Skip to content

Manchin, Schumer reach deal on climate, health, tax measure

Budget deal that West Virginia Democrat and Senate majority leader had been discussing is officially back on the table

Senate Energy and Natural Resources Chairman Joe Manchin, D-W.Va., talks with the media on July 19.
Senate Energy and Natural Resources Chairman Joe Manchin, D-W.Va., talks with the media on July 19. (Tom Williams/CQ Roll Call)

The Senate plans to begin floor consideration of a roughly $300 billion deficit-reducing budget reconciliation package next week after Sen. Joe Manchin III and Majority Leader Charles E. Schumer announced a surprise agreement Wednesday to add climate and tax provisions Manchin previously shunned.

Just two weeks ago, Manchin said he wanted to wait for the July inflation data, which will be released Aug. 10, to decide whether he could support any climate provisions or tax increases.

At the time, the West Virginia Democrat said if Schumer was insistent on moving a reconciliation bill before the Senate departed for its August recess, he would vote only for provisions to allow Medicare to negotiate prescription drug prices for certain drugs and a two-year extension of expanded subsidies to purchase health insurance on the 2010 health care law’s exchanges.

But on Wednesday, Manchin once again changed his position, issuing a nearly 1,300-word statement explaining that he will support some climate and tax provisions now after all.

“Contrary to foolish talk otherwise, America cannot spend its way out of debt or out of inflation. With respect to my position, I have never and will never walk away from solving the problems facing the nation we all love,” he said.

Shortly after that missive went out, Manchin and Schumer, D-N.Y., released a joint statement announcing they’d “finalized legislative text” that would lower deficits by $300 billion over a decade.

The bill, which they’re dubbing the “Inflation Reduction Act of 2022,” would devote $369.8 billion to clean energy and climate change programs and would extend the expanded health insurance subsidies for three years instead of two.

The measure would preserve the prescription drug pricing deal Manchin and Schumer had previously agreed to, while the remainder would be paid for, and then some, “by closing tax loopholes on wealthy individuals and corporations,” according to the joint statement.

The bill “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,” Manchin and Schumer said.

The duo also announced that they’ve reached agreement with President Joe Biden and Speaker Nancy Pelosi, D-Calif., to separately pass “comprehensive permitting reform legislation” before the fiscal year ends Sept. 30.

Biden said in a statement that he spoke with Manchin and Schumer on Wednesday afternoon and offered his support for their deal.

“This is the action the American people have been waiting for. This addresses the problems of today — high health care costs and overall inflation — as well as investments in our energy security for the future,” Biden said, urging Congress to pass the legislation “as soon as possible.”


A summary of the bill says it would spend an estimated $433 billion over the next decade. Most of that, nearly $370 billion, is for energy and climate provisions, while the remaining $64 billion is the estimated cost of extending the expanded health insurance subsidies for three more years.

The package is estimated to raise more than enough money to pay for that spending, with a total of $739 billion in revenue over 10 years from tax increases, enhanced tax enforcement and prescription drug cost savings.

Most of those offsets come from previous iterations of the bill, except for a provision to close the so-called carried interest loophole, which had long been off the table in the negotiations. That provision — which would tax investment fund managers’ share of their clients’ capital gains as ordinary income, raising their effective tax rate — is estimated to raise $14 billion.

A spokesman for Sen. Kyrsten Sinema, D-Ariz., said she won’t have a comment until she reviews the text.

It’s unclear whether Sen. Kyrsten Sinema, D-Ariz., will support this latest agreement. She has reportedly opposed changing the taxation of carried interest. A Sinema spokesman said she won’t have a comment until she reviews the text.

Also unclear is whether the measure will get support from a handful of New Jersey and New York lawmakers who threatened to oppose any bill that adjusts the tax code but doesn’t provide relief from a $10,000 cap on state and local tax deductions. Manchin in his statement reiterated that he opposes lifting the SALT cap, saying it would “favor red state or blue state elites.”

The largest revenue raiser is a 15 percent domestic minimum corporate tax estimated to raise $313 billion. It’s likely to be similar to the minimum tax that’s been proposed in previous bills and that is based on companies’ book income reported to shareholders.

The prescription drug pricing provisions are estimated to save $288 billion.

The summary says another $124 billion in revenue would come from enhanced tax enforcement. In prior iterations of the bill, this revenue projection reflected net savings after accounting for $80 billion in mandatory spending for the IRS to step up audits and data processing intended to catch tax cheats and avoiders, but that spending is not reflected in the summary.


The agreement came as a surprise to Democratic senators who had been preparing to vote on a slimmed-down budget reconciliation package next week containing just a two-year extension of the health insurance subsidies and provisions to lower prescription drug costs.

Even more surprising is that Schumer is planning to bring the more expansive measure to the floor next week, given that most of it has yet to be vetted by the Senate parliamentarian. Schumer and Manchin said the revised text would be submitted to the parliamentarian Wednesday evening, “and the full Senate will consider it next week.”

Sen. Richard Blumenthal, D-Conn., told reporters there had been little talk of broadening the bill after Manchin said he would support only the health-related measures.

“But if there is an agreement that moves us forward on climate change, as well as cutting costs of prescription drugs and advancing subsidies for health care insurance, it could be a very important and even historic development,” Blumenthal said.

Senate Finance Chair Ron Wyden, D-Ore., was less taken aback, noting that even two weeks ago, final details of the billions in clean energy tax credits were “basically there.” He said support from all 50 members of the Democratic caucus remains for the health-related language.

The health insurance subsidies are the main reason Democrats are rushing to pass the bill. Democrats expanded the premium tax credits, as the subsidies are formally known, in their coronavirus relief bill last year to fully cover the costs of premiums for the lowest-income earners and provide some benefits for higher earners.

Those more generous subsidies are set to expire at the end of the year, but premium announcements are expected in late August and September. Democrats want to quickly extend the subsidies to avoid big premium hike notices going out just months before the November midterm elections. The new deal to extend the subsidies through 2025 instead of 2024 ensures the same scenario does not plague the party again in the presidential cycle.

Republicans quickly panned Democrats’ deal, even though Manchin claimed he listened to GOP feedback in crafting it.

“I have worked diligently to get input from all sides on the legislation my Democratic colleagues have proposed and listened to the views of my Republican friends to find a path forward that removes inflationary policies so that Congress can respond to Americans’ suffering from high prices,” he said.

Laura Weiss contributed to this report.

Recent Stories

Alabama IVF ruling spurs a GOP reckoning on conception bills

House to return next week as GOP expects spending bills to pass

FEC reports shine light on Super Tuesday primaries

Editor’s Note: Never mind the Ides of March, beware all of March

Supreme Court to hear arguments on online content moderation

In seeking justice by jury trials, Camp Lejeune veterans turn to Congress