Republicans see inflation, taxes and immigration as Democratic weaknesses worth attacking, and two opposition senators as prime targets, in the coming battle over an economic package that Democrats want to push through the Senate.
The measure embodies some of the top ambitions on the environment, energy, health care and tax policy that President Joe Biden and party leaders want to implement as voters begin to tune into this fall’s congressional elections. The GOP would like to derail or weaken the measure, or at least force Democrats to pick up votes that would be painful to defend in re-election campaigns.
Republicans are already taking aim at Sen. Joe Manchin, DW.Va., who crafted the measure with Senate Majority Leader Chuck Schumer, DN.Y., and unexpectedly breathed life into an effort that most Democrats considered dying. Manchin is a conservative Democrat from a deep red state who has bucked his party’s priorities in the past, and Republicans have savaged him in recent days, a relentless signal that they will be coming for him if he seeks re-election in 2024.
“He made a terrible deal,” Senate Minority Leader Mitch McConnell told reporters this week. That’s a deal only Bernie Sanders would want.”
Even Sen. Shelley Moore Capito, RW.Va., who has a strong relationship with Manchin and rarely clashes with him publicly, criticized the legislation to impose a minimum tax on huge, profitable corporations that she said would stifle investment. “Like many West Virginians, I am concerned that this tax increase will delay closing the digital divide” in rural communities, he said.
Republicans are taking a softer approach with Sen. Kyrsten Sinema, D-Ariz., who has been gun-shy on the legislation and has shown concerns about tax increases. She is her party’s biggest question mark on the bill in the 50-50 House, where all Republicans seem certain to vote “no,” and she has had several discussions with GOP senators during votes this week.
Sinema has opposed previous proposals to raise taxes on wealthy corporate executives, which this time would raise about $14 billion of the legislation’s $739 billion in revenue. He met with Arizona manufacturers who oppose raising the minimum corporate tax and thanked her in a tweet afterward for her “thoughtful approach and willingness to listen to AZ job creators.”
“I don’t know what he thinks,” Idaho Sen. Mike Crapo, the top Republican on the Senate Finance Committee, told reporters.
The GOP seems certain to try to remove or reduce the minimum corporate tax and tax hikes on wealthy corporate executives as well, and has hopes of winning over Sinema as the swing vote for that. After opposing proposed tax rate hikes by Democrats last year on corporations and high earners, they switched to a minimum corporate tax that he supported, but it is uncertain whether he will do so now.
Republicans could craft amendments aimed at specific Democratic senators — such as exempting coal producers from certain taxes in a play for Manchin.
To support its argument, the GOP released an analysis by the nonpartisan Joint Committee on Taxation that Republicans said showed tax breaks for people making less than $400,000. That would violate Biden’s pledge not to raise contributions to this income group.
“Ordinary Americans would bear a significant portion of the burden of this tax increase,” said No. 2 Senate GOP leader John Thune of South Dakota.
Democrats rejected that attack, noting that the study omitted the impact of the bill’s health care and energy tax cuts on individuals. He also estimated lower wages, stock prices and dividends that he believes would result as part of the bill’s effect on people.
The 10-year measure includes hundreds of billions in spending and tax breaks to encourage alternative energy production and boost fossil fuels with steps such as tax breaks for technology that reduces carbon emissions. There’s also money to help people buy private health coverage and provisions that give Medicare the power to negotiate the prices of certain drugs with drugmakers.
In total, the Congressional Budget Office said Wednesday the measure could reduce federal deficits by about $305 billion. However, $204 billion of that would come from an improvement in IRS tax collections, which would be real if it happens, but the nonpartisan agency does not count in its official score of the bill’s impact.
In a nod to mainstream voters’ concerns about gas prices and overall consumer costs, Democrats are calling the bill the Inflation Reduction Act. But its impact on the nation’s worst run of inflation in four decades looks likely to be limited.
As the Senate prepares for days of votes on the measure, both parties are using studies to lay out points of contention.
The Penn Wharton Budget Model of the University of Pennsylvania estimated that the measure would “increase inflation very slightly through 2024 and reduce inflation thereafter,” though the changes would be “statistically indistinguishable from zero.” McConnell said the study showed the Democratic bill “would actually increase inflation in the short term and do nothing for inflation in the long term.”
Democrats cited a Moody’s Analytics report that said the bill “will push the economy and inflation in the right direction.” saying the measure would boost the economy, “lower costs for families and fight inflation.”
This battleground suggests that Republican amendments on the price issue are likely. One could imagine a proposal that would prevent the bill from going into effect unless inflation or gasoline prices fall to certain levels. Democratic leaders are trying this week to unite senators against such plans.
The GOP could also try to renew immigration restrictions imposed by President Donald Trump, who has cited the pandemic as a reason to block immigrants, an issue that sharply divides Democrats. And they may seek to eliminate tax credits aimed at encouraging alternative energy that favor companies that pay union wages.
AP reporter Seung Min Kim contributed to this report.