In a surprise move announced Wednesday, Senate Democrats actually agreed on something — namely, the Inflation Reduction Act of 2022.
After months of negotiations that seemed to go nowhere, West Virginia Senator Joe Manchin and Senate Majority Leader Chuck Schumer came away from the table with three big pieces of legislation that lean heavily on aspects of President Biden’s Build Back Better Act that was stonewalled by Manchin in December.
“The Inflation Reduction Act of 2022 will make a historic down payment on deficit reduction to fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40 percent by 2030,” the two Senators said in a statement.
"The bill will finally allow Medicare to negotiate for prescription drugs and lower health care costs for millions of Americans. Additionally, we have reached agreement with President Biden and Speaker Pelosi to pass comprehensive permitting reform legislation before the end of this fiscal year. We urge every member of the U.S. Senate to support this important legislation.”
So what can we expect from the Inflation Reduction Act? Here’s what you need to know.
Big Changes on the Climate Front
Although much of the bill is still shrouded in secrecy, we do know that it will allocate $369 billion to address the climate crisis, investing in clean energy and climate programs with the goal of reducing carbon emissions by 40% by 2030. If the bill passes and becomes law, it will be the most aggressive climate legislation ever passed in the U.S.
Manchin had been reported to be steadfastly against approving the sweeping climate bill, so his change of heart comes as a welcome surprise to many who have been following the negotiations saga for months — at a time when aggressive climate action must be made in order to fight the worst of the climate crisis.
Lower Prescription Drug Prices for Medicare Recipients
Schumer and Manchin’s reconciliation bill will also give Medicare the freedom to negotiate prescription drug prices, resulting in more affordable health care for the millions of Americans who depend on Medicare.
According to reporting by CNN, the Health and Human Services Secretary will be able to “negotiate the prices of 10 drugs in 2026, and another 15 drugs in 2027 and again in 2028. The number would rise to 20 drugs a year for 2029 and beyond.” It will also introduce a cap of $2,000 for out-of-pocket drug costs for Medicare recipients.
The bill also calls for extending Affordable Care Act subsidies that were enacted as part of the American Rescue Plan for three more years.
How Will the Bill Be Funded?
Manchin and Schumer have proposed a minimum 15% corporate tax and an increased tax on the country’s highest earners. The tax increase will result in $739 billion in the new revenue and $300 billion in deficit reduction. Single-filer Americans earning under $400,000 a year, and married couples making under $450,000, will not see any changes in their taxes.
Will the Inflation Reduction Act of 2022 Actually Pass?
With Manchin on board, the bill could actually become law despite fierce opposition from Senate Republicans. With a Democratic majority in the Senate — and everyone else voting along party lines, of course — Manchin’s vote means it could pass and become law by the end of the year.
“I thank Senator Manchin for his willingness to engage and his commitment to reaching an agreement that can earn the support of all 50 Senate Democrats,” said Schumer.
"Rather than risking more inflation with trillions in new spending, this bill will cut the inflation taxes Americans are paying, lower the cost of health insurance and prescription drugs, and ensure our country invests in the energy security and climate change solutions we need to remain a global superpower through innovation rather than elimination," Manchin said Wednesday afternoon.
The bill is a massive step forward after months of Congressional stonewalling, though it’s important to note what it’s missing: landmark programs such as the Child Tax Credit, a paid leave program of any variety, funding for early childhood education, and more.
Nevertheless, taking significant action on the climate and reducing the health care costs for many millions of Americans is a major step forward.