US Senate Democrats bill will mark climate and health care costs

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U.S. Senate Majority Leader Chuck Schumer (D-NY) holds his weekly post-Democrat Caucus Party luncheon press conference at the U.S. Capitol in Washington, August 2, 2022.

Jonathan Ernest | Reuters

The $430 billion climate change, health care and tax bill passed by the US Senate on Saturday delivers a major win for Democrats and will help curb the carbon emissions that drive climate change while reducing costs for the elderly.

Democrats hope the bill, which they rammed through the Senate in the face of united Republican opposition, will boost their chances in the November 8 midterm elections, when Republicans will be favored to regain a majority in at least one chamber of Congress.

The package, called the Inflation Reduction Act, is a significantly scaled-down version of an earlier bill backed by Democratic President Joe Biden that was blocked by Senate Democratic nonconformists Joe Manchin and Kyrsten Sinema as too costly.

“This is what the American people want,” Senate Majority Leader Chuck Schumer told reporters. “We’re prioritizing the middle class, working families, those struggling to get into the middle class, instead of what Republicans are doing: prioritizing those at the top.”

The Senate’s partisan 51-50 vote, with Vice President Kamala Harris’ deciding vote, sends the legislation to the Democratic-controlled House of Representatives, which is expected to pass it on Friday, after which Biden could sign it.

Republicans called the bill a spending “wish list” they said would hurt an inflation-battered economy, saying it would kill jobs, raise energy costs and undermine growth at a time when the economy is facing a potential recession.

“Senate Democrats are misinterpreting the outrage of the American people as a mandate for another reckless tax and spending spree,” Senate Republican Mitch McConnell said Saturday. “The Democrats want to impose hundreds of billions of dollars in tax hikes and hundreds of billions of dollars in reckless spending – and for what?”

About half of Americans – about 49% – support the bill, including 69% of Democrats and 34% of Republicans, according to a Reuters/Ipsos poll conducted Aug. 3-4. The most popular element of the bill gives Medicare the power to negotiate drug prices, supported by 71% of those polled, including 68% Republicans.

Economists, who say the legislation could help the Federal Reserve fight inflation, do not expect a big impact on the economy in the coming months.

Focus on climate

With $370 billion in climate-focused spending, it would become the largest climate change bill ever passed by Congress.

The bill provides businesses and families with billions in incentives to encourage the purchase of electric vehicles and energy-efficient appliances, as well as spur new investment in wind and solar energy that would double the amount of new clean electricity generation capacity coming online in the United States by 2024, according to modeling from Princeton University’s Project Repeat.

This would help put the United States on track to meet its pledge to halve its greenhouse gas emissions by 2030 below 2005 levels, made at the Glasgow Climate Summit. last year.

While environmental groups broadly embraced the bill, they noted that compromises achieved by Manchin, who represents coal-producing West Virginia, would extend the use of fossil fuels in the United States.

Those provisions include rules that would allow the federal government to authorize new wind and solar power developments on federal lands only when it also auctions oil and natural gas drilling rights.

Drug costs

The legislation would reduce drug costs for the government, employers and patients, said Juliette Cubanski, deputy director of the Medicare program at the Kaiser Family Foundation.

“Perhaps the biggest effect would be for people with prescription drug coverage through Medicare,” she said.

A key change is the provision allowing the federal Medicare health plan for elderly and disabled Americans to negotiate lower prices for prescription drugs.

The pharmaceutical industry argues that price negotiation would stifle innovation. Negotiated prices for 10 of Medicare’s most expensive drugs would apply starting in 2026, with that number increasing until it peaks at 20 per year in 2029.

The nonpartisan Congressional Budget Office estimates Medicare would save $101.8 billion over 10 years by negotiating drug prices.

The provision also introduces a $2,000 annual cap on seniors’ out-of-pocket expenses through the Medicare program.

Tax provisions

The bill also imposes a new excise tax on stock redemptions, a late change after Sinema raised objections to another provision that would have imposed new levies on carried interest, currently a tax loophole for investors. hedge funds and private equity financiers. The provision has been dropped.

The excise tax is expected to generate an additional $70 billion in tax revenue annually, lawmakers said. This is more than the provision for carried interest had planned to increase.

A nonpartisan Congressional Budget Office report released before this latest change estimated the measure would reduce the federal deficit by a net $101.5 billion over the next decade.

That was about a third of the $300 billion in deficit reduction projected by Senate Democrats, but excluded a projected $204 billion revenue gain from increased enforcement by the Internal Revenue Service.

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