Jul 27, 2022 - Politics & Policy

Washington waits for Sinema's verdict

Photo illustration of Sen. Joe Manchin and Sen. Kyrsten Sinema looking at each other with the earth in the background

Photo illustration: Sarah Grillo/Axios. Photos: Stefani Reynolds-Pool, Alex Edelman/AFP via Getty Images

Sen. Kyrsten Sinema (D-Ariz.) has spent the summer out of the spotlight. That's now going to change.

Why it matters: Solving the Democrats' tax and spending puzzle in the Senate — where President Biden's agenda has stalled for over a year — has always involved two key pieces: Sinema and Sen. Joe Manchin (D-W.Va.).

  • But as they hammered out the details of their $740 billion reconciliation package — which they rechristened the "Inflation Reduction Act of 2022" — Manchin and Senate Majority Leader Chuck Schumer didn't include Sinema in their secret talks.
  • That decision may not be fatal to winning her support. But much of Washington is flying blind on whether she'll back spending $369 billion on climate and another $64 billion on health care by raising the corporate minimum tax rate to 15%.

"We do not have a comment, as she will need to review the text," a Sinema spokesperson said in the hours after news broke of Manchin's stunning reversal.

  • One of the first signs Sinema wasn't consulted on the Schumer-Manchin agreement was that it included some $14 billion in new revenue from taxing carried interest, which she has indicated she opposes.

Between the lines: Sinema was on record last December supporting the 15% corporate tax rate, which will raise an estimated $313 billion to fund the Democrats' climate priorities.

  • But that was before inflation took off and the constant chatter about a potential recession subsumed Washington.
  • Since Manchin initially killed Biden's Build Back Better agenda in December of 2021, corporate America — which is close to Sinema — didn't see a need to take her temperature on taxes.
  • And throughout the spring, Sinema shared and encouraged the view that Build Back Better — and any corporate tax increases — was dead.

The big picture: While Manchin's colleagues were fed up with him for killing every attempt so far at passing a major, Democrats-only spending bill, the party can taste a potential legislative victory.

  • "The good news here is that it is Sen. Manchin who is announcing a deal. Not that they're close to a deal, not that there are some parts to a deal," a giddy Sen. Elizabeth Warren (D-Mass.) told reporters. "That makes me very hopeful."

Driving the news: The revival of Build Back Better comes at a crucial time for Democrats, who have been desperate to notch a win on these priorities for over a year now.

  • If they can successfully get this legislation over the finish line, it'll be a massive victory they can campaign on before November — serving as a possible distraction from the economy and rising inflation.
  • Schumer said he plans to submit the bill text to the Senate parliamentarian Wednesday night to begin reviewing whether it passes the "Byrd rule" for what can be included in the Senate's budget reconciliation process.

The intrigue: The timing of this announcement, which came just hours after the Senate passed a $280 billion China competition and chips manufacturing bill, shows how Schumer and Manchin turned the tables on Minority Leader Mitch McConnell.

  • Remember: McConnell threatened to tank "CHIPS-plus" if Democrats pursued a robust reconciliation deal.
  • The bill ultimately passed on Wednesday with huge GOP support after most members thought a sweeping reconciliation bill was doomed, paving the way for Democrats to push ahead with a more ambitious package.
  • "You think we got sucker-punched?" Sen. John Cornyn (R-Texas) asked Axios' Andrew Solender, adding: "I don’t think it’s a done deal yet."
  • "I think they might want to count their chickens before they start popping champagne corks," he said.

Schumer is also taking a huge risk by doing this now, as it jeopardizes House passage of the China bill.

  • A huge chunk of the House GOP conference, including leadership, was already planning on voting against the measure. Now, many other House Republicans may also revolt given the Senate leader's sleight-of-hand approach.
  • House Speaker Nancy Pelosi will have to get nearly every single House Democrat on board to ensure it passes, corralling progressives who have suggested they oppose some provisions that would provide a boost to corporations.
  • And while blindsided by the surprise agreement, Republicans are now preparing to hit Democrats for raising taxes as the country potentially heads into a recession.

Behind the scenes: The majority of Senate Democrats were stunned upon learning of the news Wednesday evening, including Majority Whip Dick Durbin (D-Ill.). Many were informed of the deal and its contents by reporters.

  • They later met virtually with Schumer to discuss the details and will meet in person for a full, caucus-wide meeting Thursday morning.

What they're saying: "I want to thank Sen. Schumer and Sen. Manchin for the extraordinary effort that it took to reach this result," Biden said in a statement. "This is the action the American people have been waiting for."

By the numbers

Total price tag: $739 billion.

  • $313 billion: 15% corporate minimum tax
  • $288 billion: prescription drug pricing reform
  • $124 billion: IRS tax enforcement
  • $14 billion: carried interest loophole
  • $369 billion: energy security and climate change
  • $64 billion: Affordable Care Act extension

Total deficit reduction: More than $300 billion

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