WASHINGTON – Republicans see inflation, taxes and immigration as Democratic weak spots worth attacking, and two opposition senators as prime targets, in the upcoming battle over an economic package the Democrats want to push through the Senate.
The measure embodies some of the top environment, energy, health care and tax policy aspirations that President Joe Biden and party leaders want to enact as voters start tuning in to this fall's congressional elections. The GOP would like to derail or weaken the measure, or at least force Democrats to take votes that would be painful to defend in reelection campaigns.
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Republicans are already aiming fire at Sen. Joe Manchin, D-W.Va., who crafted the measure with Senate Majority Leader Chuck Schumer, D-N.Y., and unexpectedly pumped life into an effort most Democrats considered moribund. Manchin is a conservative Democrat from a deep red state who has scuttled his party's priorities before, and Republicans have savaged him in recent days, an unsubtle signal that they'll be coming for him should he seek reelection in 2024.
“He made a terrible deal," Senate Minority Leader Mitch McConnell, R-Ky., told reporters this week. “How he can defend this from a West Virginia point of view, or think of it as a centrist type of agreement, is astonishing. This is an agreement only Bernie Sanders would love.”
Even Sen. Shelley Moore Capito, R-W.Va., who has a strong relationship with Manchin and seldom clashes with him publicly, lambasted the legislation for imposing a minimum tax on huge, profitable corporations that she said would hinder investments. “Like many West Virginians, I’m concerned that this tax increase will delay closing the digital divide" in rural communities, she said.
Republicans are taking a softer approach with Sen. Kyrsten Sinema, D-Ariz., who has been coy about the legislation and has shown concerns about tax increases. She's her party's biggest question mark on this bill in the 50-50 chamber, where all Republicans seem certain to vote “no,” and she's held several discussions with GOP senators during votes this week.
Sinema has opposed past proposals to raise taxes on wealthy equity firm executives, which this time would raise around $14 billion of this legislation's $739 billion in revenue. She met with Arizona manufacturers who oppose boosting the corporate minimum tax and thanked her afterward in a tweet for her “thoughtful approach & willingness to listen to AZ job creators."
“I don't know what she thinks," Idaho Sen. Mike Crapo, top Republican on the Senate Finance Committee, told reporters. “'We are making our case' is the best we can say."
The 10-year measure includes hundreds of billions in spending and tax breaks to encourage alternative energy production and to bolster fossil fuels with steps like tax breaks for technology that reduces carbon emissions. There’s also money to help people buy private health coverage, and provisions giving Medicare the power to negotiate prices on some drugs with pharmaceutical makers.
The bill “will lower costs, fight inflation, and secure historic wins in the fight against climate change," Schumer said.
The GOP seems certain to try stripping or toning down the corporate minimum tax and language raising taxes on wealthy equity firm executives as well, and has hopes of winning over Sinema as the decisive vote for that. After she opposed Democrats' proposed tax rate increases last year on corporations and high earners, they switched to a corporate minimum tax that she supported, but it is uncertain if she will do so now.
Republicans could fashion amendments aimed at particular Democratic senators — such as one exempting coal producers from certain taxes in a play for Manchin.
To buttress its argument, the GOP released an analysis by the nonpartisan Joint Committee on Taxation that Republicans said showed tax boosts for people earning below $400,000. That would violate Biden's pledge to not boost levies on that income group.
“Ordinary Americans would bear a substantial part of the burden of this tax increase," said No. 2 Senate GOP leader John Thune of South Dakota.
Democrats dismissed that attack, noting that the study omitted the effect of the bill's health care and energy tax breaks for individuals. It also counted lower salaries, stock prices and dividends it believes will occur as part of the effect the bill would have on people.
Overall, the Congressional Budget Office said Wednesday the measure could trim federal deficits by around $305 billion. But $204 billion of that would come from improving IRS tax collections, which will be real if it occurs but the nonpartisan agency does not count in its formal scoring of the bill's impact.
In a bow to dominant voter concerns about gasoline prices and overall consumer costs, Democrats call the bill the Inflation Reduction Act. Yet its impact on the nation's worst bout with inflation in four decades seems likely to be limited.
The University of Pennsylvania's Penn Wharton Budget Model estimated the measure would “very slightly increase inflation until 2024 and decrease inflation thereafter," though the changes would be “statistically indistinguishable from zero." McConnell said that study showed the Democrats' bill would “actually increase inflation in the short term and do nothing for inflation in the long term."
Democrats have cited a Moody's Analytics report saying the bill would “nudge the economy and inflation in the right direction." And they distributed a letter by five former Treasury secretaries, including Henry Paulson Jr., who served under GOP President George W. Bush, saying the measure would strengthen the economy, “lower costs for families and fight inflation."
That battlefield suggests Republican amendments are likely on the subject of prices. One could imagine a proposal preventing the bill from taking effect unless inflation, or gasoline prices, fall to certain levels. Democratic leaders are trying this week to unify rank-and-file senators against such plans.
The GOP could also try to renew immigration restrictions imposed by President Donald Trump that cited the pandemic as a reason to exclude migrants, an issue that sharply divides Democrats. And they might seek to delete tax credits aimed at encouraging alternative energy and that favor companies that pay union-scale wages.
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AP reporter Seung Min Kim contributed to this report.