Saturday 10 December 2022
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PoliticsWorldUS Senate passes proposed Inflation Reduction Act: Sweeping climate change, healthcare bill...

US Senate passes proposed Inflation Reduction Act: Sweeping climate change, healthcare bill explained

The US Senate on 7 August passed a sweeping $ 430 billion intended to fight climate change, lower drug prices and raise some corporate taxes. Observers are seeing the woke, socialist and populist move as a major victory for President Joe Biden, as Democrats hope it will augment their chances of keeping control of Congress in this year's elections.

After a marathon 27-hour weekend session of debate and Republican objections, the US Senate approved the legislation known as the Inflation Reduction Act by a 51-50 party-line vote. Vice President Kamala Harris cast the tie-breaking ballot.

The action sends the measure to the House of Representatives for a vote, likely on 12 August when representatives plan to reconvene briefly during a summer recess. They are expected to pass it, which would then send the to the White House for Biden's signature. In a statement, Biden said he looked forward to signing the bill into law.

"The Senate is making history," an elated US Senate Majority Leader Chuck Schumer said, after pumping his fists in the air as Democrats cheered and their staff members responded to the vote with a standing ovation.

"To Americans who have lost faith that Congress can do big things, this is for you," he said. "This bill is going to change America for decades."

Schumer said the legislation contains "the boldest clean energy package in American history" to fight climate change while reducing consumer costs for energy and some medicines.

Democrats have drawn harsh attacks from Republicans over the legislation's $ 430 billion in new spending and roughly $ 740 billion in new revenue.

Senators were due to break for an August recess after the session.

How did Democrats manage the US Senate?

Democrats approved the by using a parliamentary manoeuvre called reconciliation, which allows budget-related legislation to avoid the 100-seat chamber's 60-vote threshold for most bills and pass on a simple majority. Senate Democrats, with a narrow 50-seat majority, stayed unified to pass the legislation, using a special, filibuster-proof process to approve the measure without Republican votes.

After several hours of debate, the US Senate began a rapid-fire "vote-a-rama" on Democratic and Republican amendments on Saturday evening that stretched into Sunday afternoon.

Democrats repelled more than 30 Republican amendments, points of order and motions, all intended to scupper the legislation. Any change in the bill's contents wrought by an amendment could have unravelled the Democrats' 50-senator coalition needed to keep the legislation on track.

The final, party-line vote was 51-50, with Vice President Kamala Harris breaking the tie. The package is the product of painstaking negotiations, and its final passage would give Democrats a chance to achieve major policy objectives ahead of the upcoming midterm elections.

What do Democrats intend to achieve with this bill?

The was 18 months in the making as Biden's original sweeping Build Back Better plan was whittled down in the face of opposition from Republicans and key legislators from his own party. It would raise over $ 700 billion in government revenue over 10 years.

Biden made calls to senators about the over the weekend, a White House official said, and senior aide Steve Richetti kept an open line with Democratic US Senator Joe Manchin of West Virginia over the last several months to help move the measure forward.

"It required many compromises. Doing important things almost always does," Biden said in a statement.

Democrats hope the passage of the will help the party's candidates in the House of Representatives (lower house) and Senate (upper house) in the 8 November midterm elections at a time when Biden is suffering from poor public approval ratings amid high inflation.

The legislation is aimed at reducing carbon emissions and shifting consumers to green energy while cutting prescription drug costs for the elderly and tightening enforcement on taxes for corporations and the wealthy.

Because the measure pays for itself and reduces the federal deficit over time, Democrats contend that it will help bring down inflation, an economic liability that has also weighed on their hopes of retaining legislative control in the run-up to the 2024 presidential election.

What are Republicans objecting to?

Republicans, arguing that the will not address inflation, have denounced the measure as a job-killing, left-wing spending wish list that could undermine growth when the economy is in danger of falling into recession.

In a foreshadowing of the coming autumnal election campaign, Republicans used their amendment defeats to attack vulnerable Democrats who are seeking reelection in November.

"Democrats vote again to allow chaos on the southern border to continue," Senate Republican leader Mitch McConnell said in a statement that named four Democratic senators who are facing tight contests for re-election.

What is in it for healthcare?

The law would extend subsidies for health insurance under the Affordable Care Act and use the rest of the new revenue to reduce the deficit.

For one, Democrats were unable to muster the votes necessary to retain a provision to cap soaring insulin costs at $ 35 a month on the private health insurance market, which fell outside the reconciliation rules. Democrats said the legislation would still limit insulin costs for those on Medicare.

The secretary at the Health and Human Services would negotiate the prices of 10 drugs in 2026, and another 15 drugs in 2027 and again in 2028. The number would rise to 20 drugs a year for 2029 and beyond.

"Today, Senate Democrats sided with American families over special interests, voting to lower the cost of prescription drugs, health insurance, and everyday energy costs and reduce the deficit, while making the wealthiest corporations finally pay their fair share," Biden said.

After the bill's passage in the US Senate, Arizona Senator Kyrsten Sinema said in a statement it would "help Arizonans build better lives for themselves and their families by lowering prices, making health care more affordable and accessible, and securing Arizona's water and energy future," while also "boosting innovation and spurring job creation."

What is in the for climate change?

The law would enable spending of over $ 430 billion to reduce carbon emissions. What is left after the expenditure on healthcare and fighting global warming would be used to reduce the deficit.

The nearly $ 370 billion clean energy and climate package is the largest climate investment in US history and the biggest victory for the environmental movement since the landmark Clean Air Act. It also comes at a critical time; this summer has seen punishing heat waves and deadly floods across the country, which scientists say are both linked to a warming planet.

The has support from many environmental and climate activists but is short of the $ 555 billion that Democrats had originally called for. This portion of the bill takes on transportation and electricity generation, and it includes $ 60 billion for growing renewable energy infrastructure in manufacturing like solar panels and wind turbines. It also includes several tax credits for individuals on things like electric vehicles and making homes more energy efficient.

The bill would, according to Democrats, lower greenhouse gas emissions by 40%, based on 2005 levels, by the end of the decade, which is short of the 50% Biden had originally aimed for.

Analysis from Senate Majority Leader Chuck Schumer's office — as well as multiple independent analyses — suggests the measure would reduce US carbon emissions by up to 40% by 2030. Strong climate regulations from the Biden administration and action from states would be needed to get to President Joe Biden's goal of cutting emissions by 50% by 2030.

The bill also contains many tax incentives meant to bring down the cost of electricity with more renewables, and spur more American consumers to switch to electricity to power their homes and vehicles.

Lawmakers said the bill represents a monumental victory and is also just the start of what's needed to combat the climate crisis.

What tax changes have been proposed to fund the schemes?

The legislation would reduce the deficit, be paid for through new taxes — including a 15% minimum tax on large corporations and a 1% tax on stock buybacks — and boost the Internal Revenue Service's ability to collect. The bill also contains many tax incentives meant to bring down the cost of electricity with more renewables, and spur more American consumers to switch to electricity to power their homes and vehicles.

To avoid a last-minute collapse of the bill on Sunday, Democrats created a plan to win over Sinema, who was concerned over the 15% corporate minimum tax's impact on subsidiaries owned by private equity. Senate Democrats accepted a narrower tax proposal, but instead of paying for it through a change to the state and local tax (SALT) deduction, as Senate GOP Whip John Thune of South Dakota suggested, they instead extended the limitation on the amount of losses that businesses can deduct for another two years.

Republican Josh Gottheimer of New Jersey had been part of the "No SALT, no deal" caucus. But he said the bill passes his test because it doesn't raise individual income tax rates.

Republican Mikie Sherrill of New Jersey, another member of that caucus, echoed his sentiment: "I will also remain steadfast in my commitment to ensuring that any discussion of reforms to the 2017 tax law begins with addressing SALT. Because this legislation does not raise taxes on families in my district, but in fact significantly lowers their costs, I will be voting for it."

Senate Minority Leader Mitch McConnell said in a statement that the bill included "giant job-killing tax hikes" and amounted to "a war on American fossil fuel." The Kentucky Republican said Democrats "do not care about middle-class families' priorities."

Concerned about how this provision would affect certain businesses, particularly manufacturers, Sinema has suggested that she won changes to the Democrats' plan to pare back how companies can deduct depreciated assets from their taxes. The details remain unclear. However, Sinema nixed her party's effort to tighten the carried interest loophole, which allows investment managers to treat much of their compensation as capital gains and pay a 20% long-term capital gains tax rate instead of income tax rates of up to 37%.

The provision would have lengthened the amount of time investment managers' profit interest must be held from three years to five years to take advantage of the lower tax rate. Addressing this loophole, which would have raised $ 14 billion over a decade, had been a longtime goal of congressional Democrats. In its place, a 1% excise tax on companies' stock buybacks was added, raising another $ 74 billion, according to a Democratic aide.

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