Congress Moves On Not One, But Two Major Spending Bills

Hot on the heels of passing the expansive $280 billion CHIPS and Science Act aimed at building up America’s technology edge, West Virginia Sen. Joe Manchin struck a deal on a major spending package with Senate Majority Leader Chuck Schumer to address health care and climate change.

The new 725-page bill, called the “Inflation Reduction Act of 2022,” would invest approximately $300 billion in deficit reduction and $369.75 billion in energy security and climate change programs over the next decade.

The package aims to curb U.S. carbon emissions by almost 40% by 2030.

The proposal would expand health care subsidies, allow Medicare to negotiate on prescription drugs, and be paid for by raising taxes on corporations and eliminating certain deductions.

The pandemic may play a role in getting the legislation passed this week. There is no proxy voting in the Senate, as there is in the House, and Senator Manchin and Senate Majority Whip Dick Durbin are currently isolating as they recover from COVID-19. Even one missing vote would doom passage of the bill.

Included are incentives for Americans to invest in clean energy, with tax incentives for home energy efficiency improvements. There are also tax credits for individuals who buy electric vehicles.

The bill would continue pandemic-era expansions to Affordable Care Act subsidies through 2025 and allow Medicare to negotiate with drug companies to lower drug costs, which has long been a Democratic goal. Under the bill, drug manufacturers would be penalized for raising prices faster than inflation.

The Inflation Reduction Act would be paid for by implementing a 15% corporate minimum tax as well as collecting more through IRS tax enforcement, Democrats said. The legislation includes billions of dollars for taxpayer services, enforcement and modernization of the agency.

The provision deals with the so-called "carried interest" loophole allowing hedge fund managers and private equity executives to pay lower tax rates on investments. Democrats want to ramp up the tax to bring in an additional $14 billion.

The House is already out for its annual month-long August recess, but could return if the Senate passes its legislation.

The Senate had already passed the $280 billion CHIPS and Science Act aimed at building up America’s manufacturing and technological edge to counter China by an overwhelming bipartisan vote.

The CHIPS and Science Act provides $52 billion in subsidies and additional tax credits to companies that manufacture chips in the United States. It also adds $200 billion for scientific research, especially into artificial intelligence, robotics, quantum computing and other technologies.

The subsidies for chip companies are expected to produce, in the short term, tens of thousands of jobs, with manufacturers pledging to build new factories or expand existing plants in Ohio, Texas, Arizona, Idaho and New York.

The bill calls for pouring $10 billion into the Department of Commerce to create 20 “regional technology hubs” across the country.

The legislation stipulates that chip manufacturers that take the federal funds and tax subsidies provided by the legislation cannot expand existing factories or build new ones in unfriendly countries. The Department of Commerce would claw back the funds provided by the bill if companies do not abide by those restrictions, senators said.