Democrats flag surprise breakthrough on health care, energy and climate spending

Washington: In an unexpected turnabout, Senate Majority Leader Chuck Schumer and Senator Joe Manchin announced on Wednesday, Washington-time, they had reached an expansive agreement that had eluded them for months on health care, energy and climate issues, taxes on higher earners and corporations and trimming of the federal debt.

For months, Manchin’s opposition had blocked a larger agreement sought by President Joe Biden and other Democrats, partly on grounds that he said it would fuel rather than fight inflation.

The announcement suddenly presented Biden and Democrats with the prospect of pushing a major achievement through Congress in the runup to November congressional elections in which Republicans have seemed strongly positioned to capture House control and possibly a majority of the Senate as well.

Democratic Senator Joe Manchin.Credit:AP

Manchin and fellow Democrat Schumer said the measure would raise $US739 billion ($1 trillion) over 10 years in revenue, the biggest chunk coming from a 15 per cent corporate minimum tax.

It would spend $US369 billion on energy and climate initiatives and $US64 billion to extend expiring federal subsidies for people buying health insurance. That would leave over $US300 billion to reduce federal deficits over the decade.

The Senate will consider the sweeping package next week, said Schumer and Manchin, who had negotiated for months and had seemed deadlocked over anything but a far smaller measure.

Senate Majority Leader Chuck Schumer.Credit:AP

Tellingly, Democrats were calling the measure “The Inflation Reduction Act of 2022.”

Polls show that inflation, as embodied by gasoline prices that surpassed $US5 per gallon before easing, have been voters’ chief concern. For months, Manchin’s opposition to proposed, larger packages has been premised in part on his worry that it would fuel inflation.

Manchin’s resistance had long derailed broad legislation on the proposal’s issues.

Manchin, one of the most conservative Democrats in Congress, just last week said he would only agree to far more limited legislation curbing prescription drug costs and extending federal subsidies for health care costs.

He said he was open to considering a broader compromise on environment and tax issues after Congress returned from a summer recess in September, an offer that many Democrats thought dubious.

There was no immediate explanation why Manchin had suddenly agreed to the far broader package.

In December, his resistance derailed a wide-ranging $US3.5 trillion, 10-year social and environment bill that was Biden’s top domestic priority.

In his statement, Manchin said the new measure “would dedicate hundreds of billions of dollars to deficit reduction by adopting a tax policy that protects small businesses and working-class Americans while ensuring that large corporations and the ultra-wealthy pay their fair share in taxes.”

News of the agreement came hours after the Senate passed sweeping legislation to subsidise the domestic semiconductor chip industry with several Republican votes.

Last month, top Senate Republican Mitch McConnell promised to block the “Chips bill” as it is known, unless Democrats abandoned their plans for a reconciliation bill like the one Manchin and Schumer outlined. The House will vote on the bill on Thursday, but Republicans don’t have the votes to block it on their own.

Republicans were quick to criticise the move. “I can’t believe that Senator Manchin is agreeing to a massive tax increase in the name of climate change when our economy is in a recession,” Senator Lindsey Graham said.

McConnell also criticised the bill, saying it would “kill many thousands of American jobs”.

Schumer said the Senate will take the bill up next week

AP, Reuters

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