Former Treasury Secretary and Obama economic adviser Larry Summers defended Democrats’ new economic package in a discussion with Sen. Joe Manchin (D-WV) days before Manchin reversed course and agreed to the bill, according to a report from The Washington Post.
If it passes, the new spending package would be the largest legislative climate investment the U.S. has ever made at $369 billion. The bill would also raise taxes on billion-dollar businesses and extend Affordable Care Act subsidies.
Summers was reportedly beckoned by Democratic senators earlier this week to assure Manchin that the spending package would not result in more inflation.
“The two men spoke this week, and Manchin listened as Summers talked in detail about why Democrats’ proposed economic package — including its energy provisions — would not lead to higher prices,” the Post reported.
Summers, who has repeatedly warned the Biden administration about inflation over the past year, told Politico last week that he disagreed with Manchin’s concern about Democrats’ tax increases adding to inflation.
“I think the theory that all tax increases are inflationary is not a plausible or reasonable economic theory,” Summers said on Politico’s “Playbook Deep Dive” podcast. “To suggest that it is inflationary is, I think, just wrong in the same way that it was just wrong to suggest that in the short run, investing in infrastructure would somehow be deflationary.”
On Wednesday, Manchin appeared convinced that the bill, dubbed the “Inflation Reduction Act of 2022,” would not add to the country’s rising prices. He claimed that reconciling with Democrats on the package would help the country fight inflation.
Manchin’s reversal comes after he shot down Democrat attempts at pushing through Biden’s agenda in recent weeks, and reportedly told Democratic leaders he would “unequivocally” refuse to support legislation related to climate change and tax increases.
“We must be honest about the economic reality America now faces if we want to avoid fanning the flames of inflation,” Manchin said in a statement Wednesday. “At its core, the purpose of reconciliation is to get our economic and financial house in order. Contrary to foolish talk otherwise, America cannot spend its way out of debt or out of inflation.”
Manchin’s agreement to the package he touts as an inflation-fighting bill came a day before the U.S. Bureau of Economic Analysis released GDP numbers for the last quarter, showing that the country is in a recession.
Democrats will use the budget reconciliation process to bypass the Senate filibuster and advance the bill along party lines, potentially giving the party a much-needed legislative victory before a midterm election where Democrats are expected to face a “red wave.”
The bill still needs to leap at least one hurdle before it stands a chance at reaching President Joe Biden’s desk as Democrats need to convince Sen. Kyrsten Sinema (D-AZ), who has voiced opposition to elements of Biden’s spending agenda. Axios reported that hours after Manchin’s surprise reversal, a spokesperson for Sinema said the Arizona senator did not have a comment on the bill because “she will need to review the text.”