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Happy Thursday morning.

The shocking news Wednesday that Sen. Joe Manchin (D-W.Va.), Senate Majority Leader Chuck Schumer and the White House have reached a sweeping, $740 billion reconciliation deal has rearranged the legislative and political outlook in Washington. It’s given President Joe Biden and Democratic leaders another, unexpected opportunity to enact broad climate and tax code changes. And it should quiet complaints from the left that Manchin is untrustworthy and Schumer too timid – at least for now.

We spoke with Manchin about the agreement – what he hopes to accomplish, why now, whether tax-hike skeptic Sen. Kyrsten Sinema (D-Ariz.) will support this deal and what the West Virginia Democrat thinks about his standing in the party. More in the second item.

But for now, let’s focus on the broad brush political dynamics that will drive the next few weeks.

For the first time in recent memory, Senate Republicans have been completely caught flat footed by Schumer and the Democrats.

Seventeen Senate Republicans helped Schumer pass the $280 billion CHIPS Plus bill Wednesday. This came as Democrats had seemingly abandoned much of Biden’s Build Back Better agenda, narrowing it down to Medicare prescription drug negotiations and Obamacare subsidies. Important issues, yes, but not the transformational proposals of just a year ago.

Yet just hours later, Schumer announced his agreement with Manchin, outmaneuvering Senate Minority Leader Mitch McConnell and Sen. John Cornyn (R-Texas).

Senate Republicans quickly responded by stalling a high-profile bill to aid veterans exposed to toxic substances during their military service, a move that angered veterans’ groups and made little substantive sense.

But Republicans see some political upside here: Democrats are expected to vote en masse for this package. GOP leaders will then spend the fall hammering Democrats for raising taxes during a recession, or at least an economic slowdown. New GDP data will be released this morning, and it will immediately become part of this fight.

Here’s McConnell on Wednesday night:

OK, now for the details on the Schumer-Manchin deal. Here’s the one-pager that Senate Democrats sent out last night on the “Inflation Reduction Act of 2022,” as the bill is formally known. And here’s the legislative text.

The proposal sets a 15% corporate minimum tax rate on “billion-dollar companies or larger,” according to Manchin. That nets $313 billion over a decade. The IRS would get billions of dollars of new funding to help beef up tax enforcement, especially for wealthy Americans, which will net the federal government more than $120 billion, Democrats estimate.

The Medicare prescription drug pricing provision is included although narrowed somewhat. This cuts spending by $288 billion. The plan eliminates the carried-interest loophole, yielding another $14 billion.

On the spending side, Democrats would pour nearly $370 billion in climate and energy provisions. This includes funding for new hydrogen, nuclear, renewable and fossil fuel programs. More than $300 billion would go toward deficit reduction, a huge Manchin priority.

Senate Democrats asserted the package would reduce U.S. carbon emissions by “roughly 40 percent” by 2030.” Manchin insisted he would not “vote to support policies that make the United States more dependent on foreign energy and supply chains or risk moving the country closer to the unstable and vulnerable European model of energy we are witnessing today.”

Yet some of these provisions are dramatically different from what Democrats proposed in Build Back Better. For instance, a $7,500 tax credit for buying an electric vehicle would be limited to anyone making $75,000 or less annually. But this was the price of Manchin’s support.

More than $300 billion would go toward deficit reduction, a huge Manchin priority.

The Senate Finance Committee had drafted much of this proposal in recent weeks as Schumer and Manchin tried to reach a deal on an earlier version of reconciliation. That didn’t come together, but the two sides used it for this new agreement.

House Ways and Means Committee Chair Richie Neal – who was just as surprised as Republicans over the announcement – scrambled to get details on Wednesday night. Neal liked what he’d seen generally. But he’s also a huge proponent of extending the Child Tax Credit, which was a big plank in BBB, and that provision isn’t included.

“Obviously there are parts of it that are gonna have broad support, but others, it’s all about the details, so we’ll have to wait and see,” the Massachusetts Democrat said in an interview. “I am pleased that they’ve made some headway.”

When we asked whether the House could move quickly on this plane, Neal was cautious:

Yet progressives were happy to see anything from Manchin at this point. Here’s Sen. Elizabeth Warren (D-Mass.):

Rep. Pramila Jayapal (D-Wash.), chair of the Congressional Progressive Caucus, added “It’s never too late to do the right thing.”

The next steps: The Senate parliamentarian has to review all of this text, and we anticipate that will take several days. Schumer hopes to consider this package on the floor next week, but we are a bit skeptical on their timing given how long it takes the parliamentarian to complete the Byrd Rule process.

So if the Senate finishes work on this bill next week, we’d be surprised. The House will probably have to come back in the second or third week of August for their opportunity.

One important variable to keep in mind: Senate Democrats have to hope that their entire caucus remains healthy and Covid free. They’ll need all 50 votes for this package.

Senate Democrats have a 9 a.m. caucus meeting this morning to discuss all of this. The meeting is on the ninth floor of the Hart Senate Office Building. It’s the biggest room the leadership could find.

OK, how about the House? Yeah, this is our question too. Our base case here is that it should meet the muster of much of the CPC. This is a much better deal for them than the narrow accord that Schumer and Manchin were previously discussing.

But it’s important to keep in mind that House Democrats only have a four-seat vote cushion now. That shrinks to three-seat advantage come Aug. 9, after a special election in Minnesota that will be won by Republicans. This is a big package, so there will be Democratic skeptics, and it won’t be easy to get something with this big a price tag through the chamber.

However, Speaker Nancy Pelosi has a way with legislation like this. Democrats have been waiting to take action on climate, tax and health care policy for years, as Neal noted. But we cannot make any prediction here with any level of confidence. This will be a very heavy lift given the narrow majority that Pelosi has.

What happens with the SALT caucus: Remember this: Reps. Josh Gottheimer (D-N.J.), Tom Suozzi (D-N.Y.) and Mikie Sherill (D-N.J.) have vowed for nearly a year that they would not change the tax code if the legislation did not also include lifting the state-and-local deduction caps. Now they have to decide if they are going to abandon that pledge or take down this massive bill filled to the brim with Democratic priorities. We imagine they’ll forget about SALT real quickly.

– Jake Sherman, John Bresnahan and Heather Caygle

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