While Manchin shot down President Joe Biden’s bill, the final deal includes a number of provisions that West Virginia moderates had privately derided, representing a major reversal from earlier this month. This includes provisions to address the climate crisis. The deal contains a number of Democratic goals. Although many details have not been disclosed, the measure would invest $369 billion in energy and climate change programs, with the goal of reducing carbon emissions by 40 percent by 2030, according to a one-page prospectus. For the first time, Medicare would be authorized to negotiate the prices of certain drugs and cap the cost at $2,000 for those enrolled in Medicare drug plans. It would also extend expiring enhanced subsidies for Affordable Care Act coverage for three years. The announcement comes at a critical time for Congress, as the Senate is just over a week away from beginning a month-long recess when many Democrats will campaign for re-election. The news also came several hours after the Senate approved a separate bill to invest $52 billion in American semiconductor manufacturing, sending it to the House for consideration as soon as this week.
Notably, Senate Minority Leader Mitch McConnell had previously vowed to try to stop the semiconductor bill from passing if Democrats continue to pursue their party’s line on climate and drug prices.

Manchin’s deal represents a reversal

Manchin’s support is notable given his stance earlier this month that he would “unequivocally” not support the climate or tax provisions of the Democratic economic package, which appeared to torpedo any hopes Democrats had of passing climate change legislation in near future. But Schumer and Manchin have been in rekindled talks since July 18 and struck a deal Wednesday, according to a source familiar with the matter. Manchin had poured cold water on tax and energy provisions as part of the deal, but ultimately agreed to it. The White House signed off on that agreement, Biden said in a statement. The deal still faces several hurdles before it can reach Biden’s desk, including the congressman and must pass both houses of Congress, where almost any Democrat could sideline or delay the vote.

Climate regulations ‘could be a huge win’

In a statement, Schumer’s office said the bill would cut U.S. carbon emissions by about 40 percent by 2030. Clean energy tax credits would drive the majority of those emissions reductions, a Democratic aide said. Two weeks ago, Schumer and Manchin were nearing a deal on $375 billion in climate and energy provisions of the bill. the climate front line announced tonight is $6 billion short of the original price. But a senior Democratic adviser told CNN they were happy with the $369 billion spending figure for the climate and energy portion of the bill, saying it was more funding than expected to come from a deal. . Tax credits for electric vehicles were included in the new deal, according to two Senate Democratic aides. Tax credits for electric vehicles will continue at their current levels, up to $4,000 for a used electric vehicle and $7,500 for a new EV. However, there will be a lower income limit for people who can use the tax credits — a key request of Manchin. Manchin strongly opposed tax credits for electric vehicles throughout the negotiations. Democratic Sen. Tina Smith of Minnesota told CNN she was presiding over the Senate Wednesday night when Schumer called to tell her he had reached an agreement with Manchin on a climate and energy bill. As Smith presided, her phone kept ringing off the hook with an unregistered number that Schumer was calling. Finally, he answered her. “I knew it was Chuck, I did the complete no and answered the phone,” Smith told CNN. “He said ‘40% emissions reductions by 2030, that’s a big F-ing deal!’” Smith, a Senate climate hawk, told CNN she was glad a deal was reached after several ups and downs in negotiations with Manchin. He said the deal was “the most important climate and clean energy action we’ve ever taken.” “Everybody is very excited. I’m surprised but in a good way,” Smith said. The leaders of two prominent climate groups also told CNN the latest development was unexpected. “This was unexpected, but we’re so excited to be back,” Tiernan Sittenfeld, senior vice president of government affairs at the League of Conservation Voters, told CNN. “Obviously it’s not a moment too soon as families battle the insane heat around the world and country.” Advocates awaited more details on the climate provisions, expected to be released Wednesday night. “We need to see the details of this deal, especially if fossil fuel reform and development is allowed,” Evergreen Action co-founder Jamal Raad told CNN. “We will need to see over the next few days to shape the pattern of this legislation.” But if the package does achieve the emissions reductions Schumer promises, Raad said it would be an extremely important step. “If this package does that in a bold way, that could put us on the path to achieving our goals and it could be a huge win,” he said.

Provisions for Medicare drug price negotiation remain in the bill

The deal preserves the prescription drug price changes that Manchin previously agreed to, including authorizing Medicare to negotiate the price of some costly drugs dispensed at the doctor’s office or purchased at the pharmacy. The Health and Human Services secretary would negotiate the prices of 10 drugs in 2026 and another 15 drugs in 2027 and again in 2028. The number would increase to 20 drugs per year for 2029 and beyond. It would also redesign Medicare Part D drug plans so that seniors and people with disabilities pay no more than $2,000 a year for drugs purchased at a pharmacy. And, the deal would require drug companies to pay rebates if they raise their prices in the Medicare and private insurance markets faster than inflation. In total, the drug price provisions would reduce the deficit by $288 billion over a decade, according to the Congressional Budget Office. The deal also extends the enhanced Affordable Care Act subsidies for three years. The original deal would have continued the enhanced subsidies for two years, which meant they would have ended immediately after the 2024 presidential election — a scenario that congressional Democrats didn’t want to face. The subsidies were expanded this year as part of Democrats’ $1.9 trillion coronavirus relief package, known as the American Rescue Plan, which took effect in March 2021. They have made health care coverage on the Obamacare exchanges more affordable, leading to record year registration. Enrollees pay no more than 8.5% of their income for coverage, down from nearly 10%. And lower-income policyholders receive subsidies that completely eliminate their premiums. Also, those earning more than 400% of the federal poverty level have become eligible for assistance for the first time. Extending the enhanced subsidies would cost $64 billion over a decade, according to the CBO.

Paying the bill

To raise revenue, the bill would impose a 15 percent minimum tax on corporations, which would raise $313 billion over a decade. While details on the current deal remain sketchy, the House version of the Build Back Better package would have imposed a tax on corporate profits that big companies report to shareholders rather than the Internal Revenue Service. It would apply to companies with more than $1 billion in revenue and have a similar revenue growth rate. The current deal also aims to close the carried interest loophole, which allows investment managers to treat their compensation as capital gains and pay a long-term capital gains tax rate of 20% instead of income tax rates of up to 37%. Closing that gap, which would raise $14 billion over a decade, has been a long-term goal of congressional Democrats. The package also calls for giving the IRS more funding for tax enforcement, which would raise $124 billion. Democrats say families making less than $400,000 a year would not be affected, according to Biden’s pledge. There would also be no new taxes on small businesses. Manchin said in a statement that the deal would ensure “that big corporations and the ultra-wealthy pay their fair share of taxes,” though it does not include tax rate hikes on wealthy Americans and big corporations that Democrats originally wanted to include. in the fiscal reconciliation packages before they were shot down by Democratic Sen. Kyrsten Sinema of Arizona. Notably, Manchin also poured cold water on one of Schumer’s priorities — tackling the $10,000 cap on the state and local tax deduction, known as SALT, which was part of the 2017 GOP tax cut package and affects many states in the Northeast and on the West Coast. Many details of the current deal remain to be worked out, which could delay or invalidate it, said Howard Gleckman, a senior fellow at the nonpartisan Tax Policy Center. In total, Democrats say the deal will reduce the deficit by more than $300 billion. “Instead of risking more inflation with trillions in new spending, this bill will lower the inflationary taxes Americans pay, lower health insurance and prescription drug costs, and ensure our country invests in energy security and climate solutions change we need to remain a global superpower through innovation, not elimination,” Manchin said in his own statement Wednesday afternoon. This story has been updated with an additional development on Wednesday.