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Schumer-Manchin Deal Reduces Energy Costs, Health Care Costs, and Deficit

We understand that Republicans don’t really care what’s in the Schumer-Manchin budget deal. To cry constantly for Democrats to do something about inflation only to erupt in petty rage when Democrats offer the Inflation Reduction Act proves that Republicans just don’t want Democrats to do anything big before the mid-term election.

We Democrats ourselves shouldn’t get all excited about the deal yet: Arizona Senator and Manchin’s fellow saboteur of their own party’s agenda Kyrsten Sinema still hasn’t said she supports the deal. Like Manchin, Illinois Senator Dick Burbin tested positive for coronavirus this week, so getting them in the chamber for a vote before the August recess might be problematic. Vermont Senator Patrick Leahy is still out recovering from hip surgery, so we probably can’t get all 50 Democrats in the room until after the August recess. Plus the Senate parliamentarian has to agree that this bill is sufficiently taxy and spendy to allow passage on a simple majority under budget reconciliation rules. The hope we have now is better than the no-go we had Wednesday, but it’s still just hope, and not enacted law to save the planet. And even if it passes, the Inflation Reduction Act is barely a fifth of the Build Back Better plan President Biden offered last year to combat the great crises of our time.

But what is all the hope and fuss about? What has Republicans ready to bail on veterans and gay marriage and Democrats ready to fête Joe Manchin?

The Inflation Reduction Act as currently drafted raises $739 billion in new revenue over the next ten years. It spends $433 billion. It thus reduces the deficit—i.e., helps fund programs that previous Congresses never paid for—by $306 billion.

Most of the spending, $369 billion, goes to save us from climate change by doubling our reduction of globe-warming emissions from the expected 20% to 40% by 2030. The climate money covers tax credits, rebates, and manufacturing incentives for solar panels, wind turbines, heat pumps, energy efficiency, and electric vehicles. Buy an electric car (with U.S.-made batteries, under certain prices, and under buyer income caps), and this bill offers a $7,500 tax credit for a new zap car and $4,000 for a used one. The bill also covers improving energy efficiency at factories, finding and fixing pollution in low-income communities, and restoring forests and coastal regions.

Reducing demand for fossil fuels and diversifying the energy market helps reduce inflation:

According to Robbie Orvis, senior director at Energy Innovation, rising energy prices have driven roughly a third of the 9 percent rise in the overall Consumer Price Index this past year. By helping Americans become less reliant on fossil fuels, the spending helps ease the global oil crunch and cut consumer bills [Emily Stewart, Li Zhou, and Rebecca Leber, “What Democrats’ Big New Bill Would Actually Do,” Vox, 2022.07.28].

The Inflation Reduction Act also seeks to reduce methane emissions. No, Senator Thune, there’s still no Cow Fart Tax, but the Schumer-Manchin deal will penalize fossil-fuel producers exceeding a new methane-leak standard:

The bill makes some strides on the second most problematic climate pollutant, methane. Methane is 86 times more powerful a greenhouse gas than carbon over a 20-year period, and it’s also an incredibly leaky gas that is emitted at any point in oil and gas production — drilling at the wellhead, compressor stations, and liquefied natural gas terminals. For the first time, Congress would set some industry-wide limits on methane leakage. Oil and gas companies that emit above a certain level of methane across all operations trigger a fee that will escalate over time. There’s also a new royalty fee on all methane extracted from public lands, including the common practice of venting and flaring. And to enforce all this, there is additional funding for monitoring methane leaks for oil operators and the Environmental Protection Agency [Rebecca Leber, “What’s in the ‘Game Changer’ Climate Bill Nobody Saw Coming,” Vox, 2022.07.28].

In non-climate niceness, the Inflation Reduction Act spends $64 billion to extend for three years the Affordable Care Act subsidies that Democrats passed in 2021 to ensure that no household has to pay more than 8.5% of its income for health insurance. The plan authorizes Medicare to start negotiating prices on some prescription drugs in 2026, which will eventually save Medicare $288 billion. The plan caps out-of-pocket prescription drug costs for old folks at $2,000 a year and requires drug makers to rebate Medicare recipients for drug price increases that exceed the rate of inflation.

The Inflation Reduction Act pays for itself and a lot more through four policies:

  1. Requiring corporations with profits over $1 billion to pay at least 15% income tax contributes $313 billion.
  2. The Medicare prescription drug pricing reform mentioned above saves $288 billion.
  3. Increasing funding for the IRS (hey! Senator Wyden mentioned that earlier this week!) catches tax cheats and nets $124 billion.
  4. Closing the carried interest loophole (Vox explains: “Currently, private equity and other investment managers get to treat part of their earnings as capital gains, taxed at a lower 20 percent rate, instead of as income, which would be taxed at a much higher rate.”) chips in $14 billion.

Democrats emphasize that this plan upholds President Biden’s promise that nobody making $400K or less and no small businesses pay more in taxes.

In sum, Democrats are offering a hugely compromised plan, doing only a fifth of what the President wanted to do on climate change (which was still not as much as those to Biden’s left wanted) but still investing in 21st-century technology that can save planet. Democrats are also reducing costs for energy and health care and dialing back the national debt. In response, Republicans are ripping up every other bill they can to protest the Democrats’ doing what legislators are supposed to do.


  1. Guy 2022-07-29 10:22

    It’s TIME for REPUBLICANS to go into Minority Party Status for a VERY, VERY LONG time. Republicans have proven they do NOT care about most of us.

  2. Edwin Arndt 2022-07-29 10:33

    Cory, as you explain this bill, it all sounds great. But,, but,, over the next ten years
    there will be five elections. If you really think this bill, if passed, will play out
    as you describe, you are a true optimist. Color me very skeptical.

  3. Cory Allen Heidelberger Post author | 2022-07-29 11:46

    Edwin, Congress passes bills like this all the time, proposing long-term investments that may or may not be reversed by future Congresses. They passed the Affordable Care Act in 2010. It was a great idea then, and it still is a great idea (as a first step toward universal health care, of course). The prospect that Chief Justice Roberts might have killed it in 2014 or that Senator McCain might have turned his thumb the other way to repeal the ACA in 2017 was not a reason to vote against good policy in 2010.

    Good policies are hard to pass against the current GOP opposition and against Manchin’s and Sinema’s own misguided agendae. They’ll be hard to keep if Congress flips. That just means we have to lay out the case now for their benefits, put them into effect, and work hard to point out the benefits that accrue to the voters.

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