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Manchin upends effort for a downsized `Build Back Better’

West Virginia Democrat says he won't support climate spending, tax increases

Sen. Joe Manchin III, D-W.Va., told Democratic leaders Thursday he would not support a reconciliation package that included climate change or tax increases.
Sen. Joe Manchin III, D-W.Va., told Democratic leaders Thursday he would not support a reconciliation package that included climate change or tax increases. (Tom Williams/CQ Roll Call)

West Virginia Democrat Joe Manchin III is yet again upending his party’s priority economic package, jettisoning climate measures and tax increases he previously favored and leaving only provisions focused on lowering health care costs.

Manchin communicated the decision to his negotiating partner, Senate Majority Leader Charles E. Schumer, on Thursday, according to two Democratic sources familiar with the situation.

The move came one day after Manchin expressed heightened anxiety about inflation, after the June consumer price index data released that morning showed inflation climbed 9.1 percent on an annualized basis over the previous year.

Manchin had told reporters he wanted to do more “scrubbing” of the reconciliation measure to ensure whatever Democrats put in it would not exacerbate the situation.

On Thursday — after months of negotiations with Schumer — Manchin and his staff told the majority leader and his staff that he would not support two of the three pillars he’d previously identified for a narrow bill: climate spending and tax credits, and tax increases on wealthy individuals and corporations, according to a Democrat briefed on the conversations.

Manchin spokeswoman Sam Runyon did not dispute the news, which was first reported by The Washington Post.

“Political headlines are of no value to the millions of Americans struggling to afford groceries and gas as inflation soars to 9.1 percent. Senator Manchin believes it’s time for leaders to put political agendas aside, reevaluate and adjust to the economic realities the country faces to avoid taking steps that add fuel to the inflation fire,” Runyon said.

The bombshell decision Thursday marked the second time that the pivotal swing Democrat derailed his party’s plans for a “Build Back Better” package that once made up the heart of President Joe Biden’s economic agenda. Manchin called off the broader talks last December, saying he could not support the sweeping package of child care, health care, climate change, housing and other initiatives that Democrats were seeking at a time of rising inflation.

But Manchin is not abandoning the effort altogether, having already agreed to provisions that would allow Medicare to negotiate with pharmaceutical companies to lower prescription drug prices on a finite list of drugs. The plan would also impose penalties for drug companies that hike prices faster than inflation and implement a $2,000 annual out-of-pocket cap for Part D patients.

“We know what we can pass is basically the drug pricing on Medicare. We know that one,” Manchin told reporters Wednesday. “Is there any more we can do? I don’t know.”

Manchin and his staff told Schumer and the majority leader’s staff “unequivocally” that he is “willing to support a reconciliation bill in August that includes only the provision to lower prescription drugs prices and a two-year extension of subsidies” for health insurance, according to the Democrat briefed on the conversation.

While that condition seems to preclude literally everything else Democrats had planned, Manchin was “explicit” that he would not support a bill in August that includes energy and climate provisions or tax increases, the Democratic source said.

The two-year extension of the health insurance subsidies is a reference to a temporary expansion of the premium tax credits created by the Obama administration’s health law that Democrats first broadened in last year’s coronavirus relief law.

That 2021 law expanded subsidies to higher earners, capping their premiums at 8.5 percent of household income, and provided for zero-premium plans for lower-income earners.

Those credits are set to expire at the end of the year, but many states are set to announce premium increases in mid-August so Democrats want to act before then.

Manchin had publicly left the door open to extending the expanded health insurance subsidies, including as recently as Wednesday. But the assumption was he and Schumer were discussing a permanent expansion – although perhaps more narrow than the version included in the coronavirus relief law – given one of his chief complaints about the $2.2 trillion House-passed reconciliation bill was that it relied too much on temporary policies that masked the true cost of the bill.

Manchin had said repeatedly last year – up until he announced his outright opposition to the House bill in December – he would only support policies that spanned the full 10-year budget window.

Also a significant reversal was Manchin’s decision to walk away from an agreement he made with Schumer just last week. The duo had decided they could funnel roughly $200 billion in revenue from expanding a 3.8 percent net investment income tax to the profits of active business owners into the Medicare trust fund. That provision, which was expected to extend Medicare’s solvency by three years, was added at Manchin’s request, according to one of the Democratic sources.

Schumer had also made numerous other concessions to Manchin in the negotiations as he and his staff provided the West Virginia centrist with various options, detailed in legislative text, that were designed to address his concerns and demands, the source said.

Those offers include narrowing the roughly $550 billion in climate and energy provisions in the House bill to $335 billion by striking policies Manchin opposed like electric vehicle tax credits and “direct pay” tax credits that would have allowed companies making climate-friendly investments to get subsidies that exceeded their tax burden.

Schumer also told Manchin he would support fossil fuel-friendly measures the West Virginian argues are needed in the short-term to lower energy prices, including “permitting reform and additional measures for drilling,” the source said.

And an earlier concession Schumer made that seemingly all Democrats had gotten on board with in recent months was Manchin’s demand to use half of all the revenue from tax increases and other savings provisions in the bill to reduce the deficit instead of offsetting more party spending priorities.

It’s not yet clear that the narrow health care reconciliation package Manchin says he is willing to support will have enough backing from other Senate and House Democrats to get through narrow majorities in both chambers.

In the evenly divided Senate, where Democrats are using the budget reconciliation process to get around the filibuster and pass the bill with a simple majority, all 50 Democratic Caucus members must be on board. And the loss of the climate pillar was already causing some frustration as the news broke Thursday night.

“Rage keeps me from tears. Resolve keeps me from despair. We will not allow a future of climate disaster,” Sen. Edward J. Markey, D-Mass., one of the chamber’s leading climate hawks, tweeted. “We will not give up.”

But it’s unclear if Markey or others are so enraged they’d block progress on Democrats’ long-held health care priorities.

In a sign they probably won’t, Sens. Brian Schatz, D-Hawaii, and Jeff Merkley, D-Ore., called in separate tweets for Biden to do more on climate through executive actions.

And California Democrat Alex Padilla told his Twitter followers to register their outrage at the ballot box.

“Preserving the ability of our planet to sustain life SHOULD NOT be a partisan issue,” he said. “ This November, support candidates that are taking steps to address the climate crisis. And vote out those that are standing in the way.”

Manchin is not up for reelection until 2024. And his hesitancy to support climate provisions, which have long plagued the negotiations, reflects the interests of West Virginia fossil producers he sought to ensure would not be harmed by any of Democrats’ policy changes.

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