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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:
“Democrats have already crushed American families with historic inflation.
“Now they want to pile on giant tax hikes that will hammer workers and kill many thousands of American jobs.
“First they killed your family’s budget. Now they want to kill your job too.”
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:
“I think there’s a lot of pent-up interest in getting at some of these issues. There’s long been frustration in the caucus. So yes, I think there’s some room on this.”
Yet progressives were happy to see anything from Manchin at this point. Here’s Sen. Elizabeth Warren (D-Mass.):
“The good news here is that it is Sen. Manchin who is announcing a deal, not that they’re close to a deal or not that there are some parts to a deal. But these are Sen. Manchin’s words. So that makes me very hopeful. And there’s good detail on a 15% minimum tax per billion dollar corporations.”
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
PRESENTED BY META
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LIVE FROM COVID QUARANTINE
What Joe Manchin told us
We caught up with Sen. Joe Manchin (D-W.Va.) after the reconciliation deal was announced. Manchin has Covid and is in quarantine.
Let’s review recent history for a moment. Just a few weeks ago, it seemed as if the big reconciliation package was dead. Instead, Senate Majority Leader Chuck Schumer was going to push a narrower proposal through the Senate and send senators home to campaign for re-election.
Manchin insisted he was still at the negotiating table, but most everyone – lawmakers and press included – discounted it.
“People are going to look crazy, aren’t they?” Manchin said to us in an interview after the deal was announced Wednesday.
Here’s how Manchin revived the deal, in his telling:
“Remember when I told you I didn’t walk away? I never walked away. I’ve never walked away from anything.
“And I’ve been trying to tell people that. …The bottom line was inflation scared the bejesus out of me at 9.1 [%]. I said, ‘I’m gonna go back and re-scrub that bill.’ And then, you know, Chuck and I have a little bit of a relationship, if you will. Good, bad, indifferent at times, but it’s always been respectful and he got mad. …
“So Monday, I said, ‘Chuck, I’m not walking away, never have, my people are still working. If you want to see if we can basically scrub everything and make sure it’s not inflationary.’ That’s just how this went. And he says, ‘Yeah, we’re willing to engage again.’ And I said, ‘Okay, if you want to engage again.’ I said, ‘We haven’t stopped, we’re going through everything, taking out anything that we think could be inflammatory.’
“And I gotta give him credit, they were okay. And we went through the whole thing.’”
Manchin maintained throughout our conversation that this deal didn’t represent any type of reversal for him. The West Virginia Democrat said he was always open to a big package, but it had to make sense economically and policy-wise. The package couldn’t exacerbate inflation, and it also has to include energy provisions that invest in future technologies while allowing the expansion of fossil fuel production. This was a must-have for Manchin, who chairs the Energy and Natural Resources Committee.
One of the biggest GOP criticisms of the legislation will be that it raises taxes. Manchin countered that the legislation only raises taxes on companies that have a book value of $15 billion and don’t currently pay a 15% tax rate.
On carried interest — which this proposal would eliminate — Manchin said Wall Street has “been on a hell of a ride for a long time,” and it’s time for it to end.
Manchin explained to us a bit of his thinking over the last year, a period in which he walked away from reconciliation talks several times. Manchin said Build Back Better was just a step too far for him:
“When you come to me, and I don’t think I’m for it, I’ll still sit and work with you because maybe I’m not seeing something. And people think, ‘Well, Joe just drags us along.’ I didn’t drag it on. I tried to find a positive position. And I go to the ends of the world. Maybe I should say, ‘Hey, I’m done.’”
Manchin is keenly aware that there will be progressives who will complain about what didn’t make it into this bill. But he recounted a conversation with Speaker Nancy Pelosi, who said to him: “It’s not what we didn’t do. It’s what we did.”
Manchin also knows very well what his fellow Democrats – especially on the left – thought of him since he blocked Build Back Batter in mid-December:
“I’ve taken one hell of an ass-kicking for what, eight months now? From every side you could possibly have. But I never gave up.
“The smart thing politically for me [to] do once Build Back Better was done and I walked away was to let a sleeping dog lie.
“But when you get a moment in time, and if you know in your heart something needs to be done, it’s the right thing.”
A big question here is whether Sen. Kyrsten Sinema (D-Ariz.) will support this package. She has been a hard no on raising taxes throughout the year-long talks. Manchin said this:
“[Sinema] really was fighting hard on ‘No taxes.’ I think she was always hard on that. And I think that didn’t happen. She was adamant about not expanding the drug discounts to everything. And she got that modified, so that she gets a big input in this. Really big.”
Sinema’s office officially said this: “We do not have comment as she will need to review the text.”
– John Bresnahan and Jake Sherman
Can House Republicans kill CHIPS?
The House vote today on CHIPS Plus is going to be very interesting now. Remember, the Senate passed the legislation Wednesday by a wide bipartisan margin.
The reason Republicans agreed to do that was because Senate Majority Leader Chuck Schumer and Sen. Joe Manchin (D-W.Va.) signaled they were done discussing a tax-raising and money-spending reconciliation deal. McConnell and Cornyn believed that. Now Republicans are pretty peeved and even voted against a bipartisan veterans health care bill in response.
We scooped last night that the House Republican leadership would whip against the bill. There are roughly 30 Republicans who are supportive of the package, and we doubt GOP leaders can turn all of them. But they’ll try to make Democrats sweat.
Commerce Secretary Gina Raimondo will be on Capitol Hill today to meet with the Congressional Progressive Caucus in an attempt to get the left in line. Democratic leadership sources told us they believe the progressives will support the bill now that reconciliation is looking up.
And CPC Chair Pramila Jayapal (D-Wash.) told us she has been in conversations for days with Raimondo about ensuring companies can’t use funding from the bill for stock buybacks. Jayapal said she feels good about the commitment from the Commerce Department on this and expects that to translate into progressive support.
— Jake Sherman and Heather Caygle
CLOSE THE BROKERAGE ACCOUNTS
Scoop: House Dems to propose ban on stock trading in August
Breaking News: House Democrats plan to announce a proposal next month to ban lawmakers, their spouses and senior staff from trading stocks, according to multiple sources close to the issue.
The framework, which the House Democratic leadership will release in early August, would force members of Congress, their spouses and senior staff to choose between putting their assets in a qualified blind trust or completely divesting their investment portfolios.
The proposed legislation would allow members, spouses and senior staff to hold mutual funds.
The leadership’s goal is to introduce legislation in the beginning of September and push it through the chamber that month.
“We’re almost ready to move forward on this,” House Administration Committee Chair Zoe Lofgren (D-Calif.) told us Wednesday.
Stock trading by lawmakers has taken on a huge political import in recent years. Both Republicans and Democrats have backed a ban on trading in publicly traded equities. Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer have supported the effort to curb stock trading.
But this move is not without practical challenges. If Congress forces lawmakers to put their assets in qualified blind trusts, they would likely have to hire more staff to approve the trusts.
Furthermore, some sources have suggested that the inclusion of spouses is unnecessarily onerous. For example, what happens if a member of Congress’s spouse is a stock broker? Does he or she have to quit their job?
– Jake Sherman, Heather Caygle and Max Cohen
PRESENTED BY META
Rep. Liz Cheney (R-Wyo.) is up with a new ad for her primary in Wyoming in which she highlights some of the bizarre remarks made by her opponents. She ends the spot with a clip of her saying, “We’ve gotta elect serious leaders.”
New: Maxwell Alejandro Frost, a Democrat running to succeed Rep. Val Demings (R-Fla.), has a new ad out highlighting his confrontation with Gov. Ron DeSantis on gun policy.
In June, Frost interrupted DeSantis during a live event and called on the Republican to take action on gun violence. “Nobody wants to hear from you,” DeSantis replied — a line that is played repeatedly in Frost’s new ad.
“I’ve been making sure they hear from us for 10 years,” Frost says in the spot, citing his work at the ACLU and his anti-gun violence activism. The Congressional Progressive Caucus, the Congressional Hispanic Caucus BOLD PAC and Sen. Elizabeth Warren (D-Mass.) have all endorsed Frost’s candidacy in the Orlando-area seat.
Frost, who would be the first Gen Z candidate elected to Congress, calls for new leadership in the ad.
— Max Cohen and Jake Sherman
PRESENTED BY META
9:30 a.m.: President Joe Biden will get his daily intelligence briefing.
11 a.m.: Speaker Nancy Pelosi will hold an event about reproductive health care.
2:15 p.m.: Biden will speak about the economy and meet with CEOs. Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo will attend.
3:15 p.m.: Karine Jean-Pierre will brief.
Vice President Kamala Harris will be in New York and the Hamptons today.
White House Memo: “Biden Is Facing Crisis After Crisis. But Are They Emergencies?” by Michael Shear
“With Roe Gone, Republicans Quarrel Over How Far to Push Abortion Bans,” by Mitch Smith and Julie Bosman in Indianapolis
“US economy likely grew modestly, if at all, last quarter,” by Paul Wiseman
“Pelosi and China: The making of a progressive hawk,” by Andrew Desiderio
“Exclusive: 100 days before the midterms, Americans aren’t happy about their options, poll shows,” by Susan Page, Chelsey Cox, Ella Lee and Katherine Swartz
PRESENTED BY META
The metaverse will make learning more interactive
Imagine students roaming with dinosaurs in the Jurassic period, visiting a museum in Paris without a plane ticket or watching Mark Antony debate in ancient Rome.
The metaverse may be virtual, but the impact will be real.
Editorial photos provided by Getty Images. Political ads courtesy of AdImpact.
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