After House Democrats passed their dream list of priorities in the $2T Build Back Better (BBB) legislation, there was huge disappointment when it died in the Senate due to the opposition of Senator Joe Manchin. Today the House approved the new Inflation Reduction Act, sending it to the President for a big-deal signing ceremony at the White House, likely next week.
A little history: After the death of BBB, Senate Leader Chuck Schumer eventually approached Senator Manchin to see if there were parts of the bill that could be passed with 50 Democratic votes and the tie-breaking vote of the Vice President. The two talked for months and last week the Senate finally approved the scaled-back bill, now called the Inflation Reduction Act (IRA).
The new bill with both tax and spending provisions comes in at $750B but has been scored as gaining revenue over a ten-year period. The revenue raised will come from corporate America with a 15% minimum tax for companies with revenue over $1B and a new 1% surcharge on stock buybacks.
There are two significant healthcare provisions in the bill. The first will extend for three years the Obamacare premium subsidies that were part of the Covid relief package. The three-year extension pushes the issue past the 2024 election and takes it off the plate for both the 2022 and 2024 election cycles. The subsidies were set to expire at the end of this year.
The other healthcare provision is an effort to lower prescription drug prices for Medicare recipients under Part D. This bill will start a multiyear process of removing the direct negotiation prohibition between the government and pharmaceutical companies. The legislation also places a $2,000 a year cap on out-of-pocket expenses for Medicare recipients under Part D.
In the climate section of the legislation there is an array of tax provisions that incentivize industry and individuals to move to renewable energy sources. Tax credits range from electric cars to the installation of wind and solar power by manufacturing companies.
In order to secure the support of Senator Manchin, the bill also includes provisions for new oil and gas leases, both on land and off-shore. Biden, Schumer and Pelosi have also promised that they will act on legislation to speed the approval process for energy projects. This not only helps oil and gas—clean energy providers have also complained about the slow and cumbersome procedures needed to get wind and solar projects up and running.
Passage of the Inflation Reduction Act is a major win for the Democrats. Time will tell if voters care enough to help them in the fall.