By David Morgan
WASHINGTON (Reuters) – The $430 billion climate change, healthcare and tax bill that passed the U.S. Congress on Friday aims to help reduce the carbon emissions that drive climate change and lower medical costs for older Americans.
President Joe Biden’s Democrats hope the bill, now passed by both houses of Congress, will boost their chances in the Nov. 8 midterm elections, when Republicans are favored to recapture the majority in at least one chamber of Congress.
The package, called the Inflation Reduction Act, is a dramatically scaled-back version of a prior bill backed by Biden that was blocked by maverick Senate Democrats Joe Manchin and Kyrsten Sinema as too expensive.
The bill will go to Biden to be signed into law.
“Today is really a glorious day for us. We send to the president’s desk a monumental bill that will be truly for the people,” House Speaker Nancy Pelosi, the chamber’s top Democrat, told reporters on Friday ahead of the vote.
Republicans blasted the bill as a spending “wish list” that they argued would hurt an economy weighed down by inflation, saying it would kill jobs, raise energy costs and undermine growth at a time when the economy is facing a potential recession.
“The Democrats’ most recent reckless tax and spending spree suffers from a serious case of policy whiplash,” said Republican Senator Chuck Grassley. “The last thing businesses and families need right now are tax hikes and a rash of poorly vetted policies creating even more confusion and uncertainty in the economy.”
About half of Americans – some 49% – support the bill, including 69% of Democrats and 34% of Republicans, according to a Reuters/Ipsos poll conducted on Aug. 3 and 4. The most popular element of the bill is giving Medicare for older and disabled Americans the power to negotiate drug prices, which 71% of respondents support, including 68% of Republicans.
Economists, who say the legislation could help the Federal Reserve battle inflation, do not expect a sizeable impact on the economy in coming months.
With $370 billion in climate-focused spending, it was the most consequential climate change bill passed by Congress.
The bill offers businesses and families billions in incentives to encourage purchases of electric vehicles and energy-efficient appliances, as well as to spur new investments in wind and solar power that would double the amount of new, clean electricity-generating capacity coming online in the United States by 2024, according to modeling by the Repeat Project at Princeton University.
That would help put the United States on course to meet its pledge to slash its greenhouse gas emissions in half by 2030 below 2005 levels, made at last year’s Glasgow climate summit.
While environmental groups largely embraced the bill, they noted that compromises secured by Manchin, who represents coal-producing West Virginia, would prolong U.S. use of fossil fuels.
Those provisions include rules that would only allow the federal government to authorize new wind and solar energy developments on federal land when it is also auctioning rights to drill for oil and natural gas.
The legislation would lower 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 to negotiate lower prescription drug prices.
Negotiated prices for 10 of the costliest drugs for Medicare would apply starting in 2026, with that number rising until it caps at 20 a 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 out-of-pocket costs for the elderly through the Medicare program.
The pharmaceutical industry says price negotiation will stifle innovation.
The bill also imposes a new excise tax on stock buybacks, a late change after Sinema raised objections over another provision that would have imposed new levies on carried interest, currently a tax loophole for hedge fund and private equity financiers. The provision was dropped.
The excise tax is expected to raise an additional $70 billion in tax revenue per year, lawmakers said. That is more than the carried interest provision had been forecast to raise.
A report by the Congressional Budget Office released prior to that last change estimated the measure would reduce the federal deficit by a net $101.5 billion over the next decade.
That was about one-third of the $300 billion in deficit reduction predicted by Senate Democrats, but excluded a projected $204 billion revenue gain from increased Internal Revenue Service enforcement. The Congressional Budget Office has not released a report on the final version of the bill.
(Reporting by David Morgan, additional reporting by Valerie Volcovici and Ahmed Aboulenein; Editing by Scott Malone, Jonathan Oatis and Howard Goller)