U.S. Senate Majority Leader Chuck Schumer (D-NY) holds the weekly news conference after the Democratic Party luncheon at the U.S. Capitol in Washington, August 2, 2022.
Jonathan Ernst | Reuters
The $430 billion climate change, health care and tax bill passed by the US Senate on Saturday offers a major victory for Democrats and will help reduce the carbon emissions that lead to climate change while reducing the cost to the elderly.
Democrats hope the bill, which they passed in the Senate over united Republican opposition, will boost their chances in the Nov. 8 midterm elections, when Republicans are favored to regain a majority in at least one chamber of Congress.
The package, called the Inflation Reduction Act, is a dramatically scaled-down version of an earlier bill backed by Democratic President Joe Biden that was blocked by embattled Senate Democrats Joe Manchin and Kyrsten Sinema as too expensive.
“It’s what the American people want,” Senate Majority Leader Chuck Schumer told reporters. “We’re prioritizing the middle class, working families, those struggling to get to the middle class, instead of what the Republicans are doing: prioritizing those at the top.”
The Senate’s party-line vote of 51-50, with the tie coming from Vice President Kamala Harris, sends the legislation to the Democratic-controlled House of Representatives, which is expected to approve it on Friday, after which Biden can sign it to become law.
Republicans blasted the bill as a “wish list” of spending they argued would hurt an economy burdened by inflation, saying it would kill jobs, raise energy costs and undermine growth at a time when the economy faces a possible recession .
“Senate Democrats are mistaking the anger of the American people as a mandate for yet another reckless tax and spending spree,” top Senate Republican Mitch McConnell said Saturday. “Democrats want to shell out hundreds of billions of dollars in tax increases and hundreds of billions of dollars in reckless spending — and for what?”
About half of Americans — about 49 percent — support the bill, including 69 percent of Democrats and 34 percent of Republicans, according to a Reuters/Ipsos poll conducted Aug. 3 and 4. The most popular element of the bill is giving Medicare the power to negotiate drug prices, which 71% of respondents support, including 68% of Republicans.
Economists, who say the legislation could help the Federal Reserve fight inflation, do not expect a major impact on the economy in coming months.
With $370 billion in climate-focused spending, it will become the most consequential climate change bill ever passed by Congress.
The bill offers businesses and families billions in incentives to encourage purchases of electric vehicles and energy-efficient appliances, as well as spur new investments in wind and solar power that will double the amount of new, clean electricity generation capacity coming online . United States by 2024, according to modeling by the Repeat Project at Princeton University.
That would help the US meet its pledge to halve greenhouse gas emissions by 2030 from 2005 levels, made at last year’s Glasgow climate summit.
While environmental groups largely embraced the bill, they noted that the compromises secured by Manchin, who represents coal-producing West Virginia, would prolong the use of fossil fuels in the US.
Those provisions include rules that would only allow the federal government to approve new wind and solar energy developments on federal land when it also auctions oil and gas drilling rights.
The legislation will lower drug costs for the government, employers and patients, said Juliette Cubanski, deputy director of the Medicare program at the Kaiser Family Foundation.
“Perhaps the biggest effect would be for people with prescription drug coverage through Medicare,” he said.
One key change is the provision that allows the federal Medicare health plan for older and disabled Americans to negotiate lower prescription drug prices.
The drug industry says price gouging will stifle innovation. The negotiated prices for 10 of the most expensive Medicare drugs will be in effect starting in 2026, with that number increasing until it reaches 20 per year in 2029.
The nonpartisan Congressional Budget Office estimates that Medicare would save $101.8 billion over 10 years by negotiating drug prices.
The provision also introduces a $2,000 annual cap on spending for seniors through the Medicare program.
The bill also imposes a new excise tax on share buybacks, a late change after Sinema objected to another provision that would impose new levies on carried interest, currently a tax loophole for hedge funds and private equity financiers. The provision was repealed.
The excise tax is expected to bring in an additional $70 billion in tax revenue annually, lawmakers said. This is more than expected to increase the provision for carried interest.
A report by the nonpartisan Congressional Budget Office released before this latest change estimated the measure would reduce the federal deficit by a net $101.5 billion over the next decade.
That was about a third of the $300 billion deficit reduction projected by Senate Democrats, but it excluded a projected $204 billion revenue gain from increased Internal Revenue Service enforcement.