Manchin and Schumer Announce Reconciliation Deal

Sen. Joe Manchin (D-WV) and Senate Majority Leader Chuck Schumer (D-NY) announced Wednesday that they had reached an agreement to revive a slimmed down version of the ‘Build Back Better Act’ that Manchin had rejected in December 2021. Perhaps most surprisingly, the revived deal includes climate change expenditures and tax increases that Manchin had claimed he had ruled out earlier this month following months of negotiations between him and Schumer. Any revised deal had been expected only to include an extension of Obamacare health care plan subsidies and a drug pricing negotiation package aimed at reducing the cost of prescription drugs.

The deal now includes a minimum tax rate on corporations of 15% of their book profit, preventing them from using depreciation expenses to reduce their tax rate below 15%. It also eliminates the carried interest loophole.

Perhaps the most controversial part of the bill is the $80 billion given to the IRS over the next 10 years, the bulk of which will be used for increased audits in an attempt to raise revenue for the federal government. Proponents of the plan, such as Sen. Ron Wyden (D-OR), claim the increased audits will catch high income tax cheats and will pay for themself. Opponents, including most Republicans, claims the IRS will target ordinary taxpayers to raise the revenue, especially the self-employed. The bill’s language does not currently limit the IRS’s increased enforcement budget to only audits on high income/high net worth individuals or corporations.

This plan will need the support of all 50 Democratic senators to pass the Senate. Moderate Democrat Kyrsten Sinema of Arizona has not yet announced her position.

 

Kentucky Floods Kill at Least 26

Heavy rains in Kentucky this past week caused massive flooding that has claimed the lives of at least 26 people, according to Kentucky Governor Andy Beshear (D). As many as 37 remain unaccounted for as rescuers attempt to access affected areas, efforts that have been hampered by damage to roads and bridges.

A dozen shelters were opened for flood victims, with least 388 residents taking refuge there Sunday.

The flooding has swept homes off their foundations and sweeping debris for hundreds of yards.

More rain is expected for many of the affected areas in Kentucky, further threatening residents already struggling to recover.

Map showing rainfall totals in Kentucky from 7/25

through 7/29. The heaviest rainfall totals, in red, were 

in eastern Kentucky.

US Enters Recession after Two Consecutive Quarters of Negative GDP Growth

The US economy officially entered recession in the second quarter of 2022, after official estimates showed the GDP, a measure of total economic output, declining at 0.9% rate in Q2. It follows a decline of 1.6% in the first quarter of the year.

The Biden administration downplayed the decline and refused to say that the US was in recession, touting the low unemployment rate (3.6%) and strong consumer spending. While two consecutive quarters of economic decline is the typical definition of a recession, the National Bureau of Economic Research also makes their own call whether the US economy is in recession.

 

Supreme Court Overturns Roe v. Wade

The Supreme Court issued their decision in Dobbs v. Jackson Women’s Health Organization last Friday, overturning the previous Supreme Court decisions Roe v. Wade and Planned Parenthood v. Casey, allowing states to ban abortions within their jurisdictions. The previous decisions that were overturned had found that a constitutional right to abortion had existed and prevented states from banning it.

The court’s decision in Dobbs was praised by pro-life, anti-abortion rights activists who had long sought to overturn the 1973 Roe v. Wade ruling. Up to 26 states are expected to ban abortions or greatly limit the ability to obtain one.

Pro-choice, pro-abortion rights activists opposed the decision, calling it a threat to women’s rights and promising federal action to preserve abortion rights, such as access to abortion pills and possibly allowing abortions on federal lands in states that ban it.

President Biden has criticized the ruling and has said that he supports codifying a nationwide right to abortion into federal law. Such legislation would require creating an exception to the filibuster rule in the Senate or scrapping the filibuster altogether. Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), while supportive of abortion rights, are opposed to such a move.

Some opponents of the Dobbs ruling are calling for changes to the Supreme Court, with some going so far as to call it ‘illegitimate’ and calling for new justices to be added to the court to balance out its conservative lean. Three of the five justices who voted to overturn Roe were appointed by former President Trump during his term.

 

Democrats Attempt Last Push for Build Back Better Revival

Democrats are working to pass a slimmed down version of the Build Back Better bill that failed to pass last year, with Senate Majority Leader Chuck Schumer (D-NY) negotiating with Sen. Joe Manchin (D-WV), whose opposition sunk the bill last time, to agree to a smaller package focused on tax increases, deficit reduction, and climate spending, among other proposals.

Manchin and Schumer are reportedly close to a deal to allow the federal government to negotiate drug prices and limit price increases to the inflation rate. Such a proposal will need to be approved by the Senate parliamentarian to include in the reconciliation bill, which will allow Democrats to pass the bill by a simple majority and without any Republican support.

Any package will need the support of all Democrats in the Senate, including moderate Sen. Kyrsten Sinema of Arizona, who has signaled her opposition in the past to raising certain taxes.

Senate Minority Leader (R-KY) sent a tweet Thursday saying that Republicans will not help move forward a bill aimed at competing with China so long as Democrats are pursuing the reconciliation package.