fall
"It’s not a Democrat bill, it’s not a Republican bill, it’s definitely not a ‘green’ bill, it’s a red, white and blue bill.” Joe Manchin
Some key elements from Senator Joe Manchin’s official announcement on the Inflation Reduction Act of 2022, which he directly negotiated with Senate Majority Leader Chuck Schumer:
Over the last year, leaders in Washington have ignored repeated warnings about the severe threat of inflation and the consequences of unprecedented domestic spending.
It is past time for America to begin paying down our $30 trillion national debt and get serious about the record inflation that is crushing the wages of American workers.
Our persistent and increasing dependence on foreign energy and supply chains from countries who hate America represents a clear and present danger and it must end.
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.
The question for my colleagues is 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.
An American patriot?
In recent media interviews, Senator Manchin has been consistent that he believes this bill best addresses the moment America is in, that he cannot predict how fellow Senate lynchpin Sinema will vote (implying all other 48 Senate Democrats and President Biden are on board) and that he has no opinion on whether it matters if Democrats maintain control of the Senate.
To reiterate, a Democrat who has held elected office for most of the past 40 years and whose party controls the House of Representatives, the Senate and the White House could not care less if his party ceases to be able to dictate the legislative agenda.
Let's put in a pin in that thought to review a summary of the Inflation Reduction Act of 2022:
Total revenue raised: $739 billion
15% corporate minimum tax: $313 billion
Prescription drug pricing reform: $288 billion
IRS tax enforcement: $124 billion
Carried interest loophole: $14 billion
Total investments: $433 billion
Energy security and climate change: $369 billion
Affordable Care Act extension: $64 billion
Total deficit reduction: $300 billion+
*If you would like to read the entire 725 page bill (full disclosure: I did not)
On the surface, why wouldn’t Democrats and progressives alike not rave about this bill? It undoubtedly is a significant step forward towards a greener America (for those who publicly acknowledge the sobering reality of climate change), reducing wealth inequality, a more affordable healthcare structure and a fairer tax system. And not a single dollar of deficit spending to boot!
Fortune reports that in the leadup to the shocking deal on Capitol Hill, multiple DC influencers (e.g. Former Treasury Secretary Larry Summers) and clean energy business leaders, including Bill Gates whose venture capital firm has invested in a battery startup in West Virginia, have been lobbying Senator Manchin to reconsider his stance on a bill to support climate (and healthcare) initiatives.
And now that a new bill has been crafted, many elites have sung its praises. A group of 126 economists sent a letter Tuesday to Congressional leaders to highlight the importance of this bill (a few highlights below):
will fight inflation and lower costs for American families while setting the stage for strong, stable, and broadly-shared long-term economic growth
makes key investments to incentivize the transition to cleaner energy sources and greater efficiency
reduces Medicare out-of-pocket costs for drugs and reduces insurance costs for 13 million Americans by building on provisions in the Affordable Care Act
revenue raised to finance them would come exclusively from wealthy individuals and corporations
it is deficit-reducing, it does so while putting downward pressure on inflation
Furthermore, Axios reported yesterday that “Five former Treasury secretaries — including Hank Paulson, who served under President George W. Bush — signed a statement strongly backing the "Inflation Reduction Act" brokered by Senate Majority Leader Chuck Schumer and Sen. Joe Manchin (D-W.Va.).”
It’s not all roses of course. According to the University of Pennsylvania’s Wharton Business School’s preliminary estimates, “the impact on inflation is statistically indistinguishable from zero.” Many conservative media outlets are referencing this study but even if further studies confirm this early analysis, this would certainly not be the first time DC named a bill so ironically.
And in the end there is only one person (apparently) who needs to be convinced of its value. From The Hill:
Asked whether Sinema is upset that she didn’t get looped into last week’s talks with Schumer, which produced the surprise deal, Manchin said he didn’t want to get anyone’s hopes up when he didn’t know whether an agreement was even possible.
“She’s my dear friend,” he said. “But why bring anyone in and all their aspirations get high and the drama we go through and it doesn’t work out?”
[Minority Whip] Sen. John Thune (R-S.D.), who has a close relationship with Sinema, said he’s talked to her about the reconciliation package and warned it would slow the economy by raising taxes on corporations.
“I’ve had conversations with her on not only this but lots of other subjects. She’ll come to her own conclusion,” he said. “She’s analyzing it, keeps her own counsel, I think as most of you know, and usually comes to her own decisions pretty independent of any pressure that she might get from either side.”
Senator Sinema, it should be mentioned, helped craft the pared down version of Build Back Better, which Senator Manchin torpedoed at the last minute.
Recent history isn’t flattering to Manchin
If you recall, the original Build Back Better bill had a price tag of $4 trillion. The pared down version with a 50% cut was pronounced dead on arrival by Senator Manchin back in December 2021:
[Then Press Secretary] Psaki said in a statement that Manchin had “in person” given Biden a written proposal last Tuesday that was “the same size and scope” of a framework for the bill that Democrats rallied behind in October, and agreed he’d continue talks. That framework had a 10-year cost of $1.85 trillion. Officials hadn’t previously disclosed that Tuesday meeting.
When the Senator from West Virginia helped end 2021 on a sour note in DC:
Manchin said he was opposing the 10-year, roughly $2 trillion bill because of his concerns about inflation, growing federal debt and a need to focus on the omicron COVID-19 variant. He accused Democrats in a written statement later of trying to “dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face,” seemingly delineating an ideological gap between himself and his party.
The entire Democratic Senate worked for nearly 6 months on a revamped Build Back Better plan which according to the White House met the framework Manchin could support. And then his office showed such respect for his peers and the White House by:
A Manchin aide gave the White House about a 20-minute notice before the lawmaker announced his position on national television, said a person familiar with the senator’s actions who described them only on condition of anonymity.
Senator Sanders did read the bill.. and had a few things to say:
The most glaring issue of the Manchin-Schumer proposal is not just what was left out of the new deal but rather his not mentioning or wanting to acknowledge presently that Build Back Better was designed to pay for itself as well.
From Senator Sanders official statement on the Inflation Reduction Act:
M. President, one of the criticisms against the original Build Back Better plan is that it would be inflationary because it would increase federal spending. That criticism is untrue. Every nickel spent in this bill would be fully paid for by increased taxes on the wealthy and large corporations. Unlike the recently passed micro-chip corporate welfare bill that adds $79 billion to the federal deficit, unlike the proposed military budget that came out of the Senate Armed Services Committee which would increase defense spending by $45 billion more than the Pentagon even requested, Build Back Better would not have increased the deficit at all.
And to echo one of Manchin’s points from his official announcement, Senator Sanders correctly points out (as reported by this publication and others), that every provision in the original Build Back Better bill had overwhelming support from the American people according to poll after poll.
Some of what the new compromise bill leaves out is disheartening to say the least:
Does not extend the $300 a month per child tax credit
Does not provide free and universal Pre-K
Does not provide 2 years of free community college education
Of the 40+ tax increases, this plan has two (one of which is the carried interest loophole which even Manchin admits might be cut to get Sinema to vote Yea)
And is almost $200 billion short of the Build Back Better commitment to fight climate change ($369 vs. $555 billion)
And some of what was included in the Inflation Reduction Act just falls inexplicably short of better ideas presented before. For example, from Senator Sanders:
For over 30 years, the VA has been negotiating with the pharmaceutical industry to lower the price of prescription drugs. Moreover, for decades, virtually every major country on earth has done exactly the same thing for all of their people.
The result: Medicare pays twice as much for the exact same prescription drugs as the VA, and Americans, in some cases, may pay ten times as much for a particular drug as the people of any major country on earth.
In other words, when it comes to reducing the price of prescription drugs under Medicare – we don’t have to reinvent the wheel.
We could simply require Medicare to pay no more for prescription drugs than the VA.
And, M. President, if we did that, we could literally cut the price of prescription drugs under Medicare in half in a matter of months, not years. In February, I introduced legislation with Senator Klobuchar that would accomplish that goal.
Lastly, something I was not aware of reading multiple articles on the topic but I was alerted to by reading Senator Sanders’ response:
Under this legislation, up to 60 million acres of public waters must be offered up for sale each and every year to the oil and gas industry before the federal government could approve any new offshore wind development. To put this in perspective, M. President, 60 million acres is the size of Michigan.
Further, under this bill, up to 2 million acres of public lands must be offered up for sale each and every year to the oil and gas industry before leases can move forward for any renewable energy development on public lands.
In total, this bill will offer the fossil fuel industry up to 700 million acres of public lands and waters to oil and gas drilling over the next decade – far more than the oil and gas industry could possibly use.
Many are jubilant at the prospect of America’s largest green investment in history. But while they rejoice, we should all keep in mind that the new bill as written can plausibly reduce US carbon emissions by roughly 40% by 2030 which falls short of the White House’s goal of 50% for the same timeframe. (FYI - cutting emissions by half is not an arbitrary metric).
Are Americans okay with this potential new legislative trend?
Senator Manchin admits he did not loop in the White House or Senator Sinema into the negotiations. And given the rest of the Senate and DC media were caught unawares of the deal, it does not seem he spoke to anyone outside of himself, his staff, Majority Leader Schumer and business leaders and DC elite (for council prior to negotiations). A bill of this magnitude is not passed every year, every term or every decade. Once in a generation is the norm. Look at healthcare reform.
Manchin claims current high inflation, staggering national debt, an untenable dependence of foreign energy and supply chains and passing legislation supported by the majority of the American people guided his thinking. And that political agendas are the enemy.
Yet each one of those arguments can be picked apart with ease. The letter from the 126 economists referenced above says the bill will ‘fight’ and ‘put downward pressure’ on inflation; they are careful not to say it will significantly reduce inflation and make no mention if this bill is better at curbing inflation than the original (or pared down) Build Back Better plan. Moreover, if Build Back Better was paid for with higher taxes, then the deficit would not have grown either.
Thinking bigger, if Manchin wants to increase domestic manufacturing and reduce America’s dependence on authoritarian regimes, then why not put forth a more holistic and cogent ‘democracy first’ plan? And on that note, how can he claim to be pro-democracy when his colleagues tried to work with him for months to negotiate this bill and he only wants to move forward with a bill only he and Schumer crafted?
Similar to the gun reform bill Manchin helped develop, this current bill addresses a narrow and immediate set of issues without any long-term vision or guiding principles as to how America should act. If the US wants to fight climate change, a bolder plan, which aligns with the Paris Agreement, is needed to address the real threat to the human race. If rising domestic spending is a critical issue, then Congress needs to more seriously analyze America’s military spending and obviously not budget more funds for defense spending than is even requested by the Pentagon. If the US wants to lead the democratic world to fight authoritarianism, then every foreign trade agreement (with Saudi Arabia, China and others) must be revisited. And what should go without saying is the US government needs to act democratically themselves by acknowledging public polling when legislating (not just when fundraising) and set an example for other nations joining in the fight against authoritarianism.
Lastly, if Manchin truly believes this bill is an American bill and that it does not matter which political party controls the Senate, how many Republicans will he convince to vote for this bill? More than zero?