Rather unexpectedly, the 117th Congress is shaping up to be one of the most productive in recent memory. A new compromise reached by Sen. Joe Manchin and Senate Majority Leader Chuck Schumer could prove to be its most significant achievement yet.
After months of often-acrimonious debate over President Joe Biden’s “Build Back Better” plan, Democrats have apparently ditched the sobriquet in favor of the substance. The new deal, intended to be passed along party lines in accordance with the Senate’s budget reconciliation rules, would accomplish nearly all of the most important goals of Biden’s initial proposal without its most controversial baggage. It would offer some $433 billion in new spending, bring in $739 billion in revenue and reduce deficits by $300 billion over a decade.
Promisingly, the proposed spending is well focused. A summary of the deal Democrats put out on Wednesday says it would offer fully $369 billion for climate and energy proposals, the most urgent parts of Biden’s original $3.5 trillion proposal. That should turbocharge the administration’s plans to reduce carbon emissions and lay the groundwork for a clean energy economy, while avoiding some of its less defensible outlays. The new bargain would also put $64 billion toward extending COVID-era subsidies for Obamacare health insurance, thus helping millions of Americans avoid significant premium increases.
More or less true to its grandiose name — the Inflation Reduction Act of 2022 — the proposal also takes budgetary restraint more seriously than its predecessors in this Congress. To raise revenue, it would establish a 15% corporate minimum tax for large companies, allot $124 billion to the IRS for enhanced tax enforcement, and close the so-called carried interest loophole, which allows investment fund managers to pay income taxes at a preferential rate. Realistically, such reforms will be subject to plenty of gamesmanship and gimmickry going forward. But this is a sober attempt at fiscal responsibility.
Perhaps more consequentially, the plan would remove a legal prohibition that has long prevented Medicare from bargaining with pharmaceutical companies on behalf of the 49 million Americans in its drug insurance program. This barrier has kept U.S. drug prices the highest in the world — $1,300 per person per year, on average. A previous proposal along these lines was expected to save taxpayers almost $290 billion through 2031, with greater savings in subsequent years as more drugs become eligible for negotiation. Advancing this reform alone would’ve been a momentous achievement.
Plenty of details remain to be ironed out, of course, and serious pitfalls still lie ahead. But all told, this compromise would be big win for Democrats, for the White House and — not least — for the U.S. taxpayer. As America’s loquacious president once said in another context, it’s a big effing deal.
