It was just a year ago that President Joe Biden’s policy agenda was dead on arrival with his multi-trillion-dollar Build Back Better package. The legislation failed to pass through Congress because of two centrist Democrats in an evenly divided Senate.
The plan that was made only through the House originally included massive provisions on climate change, healthcare, and tax reform.
But on Sunday night, a much less expensive version of Biden’s agenda was passed by the Senate. It is known as the Inflation Reduction Act, and it will now sail through the House and probably be on the president’s desk by Friday for his final signature.
President Biden wrote in a statement, “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.”
This slimmer bill costs over $1 trillion less than Build Back Better, and the Inflation Reduction Act represents months of negotiations in the back rooms of the Capitol. Even stripped way back, this bill will be positive for the White House administration in a year of mostly negatives.
When you dissect this new bill, you see the remnants of the president’s agenda that were left in and a whole lot that was taken out.
Biden’s Build Back Better plan included massive tax credits to offset middle-class families shifting to clean energy, and plans to help the manufacturing of clean energy components. It included the creation of the Civilian Climate Corps, a New Deal-style effort to build jobs and protect the environment.
The revised Inflation Reduction Act is still being called the single biggest climate investment in U.S. history, by far. But it has primarily shifted to focusing on the financial benefits of investing almost $369 billion over a decade into climate change programs and clean power.
What The Build Back Better Plan Actually Includes
The Build Back Better plan included lots of money for childcare and other social supports, but that is gone in the Inflation Reduction Act. The original legislation included an extension of the Child Tax Credit which families received through 2021. This was part of the American Rescue Plan. But this is not in the new plan. And it also doesn’t include provisions to expand child care access, support for older Americans or people with disabilities, funding for affordable housing, an expanded free school meal program, and a plan for universal preschool.
The Inflation Reduction Act does preserve some of the reform to healthcare access that was in Biden’s first plan. It caps the out-of-pocket cost of prescription drugs for seniors on Medicaid at $2,000. And it includes a cap of $35 per month on the price of insulin for Americans on Medicaid. This will not help those who are covered by private insurance.
The negotiated bill does not expand Medicaid coverage, as the Build Back Better intended to do. But it does include a three-year extension of Affordable Care Act subsidies.
The plan for funding Build Back Better included a complete reversal of Trump-era tax cuts on corporations and wealthy Americans. This is what caused Senator Kyrsten Sinema (D-AZ) to vote against it.
The Inflation Reduction Act includes a 15% minimum tax on the profits corporations report to shareholders, applying to companies that report more than $1 billion annually in their financial statements. Sinema’s negotiations also caused the package to not include a measure that would have limited a tax break for hedge funds and private equity companies.
Now, there is a 1% excise tax on stock buybacks to make up for that lost revenue.
This new package also includes an $80 billion investment in the International Revenue Service to bolster its efforts to rein in tax evasion.
It’s hard to know exactly what all these give and takes will mean in the midterm elections. Before this compromise, it was bleak for Democrats. But can they now see light at the end of the midterm tunnel?