Manchin's latest shocker: A $700B deal

Joe Manchin and Chuck Schumer looked at loggerheads after their talks on a sweeping climate, tax and health care bill ran aground nearly two weeks ago. In fact, they were working on Washington’s best-kept secret.

On July 18, four days after Manchin and Schumer’s talks seemed to fizzle out with only a limited health care deal, Manchin reached out to Schumer to see if he was amenable to picking things back up. By Wednesday afternoon, they had a deal on a bill that includes energy and tax policy, a turnaround after the two deadlocked on Democrats' marquee party-line agenda.

“It's like two brothers from different mothers, I guess. He gets pissed off, I get pissed off, and we'll go back and forth. He basically put out statements, and the dogs came after me again,” Manchin said in an interview on Wednesday. “We just worked through it.”

All throughout last week, Manchin stayed quiet about the talks even as most senators, staffers and journalists had moved on: “I didn't know if it could come to fruition. I really didn't know, OK, so why talk about something, again, build people's hopes up? I got the ire of everybody.”

That ire turned into jubilation within the Democratic Party by Wednesday night after Manchin and Schumer announced what they dubbed “the Inflation Reduction Act of 2022,” which is slated for the Senate floor next week. There’s still significant concerns to be dealt with over whether it can meet chamber rules for avoiding a filibuster, and Sen. Kyrsten Sinema (D-Ariz.) hasn’t signed off yet — but Manchin’s deal with Schumer amounts to the best news for Democrats in weeks.

Moreover, Manchin’s announcement came hours after final passage of semiconductor legislation, a bill Republicans threatened to block mere weeks ago in an effort to stop Democrats from pursuing a party-line tax, climate and health care package.

The Manchin-Schumer deal includes roughly $370 billion in energy and climate spending, $300 billion in deficit reduction, three years of subsidies for Affordable Care Act premiums, prescription drug reform and significant tax changes. Manchin said the bill was at one point “bigger than that” but that’s where the two Democrats settled.

As part of the agreement announced Wednesday, Schumer and Speaker Nancy Pelosi agreed to pass legislation governing energy permits. Manchin said he spoke to Schumer, Pelosi and President Joe Biden on Wednesday.

After Manchin’s talks with Biden stalled last December on the more sweeping Democratic bill known as Build Back Better, Manchin recalled Biden telling him: “Joe, it’s not going to help for me to be involved in this … if you can do anything, good. If not, I understand.”

“You know, as an old senator, he understands things are a little rough at times,” Manchin said. In a statement, Biden thanked Manchin and Schumer for their work and described the deal as “the action the American people have been waiting for."

Following Manchin's stated interest in limiting a party-line domestic policy bill to health care and lowering prescription drug prices without more information about inflation, Democrats were expecting to pursue a bill that did not include climate or energy provisions. But Manchin and Schumer quietly continued negotiating behind the scenes, mostly through staff, leading to the surprise breakthrough while Manchin was sidelined with Covid.

“There was no pressure. The easiest thing for me to do is walk away and do nothing ... just stay away,” Manchin said. “That was not the case, because it was not the right thing."

The agreement mirrors roughly what Manchin first laid out earlier this year as his goals for the party-line bill, albeit with a more limited tax title. Democrats plan to raise revenues for the legislation by imposing a 15 percent corporate minimum tax, increasing IRS enforcement, reducing drug prices and closing the so-called carried interest loophole.

Notably, the legislation also extends Affordable Care Act subsidies through the 2024 election and the first term of Biden’s presidency, taking a big political headache off the table for Democrats. Manchin said that “helps people because you just can't throw [increases] on them during inflammatory times like this.”

It does not include surtaxes on people making more than $10 million a year, ending a push by most Democrats to impose higher rates on the wealthy; nor does it include a global tax deal. Manchin said the bill in theory should be bipartisan but he believed Republicans would never touch the tax code for corporations.

He also saw this moment as the last, best opportunity for Democrats given the uncertainty ahead of the midterms.

“In any other environment [than] what we have right now, this would be a bipartisan bill. I really believe that. This is the only vehicle I have to work with right now,” Manchin said. “We don't know what the future will bring. But all indications, might be a little bit of a shake-up. And that changes the dynamics of getting something done," he added.

Another twist: Manchin said the final deal does not leave out new incentives for electric vehicles, which he'd resisted in what became a major sticking point in the negotiations. Manchin said the bill gives incentives to make new car batteries in America “and not only be able to assemble them, but be able to extract the minerals that we need, critical minerals, in North America.”

Schumer held a call Wednesday evening with committee chairs who have jurisdiction over climate as well as senators focused on the issue. The deal with Manchin includes a methane fee as well as a $4,000 tax credit for the purchase of used electric vehicles, according to two Democrats familiar with the matter.

The bill also includes efforts to make fossil fuels cleaner, Manchin said, as well as to increase production to help American allies amid Russia’s invasion of Ukraine, which has limited European fuel supplies.

Sinema learned of the deal on Wednesday afternoon and had no immediate comment. When asked about the agreement, Majority Whip Dick Durbin (D-Ill.) replied: “That’s news to me.” Others declined to comment, saying they had yet to see the details. Sen. Chris Van Hollen (D-Md.) said his “first clue” was Manchin’s press release.

“There were hints, but nobody wanted to say anything until it was landed,” said Sen. Sheldon Whitehouse (D-R.I.). “But it's good that it's landed."

After months of rocky negotiations — and the expectation from many that any hope of reaching a climate deal with Manchin was gone — Democrats were buoyant Wednesday afternoon, even as the details of the deal had yet to be released. Sen. Elizabeth Warren (D-Mass.) put it this way: “At least we’re using the word 'climate.' It’s a good start.”

How the bill plays in the House will also be important. Progressives were elated, with Rep. Pramila Jayapal (D-Wash.) calling it a "really important victory.”

And moderate Rep. Josh Gottheimer (D-N.J.), who made state and local tax relief his red line, was noncommittal about whether he'd dig in even as his priority was left out of the bill: “Until I see specifics it’s hard to know."

Senate Republicans attacked Manchin for agreeing to a deal with Schumer after lauding him for stopping several iterations of the party-line legislation. Sen. Lindsey Graham (R-S.C.) said in a statement he couldn’t believe Manchin was “agreeing to a massive tax increase in the name of climate change when our economy is in a recession.”

Manchin said he understands that the legislation will divide Washington and potentially reshape his reputation. Instead of the man who obstructed Biden’s agenda, Manchin is now the Democrat from deep-red West Virginia who cut a major climate change deal three months before an election.

“I'm sure all the pundits will come out [from] different directions now, but I'm not worried about me,” Manchin said. “I don't think you could be attacked any more than I’ve been attacked for a year. So, I don't know what else they could do to me.”

Anthony Adragna and Jordain Carney contributed to this report.