Senator Manchin crushes Biden's hopes for revival of economic agenda

WASHINGTON (BLOOMBERG) - Senator Joe Manchin told Democratic leaders on Thursday (July 14) he would not support new spending on climate measures or tax increases, delivering a colossal blow to President Joe Biden's ambitious economic agenda.

The West Virginia Democrat's decision, confirmed by three people familiar with the discussions, comes after more than a year of negotiations and just months before midterm congressional elections that will determine control of both chambers.

Mr Manchin told Majority Leader Chuck Schumer he is only willing to support legislation to lower prescription drug prices and extend enhanced Affordable Care Act subsidies, the people said.

That leaves Democrats in a position of accepting a much skinnier package shorn of nearly all of their long-term ambitions from a year ago, or getting nothing.

Mr Manchin's vote is pivotal in the evenly divided Senate, where Democrats need a united caucus to pass the economic package by simple majority under special budget reconciliation rules.

His decision came after the June inflation report this week showing 9.1 per cent annual inflation - the worst in more than 40 years - had him telling reporters he was more cautious than ever. He also assailed Washington leaders for failing to heed concerns from him and others about inflation for more than a year.

"I was talking about inflation before it was even thought about," Mr Manchin told reporters. "And now I'm more concerned than ever before."

Asked to confirm late Thursday night whether Mr Manchin had told Democratic leaders that he would not support tax increases or added climate change expenditures, Mr Manchin's spokesman only responded that political leaders must adjust to "economic realities" that can only further boost consumer prices.

"Political headlines are of no value to the millions of Americans struggling to afford groceries and (petrol) as inflation soars to 9.1 per cent," said Mr Manchin's spokesman Sam Runyon. "Senator Manchin believes it's time for leaders to put political agendas aside, re-evaluate and adjust to the economic realities the country faces to avoid taking steps that add fuel to the inflation fire."

A number of Senate Democrats have said it is critical to get a bill this month that would lower inflation, with prescription drug prices both a politically popular item and one on which they are unified.

Yet the loss of plans to tax wealthy people and corporations, extend the solvency of Medicare, and other provisions to reduce the deficit and tackle carbon emissions while bolstering renewable energy, will be a bitter pill for many Democrats on Capitol Hill and at the White House.

Just days ago, Mr Manchin and Mr Schumer were negotiating over hundreds of billions in spending on measures designed to fight climate change, including tax breaks for renewable energy, electric vehicles and other clean power sources.

Progress had bogged down, including the climate portion and a plan to increase taxes on the wealthy and corporations, before a self-imposed deadline set Mr Schumer to vote on the measure before the August recess.

Mr Manchin's refusal was reported earlier by the Washington Post.

The move comes seven months after Mr Manchin killed Mr Biden's plans for a grand economic bill totalling some US$2 trillion (S$2.8 trillion) and including many progressive priorities.

The death of the climate package, which at one point contained some a historic US$555 billion on clean power, electric vehicles and resilience to global warming, would represent a major setback in the Biden administration's efforts to confront global warming emissions.

The president pledged last year that the United States would cut its greenhouse gas emissions 50-52 per cent from 2005 levels by the end of the decade.

As much as US$320 billion in new and expanded tax credits for wind and solar power, nuclear plants, biofuels, advanced energy manufacturing and electric vehicles, would have cut global warming causing emissions by nearly 40 per cent by 2030, according to Democratic estimates.

Recently, Mr Schumer offered to Mr Manchin a US$375 billion package of energy and climate provisions as well as support for permitting changes sought by Mr Manchin but Mr Manchin said no.

Environmental groups urged Mr Manchin to reconsider.

"There truly aren't words for how appalled, outraged, and disappointed we are," said Ms Tiernan Sittenfeld, a senior vice-president with the League of Conservation Voters.

"Senator Manchin had every opportunity to stand up for climate, jobs and justice, and save families money when they need it most, but instead he is choosing to stand with polluters," she said.

The White House declined to comment. Representatives of Mr Schumer did not immediately respond to requests for comment.

In addition to throwing much of the Biden administration's climate and economic legislative agenda into disarray, US cooperation with an international agreement to levy a global minimum tax on companies appears to be in limbo.

Democrats planned to use the major tax and spending package to bring the US into alignment on one of the two major parts of that agreement, negotiated by the Treasury Department and representatives from over 130 countries.

The global talks remain ongoing, but a de facto US withdrawal could throw sand in the gears of what appeared to be a unique international consensus.

Democrats had also promised to increase funding for the Internal Revenue Service, by US$80 billion over 10 years, as a way to help bring in more revenue to balance with costs for their plan.

Mr Manchin has voiced support for that in the past, though it is unclear what the status of that will be now that the broader package appears to have come apart.