The Daily - How Democrats Salvaged a History-Making Bill

Episode Date: August 9, 2022

This weekend, Democrats passed legislation that would make historic investments to fight climate change and lower the cost of prescription drugs — paid for by raising taxes on businesses.How did the party finally make progress on the bill, and what effects will it have?Guest: Emily Cochrane, a Washington-based correspondent for The New York Times.Background reading: Here’s what is in the climate, tax and health care package.How Senator Joe Manchin turned from a holdout into a deal maker.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. 

From The New York Times, I'm Michael Barbaro. This is The Daily. Today, after more than a year of hard work, the Senate is making history. Over the weekend, Senate Democrats passed legislation that would make historic investments to fight climate change and lower the cost of prescription drugs and pay for them by raising taxes on businesses. It's a game changer. It's a turning point. And it's been a long time in coming. In the process, Democrats revived a set of long-sought party goals that, just a few weeks ago, were widely seen as dead. To Americans who've lost faith that Congress can do big things, this bill is for you.

I spoke with my colleague, congressional reporter Emily Cochran, about how that happened and what the bill actually means for Americans. It's Tuesday, August 9th. August 9th. So Emily, this finally happened. It appears so. I'm still processing. After a weekend where single-handedly tested how much caffeine one human body can take. Right, quite a lot.

A lot, I can assure you. So we are going to spend a lot of time talking about what's actually in this bill and why it's so historic. But let's start with how we got here to this place that nobody really thought we'd ever be with Democrats delivering a sweeping bill to fight climate change, make big changes to the healthcare system, raise taxes on businesses, and reduce the deficit. And somehow doing that while overcoming the profound resistance of Senator Joe Manchin and Senator Kyrsten Sinema. So how did that happen? So back in November, House Democrats finally had the votes they needed to pass a version of President Biden's signature domestic policy bill. It would have expanded the social safety net and really transformed the reach of the federal government. It was known as the Build Back Better Act. It was about $2.2 trillion worth of spending and tax increases. But once it got through the House, it still needed to get

through the Senate. And without any Republican support, Democrats needed all 50 members of their party to back it for it to get through the Senate. Right. And in December. Joining us now, Democratic Senator Joe Manchin of West Virginia. Senator, welcome back. Senator Joe Manchin, a conservative Democrat from West Virginia, a red state, went on national television and said, If I can't go home and explain it to the people of West Virginia, I can't vote for it. Two trillion dollars is too much.

And I cannot vote to continue with this piece of legislation. I just can't. And essentially walked away from negotiations on that specific bill. I've tried everything humanly possible. I can't get there. You're done. This is a no. This is a no. So that December statement ended Build Back Better as we knew it. And there was a lot of frustration and anger from the Democratic Party. The bill has already been retrofitted to Joe Manchin's liking. Let's make that extremely clear. They had worked for more than six months at this point to get, you know, the entire House Democratic caucus behind this bill.

Being strung along has been the path this entire time, this entire year. And then from their perspective, one person in the Senate said no. Right. I won't be swayed. The only thing we have to trust around here is our word. And it's unfortunate that it seems we can't trust Senator Manchin's word. It was a very angry New Year's, I think, for a lot of people in the Democratic Party. But after the beginning of this year, Senator Chuck Schumer, the majority leader, went back to Joe Manchin to try to get things back on track.

And these quiet negotiations began in private. No one knew what was really going on because it was really strictly between the two of them. But by the beginning of the summer, it was becoming clear what the parameters were for a deal that Manchin could get on board with. It would be a much smaller bill in terms of how much it would spend, and it wouldn't include the funding for some of these social safety programs. Any of the new spending would be rooted in climate, energy, and healthcare programs only. And Democrats were starting to come around to this idea that they would be OK doing a scaled down version that still had these pretty significant health care and climate priorities, particularly the climate, because this was widely seen as the last clear, guaranteed opportunity to do something to address climate change. But then in July.

Some tough times for your wallet, as you all know. Inflation is skyrocketing. Inflation now reaching its highest rate in 40 years at 9.1 percent. And Manchin sees these numbers and ends up going to Chuck Schumer a few days later and saying, if you want to pass a bill this summer, it can only address health care. I need to wait to see if inflation gets better before we approve this climate and energy spending and these tax increases. We can't do it this summer. and these tax increases. We can't do it this summer. Democratic Senator Joe Manchin of West Virginia appeared to once again, for like the 10th time,

kill the Democrats' Build Back Better deal on his own. And this is a spectacular public blowup. A lot of anger, rage even, directed at Joe Manchin from Democrats and people who care about a habitable climate. Massachusetts Democratic Senator Ed Markey tweeted out, rage keeps me from tears. You know, Joe Manchin, already not a beloved member of the Democratic caucus for his more conservative stances, is now getting pilloried as the one person who just single-handedly

killed the opportunity for the American government to address climate change. Right. For Manchin, we were sort of surprised. U.S. Senator Joe Manchin joins us on TalkLine this morning. Senator, good morning. How are you? Hey, Hoppy. You've outlined... He goes on a West Virginia radio show and says... And I said, Chuck, can we just wait until the inflation figures come out?

I'm not opposed altogether. I just want to wait. And then make a decision what we can do and how much we can do. He took that as no, I guess. And I guess they try to put pressure on me, but I've been doing that for over a year now. It doesn't make any sense at all. But Democrats burned by December appear ready to move on and not take that chance. President know, President Biden comes out. Since Congress is not acting as it should. Debates the idea of declaring a climate emergency. As president, I'll use my executive powers to combat climate, the climate crisis in the

absence of congressional action. But then something starts to happen behind the scenes. Manchin and Schumer start talking again, acknowledging that both were upset, frustrated, but they're going to give this another try. And within 10 days... We have a bit of news from Capitol Hill. There's suddenly a deal that no one saw coming.

The agreement is a major reversal for Manchin, who shut down a similar proposal less than two weeks ago. If this bill passes, it would be, I think, the most significant climate legislation in American history. And the question becomes, well, Manchin's on board, but is everybody else? The one person who could derail this plan, Senator Kyrsten Sinemaema has not revealed how she will vote. And there's this flurry of negotiations to make sure that all other Democrats, most notably Kyrsten Sinema, are on board. And within a few days, she has extracted her own concessions from leadership. And by the weekend, all 50 Democrats are poised to vote yes.

The yeas are 50, the nays are 50. The Senate being equally divided, the vice president votes in the affirmative and the bill as amended is passed. as amended is passed. So it took two very public breakdowns and a true rebuilding of this legislation, more or less from scratch, over more than a year to get us to this point where the Senate

passes what was once known as Build Back Better. That about sums it up. It sounds so simple when you put it that way. But it was anything but. Anything but. Okay, so Emily, let's talk about what's actually in this bill and how it will affect Americans.

So this is now the Inflation Reduction Act in a nod to the concerns of Joe Manchin and also just the new economic reality that Democrats are trying to counter here. And it has three main components, health care, climate and energy, and then how to pay for all of that. Okay, let's start with health care.

What should we understand about what's in this bill related to that? The first piece is something Democrats have wanted for years, aimed at lowering the cost of prescription drugs. So for the first time, Medicare, which is federal health insurance, largely for people over the age of 65, will be able to directly negotiate the cost of prescription drugs. And that is a significant development because it means that Medicare will be able to push against high prices set by pharmaceutical companies. And that will save the federal government money. That is part of how this bill is paid for, with the savings expected by lower prices. So just to make sure I understand, the way that this is in theory going to lower the cost of prescription drugs is that

Medicare, this federal government insurance program, is going to use its scale to finally negotiate with the big pharmaceutical companies on cholesterol drugs, heart drugs, cancer drugs, pharmaceutical companies on cholesterol drugs, heart drugs, cancer drugs, and therefore demand that they lower their costs, which in theory lowers our costs as taxpayers as well as the cost of someone on Medicare going to the pharmacy and picking up their drugs. Right. And to that last point, another part of this bill that people are really going to feel directly is that it sets a cap on the out-of-pocket costs that seniors pay annually for their prescription drugs at $2,000. And that's going to be pretty significant for Medicare recipients. I mean, our colleague Margo Sanger-Katz has spoken to people who are

fighting certain kinds of cancer who have stopped taking their medication because it's too expensive. If you're a patient receiving cancer treatments, you have some autoimmune disorders, your medication out of pocket can be more than $10,000 a year to treat a life-threatening condition. And to cap it at $2,000 is probably going to be life-changing for a lot of people on Medicare who need these prescriptions. The other component of this is there will now be a penalty if the price of a prescription drug is raised in a way that outpaces inflation. So the bill is intended to keep prices more consistent and lower for people on Medicare, and that will affect millions of people. Interesting. And that change would seem to

actually reflect the bill's name, which has gotten a lot of attention for seeming like gimmicky advertising. But if you're actually keeping drug prices from rising higher than inflation, then in theory, you are helping to reduce inflation. That's what Democrats believe. Okay. What else does this bill do in the realm of healthcare? So the other component deals with the millions of people who rely on the Affordable Care Act for their health insurance.

As part of, you may recall, the pandemic aid package that Democrats passed last year, they included expanding subsidies for the Affordable Care Act. That means lower costs, more federal help, and more people who qualify for federal help. Those subsidies were set to expire at the end of the year. And this ensures that that federal help continues for another three years. And just give us a feeling for what this help for the Affordable Care Act looks like. Who's going to benefit from it? How's it work? So it will help lower income Americans. So people who earn around $19,000 a year are able to sign up for a typical health insurance plan and not pay anything each month. And it also means that people who make more than that, say a small business owner or a freelancer who earns around $51,000 a year,

higher income people are able to get more federal support and qualify for financial help from the government for these health insurance plans. Interesting. So in a way, this is Democrats buttressing the Affordable Care Act and making sure that its promise of affordable health care is fully realized by literally, in some cases, paying for people's health care premiums. Exactly. And that's a huge priority for Democrats. Okay, but of course, for many people, the main event of this bill has to do with climate. Yes. It's the largest single investment from the American government toward fighting climate change. And it's also the part of the bill that was most in peril this whole time. The part that many people feared wouldn't get done.

this whole time, the part that many people feared wouldn't get done. We'll be right back. So Emily, describe how this bill specifically confronts climate change. The core of it is essentially designed to reward people and incentivize people and companies to move away from fossil fuels, oil, gas, and move toward wind, solar, and renewable energy. One example of that is an incentive so families purchase electric vehicles instead of gas-powered cars. Some couples will be able to get a $7,500 tax credit for a new electric car. There are also incentives for households to upgrade their home to make it more energy efficient. It's essentially just rewarding people for being more environmentally conscious with some of their purchases. And that also

applies to companies too. There's billions in here to help speed up the production of solar panels, wind turbines, batteries. There's $10 million to go toward the construction of electric vehicles and the sort of things that you would need to really help this transition to more renewable energy and environmentally friendly substances. Got it. So this bill acknowledges that individuals and companies in the U.S. economy don't naturally move from kind of bad sources of energy to cleaner sources of energy on their own. They need a financial nudge. And so this spends money to get people to move in that direction. Exactly. But because this bill needed Joe Manchin

to sign off on it, it doesn't go quite as far as Democrats would have liked. And in fact, they ended up including some proposals that climate activists certainly would not have included if they didn't need Joe Manchin's buy-in. Such as? So an example of that is a requirement that if the Interior Department plans to approve new wind and solar projects on federal lands, they also have to continue holding auctions for fossil fuel leases. And separately outside this bill, Manchin extracted commitments from Democrats in Congress that they would pass permitting reform legislation, which is designed in part to help speed up the construction of things like a

natural gas pipeline in West Virginia. And in fact, he got a commitment outside of this bill for that pipeline to be built that's been delayed. And it is going to be finished as part of this broad agreement to get his vote. So Manchin insisted on preserving and in some cases expanding our reliance on fossil fuels, which of course creates emissions that contribute to global warming rather than fighting it. So Emily, do climatologists and activists and Senate staffers think that this bill

will meaningfully address climate change? Yes, this alone will not fulfill the emissions goals that President Biden has set out. But analyses have shown that it will help the United States slash greenhouse gas emissions by about 40 percent below 2005 levels by the end of the decade. And for a lot of senators, a lot of activists who have worked for years to get something through Congress, they see this as a sign that they have ended this trajectory of inaction and they now have something they can build upon going forward. So in their minds, there's not really much debate that this bill is meaningful when we think about the climate crisis and America taking concrete action to do something about it.

Yes. I mean, when Democrats thought this bill was dead, they were devastated. They were crying. And on Sunday, you saw those same people wiping away tears of joy. And on Sunday, you saw those same people wiping away tears of joy. So, Emily, the third and final element of this bill, so important to Joe Manchin, as you said, was how it was going to pay for itself and that it was going to pay for itself. So tell us about those elements of the bill. So when Democrats set out to write this bill, the goal was to make the tax code more fair. Kyrsten Sinema was opposed to a lot of the tax rate increases that Democrats had wanted. So what they settled on instead was a more complex change to the tax code that would impose a new 15% corporate minimum tax on the profits

companies report to shareholders. Hmm, explain that. The bill essentially says that for companies who tell their shareholders that they have made more than $1 billion this year, you will have to pay a 15% minimum tax. Right, and of course, we have all read the stories, including by our colleagues, that show that year after year, some of America's most profitable companies,

I'm thinking about firms like Amazon, are not paying taxes. At the end of the year, it seems like this bill is stating very clearly, like, you will pay at least 15% of your profits. That's the hope for Democrats. How else does this bill intend to pay for itself? It imposes a new tax on company stock buybacks.

So essentially ensuring that if companies repurchase some of their own shares, they will pay a tax on that purchase. Again, part of this broader theme of making sure that the tax code is more equitable and wealthier companies are paying their fair share. Right. And from my days as a business reporter, I recall that lots of companies buy back their stock from shareholders in order to reduce the number of shares that are floating out there in the world, which in theory then raises the stock's price. But it's kind of a financial gimmick. A lot of people don't like it, but a lot of companies do it. And so the thinking here seems to be if companies are going to do it,

we're going to make them pay for it and we're going to make them pay the IRS for the privilege of doing it. Exactly. And you touched upon another element of how this bill is going to raise revenue, and that's by beefing up the Internal Revenue Service. The bill pours about $80 billion into the IRS in theory to beef up

its enforcement, its ability to crack down on the wealthiest of tax evaders. Got it. Emily, it's just a reality in Washington, and you know this well, that legislative tricks mean that a lot of bills that say they pay for themselves, we find out years later, don't pay for themselves. They add to the deficit. So based on your reporting, does this bill actually pay for itself? So because the bill was changing up until the very last possible moment, we are still waiting on some updated analyses of this bill. But before the weekend, it was projected to not only pay for itself,

but lower the federal deficit by as much as $300 billion over a decade, which is a huge priority for Joe Manchin as he was negotiating this bill. Hmm. By all accounts, this is a very ambitious bill. It covers a huge amount of ground. It spends a lot of money.

But it's not Build Back Better, right? It's not a fundamental remaking of the social fabric of the United States or a sweeping reimagining of the role that the government would play in our lives. It's less than that, but it's still very big. So what do we think it will mean to have this now head to the House of Representatives, pass there, and be signed into law by President

Biden? So I think there's a couple ways to think about it. And the first one is that the Democratic Party has given voters just months before the midterm proof that they've delivered on their vision, parts of their vision for the federal government and what it's capable of. Whether or not that is enough remains to be seen because the other way to think about it is this is going to be the peak accomplishment for Democrats under the Biden administration, that this was the pinnacle of a Democratic-controlled Washington, and it will be something to look back on if they end up back in the minority. So what you're saying is whether Democrats do well in the midterms or do terribly in the midterms, this is going to be a defining element of the party's identity moving

forward. It might actually help them retain power, but even if it doesn't, it's going to be the foundation for trying to stage a comeback in a few years. Absolutely. I mean, this is going to be the foundation of what they have done and a promise of what more they can do given that power once again. Mm-hmm. Emily, I'm really curious, was all this drama with Joe Manchin over the past year or so really necessary to get here? I think it was. There are a lot of different kinds of Democrats right now in Congress. And I think that the ambitions of what a Democratic majority can do were so high, particularly for the liberal wing of the party. And I think the negotiations with Joe Manchin and with Kyrsten Sinema and sort of the centrist wing of their party just underscored the political reality. Now, for liberals, I think the message here is, this is why you should elect more Democrats. And this is why you should elect more Democrats that have the policy mindset of a Bernie Sanders or an Elizabeth Warren, that this whole experience showed what would have been possible

if they had just had a couple more votes. Right, which they don't. That's not the hand the Democrats had right now. No, but in a 50-50 Senate, without any votes to spare, it is pretty remarkable what they have been able to do without any margin of error at all. Well, Emily, thank you very much. We appreciate it. Thank you for having me.

We'll be right back. Here's what else you need to know today. On Monday, the FBI conducted an unannounced search of Donald Trump's home in Palm Beach, going so far as to break open a safe, according to Trump. It was a dramatic escalation of the various federal investigations into the former president. The search appeared to be focused on material that Trump brought with him to Florida when he left the White House. Trump condemned the raid in a statement, calling it, quote, the weaponization of the justice system.

And the United States said it would send Ukraine an additional $1 billion in military equipment, bringing its overall aid to Ukraine to $9 billion since the war began. to 9 billion since the war began. During a briefing, a U.S. official told reporters that with U.S. support, Ukraine has inflicted significant damage to Russia's military, killing or wounding as many as 70,000 Russian soldiers and destroying at least 3,000 tanks and armored vehicles over the past six months.

Today's episode was produced by Eric Krupke, Will Reed, Nina Feldman, Muj Zaydi, and Rochelle Bonja. It was edited by Rachel Quester, contains original music from Marian Lozano and Brad Fisher, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsberg of Wonderly. That's it for The Daily. I'm Michael Barbaro. See you tomorrow.