As we reported earlier, word broke this afternoon that Sen. Joe Manchin (D-WV) had reached a deal with Senate Majority Leader Chuck Schumer on a climate, health, and tax package deal, despite Manchin’s known aversion to spending more because of inflation.

While this deal is far scaled down from the Build Back Better effort that Joe Biden had put forth, it’s still a big chunk of spending and I’m not sure how Manchin justifies it in his mind. It sounds like he’s buffaloing himself. “The Inflation Reduction Act of 2022 will address record inflation by paying down our national debt, lowering energy costs and lowering healthcare costs,” he claimed.

From The Hill:

It would invest $369 billion in energy climate programs over the next 10 years and $300 billion to reduce the deficit. It would be added to legislation to lower prescription drug prices and extend expiring health care subsidies.

“After many months of negotiations, we have finalized legislative text that will invest approximately $300 billion in deficit reduction and $369.75 billion in energy security and climate change programs over the next ten years,” Schumer and Manchin announced in a joint statement. “The investments will be fully paid for by closing tax loopholes on wealthy individuals and corporations.” [….]

It would raise $739 billion in new revenue through a variety of proposals, according to a one-page summary provided by the negotiators: $313 billion through a 15-percent corporate minimum tax, $288 billion from empowering Medicare to negotiate lower drug prices, $124 billion from strong IRS enforcement of tax law and $14 billion from closing the carried interest loophole for money managers.

Let’s remember “invest” equals “spend” — the very thing he said we shouldn’t be doing because of the high inflation.

We’re already at the highest inflation in more than 40 years, and this news comes right on top of the Federal Reserve deciding to hike interest rates by 75 basis points. The news likely to come tomorrow that we are officially in a recession, with two consecutive quarters of negative GDP.

So, apart from calling the bill “The Inflation Reduction Act,” it sounds a lot like Manchin may have just caved big time.

Biden is already celebrating it.

But this may not be a done deal yet.

Sen. Kyrsten Sinema (D-AZ) is not yet on board with this, and the deal raises issues that she’s had a problem with in the past. It’s a little astonishing that they didn’t get her on board before acting like this was a done deal.

To name one red flag out the gate, Manchin statement mentions carried interest. If that’s in there, you could lose Sinema (though would be a near-certain career ender for her as a D). Manchin also dumps on SALT, which could mean the House SALT folks are an issue.

— Benjy Sarlin (@BenjySarlin) July 27, 2022

They could probably whip the House SALT folks into line, but Sinema has had concerns with some of what is being proposed here.

An intriguing twist in this Schumer/Manchin deal: It limits carried interest to the tune of $14 billion.

Last year, @SenatorSinema made clear to Democratic leaders she doesn't want to touch carried interest.

Sinema's office, for now, is NOT commenting.https://t.co/5NSMhhEhrv

— Sahil Kapur (@sahilkapur) July 27, 2022

There's absolutely no way Sinema is on board with ending the carried interest loophole, barring some profound change in her personality on the level of divine intervention, so this just seems like a nice diary entry from Manchin about things he likes. https://t.co/Lze69n1CdX

— Alex Sammon (@alex_sammon) July 27, 2022

They may be hoping with the announcement, with Manchin all in, now the pressure will be on her and any other potential stragglers to get in line and that she’ll fall in line.

But so far, she’s not talking yet, which may mean there’s still some hope that she wouldn’t cave as well.

A spokeswoman for Kyrsten Sinema said the senator hasn't determined yet whether she could support the Schumer-Manchin deal on climate change, tax and other provisions.

"Senator Sinema will need to review the text. We don’t have comment at this time."

— Laura Litvan (@LauraLitvan) July 27, 2022

Her office has said that she will need to review the text before she can comment.

Republicans are also disturbed because they just voted for the chips and science bill, which they would have blocked if they knew that a reconciliation bill like this was coming down the pike. Sen. John Cornyn (R-TX) said this would devastate Americans.

“Senate Democrats can change the name of Build Back Broke as many times as they want, it won’t be any less devastating to American families and small businesses,” Cornyn said. “Raising taxes on job creators, crushing energy producers with new regulations, and stifling innovators looking for new cures will only make this recession worse, not better.”

So, we’ll have to wait and see what the color of the smoke is out of the Sinema chimney. But let’s hope it’s black–because this would be a killer when we’re already on the brink of a recession.