House Democrats on Friday approved a sprawling bill to lower prescription drug costs, address global warming, raise taxes on some billion-dollar corporations and reduce the federal deficit, sending to President Biden the long-delayed, last component of his economic agenda in time for this year’s elections.
The bill, known as the Inflation Reduction Act of 2022, secures the largest-ever investment to tackle climate change, with roughly $370 billion dedicated to curbing harmful emissions and promoting green technology. The bill also moves to cap and lower seniors’ drug costs while sparing about 13 million low- and middle-income Americans from increases in their insurance premiums that otherwise would occur next year.
To pay for the spending, Democrats rely on revisions to tax laws, including a new minimum tax on some billion-dollar corporations that now pay nothing to the U.S. government. That change — along with another new tax on stock buybacks and fresh funding for the Internal Revenue Service to pursue tax cheats — is expected to cover the costs of the bill. Democrats say it also can reduce the federal deficit by about $300 billion, but they have yet to furnish a final fiscal analysis.
The winding, tumultuous path to passage began soon after Biden entered the White House. As the pandemic savaged the U.S. economy last spring, the president put forward a series of policy blueprints that aimed to re-envision the role of government in Americans’ lives. Biden’s plans left virtually no portion of the country untouched, seeking to rethink tax laws, rehabilitate the nation’s aging infrastructure, and spend massive sums on health care, education and climate.
Democrats eventually adopted a $1.9 trillion American Rescue Plan to respond to the coronavirus last March, then secured bipartisan support to invest $1.2 trillion in the nation’s roads, bridges, pipes, ports and internet connections last fall. But the president’s party warred with itself in the months to follow over the final piece of Biden’s agenda, which targeted federal safety-net benefits and longer-term challenges such as global warming.
It took a string of uncomfortable public clashes — seemingly intractable fights between party liberals and moderates including Sen. Joe Manchin III (W.Va.) — before Democratic leaders reached a delicate truce. The deal chiefly brokered between Manchin and Senate Majority Leader Charles E. Schumer (N.Y.) last month forced party lawmakers to accept what many saw as agonizing compromises, as they had no choice but to jettison plans to expand Medicare, offer free universal prekindergarten and authorize a raft of new aid for low-income families.
But Democrats on Friday still hailed the accomplishment, however unlikely it once might have seemed, by stressing it delivers on many of their past promises.
“It’s not anything that anybody, three months ago, would have said is a possibility,” House Speaker Nancy Pelosi (D-Calif.) said in an interview, later emphasizing on the chamber floor that the bill “expands the promise of health and financial security for generations to come.”
Democrats erupted in raucous applause as soon as they reached the votes required for passage. Shortly after that, Biden tweeted that he would sign it into law next week, saying: “Today, the American people won. Special interests lost.”
House Republicans, meanwhile, mounted a stiff, united opposition. They attacked the measure as a tax increase on families, even though it does not raise individuals’ rates. And in speeches, they insisted it would allow the government to hire tens of thousands of new IRS agents to “snoop around in your bank account, your Venmo, your small business, and then the government will shake you down for every last cent,” as House Minority Leader Kevin McCarthy (R-Calif.) said.
McCarthy’s comments — at one point describing the “guns” in the possession of the tax agency — misstated the full purpose of the proposed IRS funds. Still, he described the fuller spending measure as the “largest tone-deaf bill” he had ever seen.
“Today the people’s house should be working to answer our country’s call to address the rising price of gas, groceries and just about anything else,” McCarthy said.
For Democrats, the vote Friday clinched an achievement they long have seen as essential toward preserving their majorities in November. Anything less risked angering voters who were sold in 2020 on the promise that Democrats would pursue dramatic economic change. The victory particularly emboldened the party’s liberals, many of whom promised Friday to continue fighting for the provisions abandoned in the name of compromise.
“We insisted the Democratic majority deliver,” said Rep. Pramila Jayapal (D-Wash.), the leader of the Congressional Progressive Caucus, a major force in crafting the original $2 trillion proposal last year.
“We have won the argument for the president’s full economic agenda that we passed in the Build Back Better bill,” she said at a news conference. “Now we just need a couple more Democratic senators to make the rest of that agenda a reality.”
Democrats now face a test in selling the accomplishment at a moment of mixed economic signals and vast political uncertainty. Inflation is trending down, yet prices are still high, while the threat of a recession looms large despite recent strong growth in the labor market. Biden’s popularity is low in some polls, even after Democrats notched a wide array of legislative victories in recent weeks, including laws to restrict gun purchases, expand veterans’ health care and manufacture much-needed computer chips.
Adding to the challenge, a new analysis released Friday by the Penn Wharton Budget Model offered a mixed review of the bill: The report found it would reduce the deficit by about $264 billion over the next decade, less than some Democrats hoped, with an effect on inflation that is “statistically indistinguishable from zero.”
“Americans are suffering. Are we here debating how to alleviate that suffering? No,” said Rep. Jason T. Smith (Mo.), the top Republican on the House Budget Committee, adding the bill would not “put out the fire of inflation.”
Republicans have suggested in recent days that a GOP majority in the next Congress could try to roll back the legislation, much as it tried repeatedly to do to the Affordable Care Act adopted under President Barack Obama in 2009. Rep. Steve Scalise (R-La.), the House minority whip, pledged this week his party would soon be “rolling out an agenda that will reverse” the bill.
But Democrats seemed to welcome such a threat. In a briefing with reporters on Thursday, a senior White House official said the outcome would help the party hone its new message to voters: Democrats are helping ordinary Americans, while Republicans are extremists beholden to special interests and former president Donald Trump.
Pelosi, meanwhile, told The Washington Post that the upcoming elections would offer Democrats a “big contrast” with the GOP. She later added: “This is the path we’re on. The Republicans want to take us off this path.”
The Inflation Reduction Act for the first time allows the U.S. government to negotiate the price of some medicines on behalf of seniors on Medicare — a novel system set to take effect in 2026. The bill also caps these seniors’ annual out-of-pocket prescription expenses at $2,000 a year beginning in 2025, and limits insulin co-pays to $35 starting in 2023 for Medicare patients.
Taking aim at drug manufacturers, the proposal further imposes penalties on those that raise the price of Medicare beneficiaries’ medicines faster than the rate of inflation. While the “inflation rebate” does not apply to prescriptions written for Americans on private insurance — a casualty of the way Democrats moved the bill in the Senate — lawmakers see the measure as a major victory after years of staunch pharmaceutical industry opposition.
“For as long as I have been running for office, people have been coming to me with concerns for the price of prescription drugs. The fact I can say, ‘We have heard you, we have taken a step forward,’ is important,” said Rep. Abigail Spanberger (D-Va.), a moderate running in a competitive race this November.
On climate change, the bill includes $161 billion in new tax credits to incentivize clean electricity and about $80 billion to encourage consumers to purchase new or used electric vehicles and improve the energy efficiency of their homes. It also approves $1.5 billion to cut down on methane, a potent greenhouse gas.
A number of Republicans took to the floor Friday to lambaste Democrats’ programs to respond to global warming. Rep. Lauren Boebert (Colo.) at one point said lawmakers were “sacrificing American families at the altar of climate change.”
In total, though, Democrats stressed their climate-related spending would reduce emissions by 40 percent below 2005 levels by the end of the decade. And they pointed to a raft of extreme weather events as they made the case for aggressive action.
“All of the experts are saying we’re very close to the point of no return. If we don’t do something soon, we might not be able to save the planet,” said Rep. Robert C. “Bobby” Scott (D-Va.), chairman of the Education and Labor Committee.
To win Manchin’s vote, however, Democrats also agreed to mandate new oil and gas leasing in the Gulf of Mexico and off the coast of Alaska, while backing a future bill to streamline permitting for pipelines and other infrastructure. The concessions troubled some lawmakers, including Rep. John Yarmuth (D-Ky.), who expressed alarm that Democrats had catered too much to Manchin and another moderate holdout, Sen. Kyrsten Sinema (D-Ariz.).
“What bugs me to this day is that ultimately Kyrsten Sinema and Joe Manchin are going to get credit for doing something where they put their own interest in front of everybody else’s,” Yarmuth, the leader of the House Budget Committee, said in an interview.
Only eight months earlier, though, it seemed unfathomable that Democrats might pass any bill at all — stymied by divisions that saw Manchin walk away from talks in December.
The battle began in the spring, after Biden introduced the proposal known as the American Families Plan. Soon, Democrats on Capitol Hill began translating the president’s vision into a bill that could be passed under the process known as reconciliation, which in the Senate allowed the party to overcome a GOP filibuster. Congressional budget leaders — Yarmuth along with Sen. Bernie Sanders (I-Vt.) — eventually clinched an outline that allowed Democrats to spend up to $3.5 trillion on their agenda.
In the months to follow, every major House committee produced reams of pages of legislative text toward the massive spending bill, which Democrats likened to the “Great Society” reforms enacted under Lyndon B. Johnson — an analogy Biden himself favored. Their resulting proposal aimed to expand Medicare benefits, invest billions of dollars in child care and free prekindergarten, authorize new paid family and medical leave and raise taxes on wealthy Americans and corporations.
But their ambitions quickly collided with the political reality. Liberals led by Jayapal favored sizable new federal investments while the party had rare control of Congress and White House. But they clashed with moderates, including Manchin and Sinema, who took a more cautious fiscal view. Without all 50 Senate Democrats, the party had no way to shepherd their bill through the chamber, leaving the debate at a standstill.
The tensions came to a head in late September, as failed negotiations stalled the entirety of Biden’s legislative agenda, including his infrastructure bill. That prompted a rare intervention from Biden, who made a personal appeal to his party on Capitol Hill to find common ground.
House Democrats eventually settled on a $2 trillion package, which they adopted over GOP opposition in November. But Manchin scuttled it a month later out of concern it might worsen inflation, infuriating liberals, who felt the party had been held hostage by a sole outlier. Even Biden, who once preached compromise, expressed outrage at the collapse, sparking days of public sniping between the White House and Manchin.
Talks resumed this spring between the moderate West Virginian and Schumer, a set of intensely private discussions that often seemed on the verge of another disappointment. Even as Democrats shaved billions of dollars, and shelved some of their most prized plans to aid low-income Americans, Manchin remained troubled by its cost — and at one point, last month, walked away from climate and tax policies he had once supported.
But Schumer and Manchin ultimately forged a deal by the end of the month, opening the door for the Senate to adopt it this month. Reflecting on the compromises Democrats made on the eve of the House vote, Pelosi said in an interview that she had urged her members to “respect the bill for what it does” rather than “make judgments about it for what it does not.”
“But live to negotiate further,” she added.
Cleve R. Wootson contributed to this report.