Joe Manchin changes his mind: What’s in the new Inflation Reduction Act announced by the Democrats?

Democrats hopes of passing a sweeping spending bill that would have tackled climate change and reduced costs for healthcare and childcare were dashed at the end of last year. The main hold-up was Senator Joe Manchin’s refusal to support the legislation to pass it with only Democratic votes.

On Wednesday though, Manchin and Senate Majority Leader Chuck Schumer announced that they had struck a deal on a reconciliation budget package that will reduce carbon emissions and cut healthcare costs. The spending will be fully paid for by closing loopholes on the richest Americans and corporations while at the same time reducing the federal deficit by $300 billion.

Democrats rebrand President Biden’s agenda

The new agreement between Manchin and Democratic leaders leaves out large chucks of the $1.7 trillion spending package based on President Biden’s Build Back Better plan that stalled in the Senate last year. The total investment would be over $400 billion in programs to combat climate change and lower healthcare costs. At the same time it will raise over $700 billion to pay for the new spending and with the money leftover reduce the federal deficit.

The bill also does some rebranding of the cutout from the president’s larger domestic investment agenda, focusing attention on what is currently concerning Americans the most, runaway inflation. The new legislation, which the Senate will consider next week, has been renamed the Inflation Reduction Act.

The bill must first pass muster with the Senate parliamentarian in order for the Democrats to use the budget reconciliation process. That would allow them to approve the bill with the 50 votes in their caucus and Vice President Kamala Harris casting the tie-breaking vote. The Democrats have a razon-thin majority and cannot afford a single defector for the bill to get through the Senate.

What is in the Inflation Reduction Act?

The new legislation intends to tackle inflation from different angles by reducing costs on healthcare and energy while also reducing the deficit.

The bill would allow Medicare to negotiate drug prices, something currently banned by previous legislation, and cap out-of-pocket costs to $2,000. It would also lower premiums on Affordable Care Act coverage for millions of Americans.

In order to lower energy costs by investing in cleaner domestic energy production and weatherization to make buildings more energy efficient. It will also help meet long-term US commitments by reducing carbon emissions 40 percent by 2030.

There will be no new taxes on families making $400,000 or less, nor will there be any new taxes on small businesses. The IRS will receive more funding to chase down tax avoiders and the carried interest loophole would be closed to make sure that the ultra-wealthy pay their fair share. Additionally, there would be 15 percent minimum corporate tax on the biggest companies so that they can’t reduce their tax burden to zero or less.