How one senator ensured the wealthy would be 'essentially unaffected' by spending bill: ex-treasury adviser

19 August 2022

On Tuesday, August 16, President Joe Biden signed the Inflation Reduction Act of 2022 into law. Getting the massive $750 billion climate change/economic/health care package past the finish line was not easy; no Republicans voted for it in the U.S. Senate, and getting Sen. Joe Manchin of West Virginia and Sen. Kyrsten Sinema of Arizona on board took a lot of maneuvering. But ultimately, the bill made it to Biden’s desk in the White House Oval office for approval — much to the chagrin of Senate Minority Leader Mitch McConnell and other GOP senators who were disappointed that Manchin and Sinema supported it.

Some progressives have been complaining that Manchin watered the bill down and that Sinema watered it down even more, arguing that Sinema, in 2024, deserves a Democratic primary challenge from the left — which could be risky in Arizona, a swing state that isn’t the bastion of Goldwater conservatism it once was but is still far from deep blue like Massachusetts or California. Many Democratic strategists, meanwhile, view the Inflation Reduction Act as something that incumbent Democrats can use to their advantage in the 2022 midterms.

New York City-based asset manager Steven Rattner, who served as counselor to the secretary of the treasury under President Barack Obama and often appears as an economic analyst on MSNBC’s “Morning Joe,” is glad that the Inflation Reduction Act was signed into law. But in an op-ed published by the New York Times on August 19, Rattner argues that it essentially leaves the United States’ super-rich unscathed.

“Early in my deal-making career, a Wall Street veteran counseled me to ‘never let the perfect be the enemy of the good,’” Rattner explains. “The Senate majority leader, Chuck Schumer, may have had similar advice in his head as he relentlessly corralled his 49 Democratic colleagues into passing the Inflation Reduction Act, which emerged as not just a good bill, but a great bill, as President Biden described it when he signed it on Tuesday. Yet without trouble from one intransigent Democratic senator and a significant political misjudgment by the Biden Administration, we would have had an even more consequential package.”

Rattner continues, “The obstinate Democrat was, in the end, not Joe Manchin of West Virginia — who fought hard for his beliefs and his constituents in the course of signing on — but Kyrsten Sinema, the Arizona freshman who prides herself on a quirky individualism seemingly patterned on one of her predecessors, the iconoclastic Republican John McCain.… While many of Mr. Manchin’s changes improved the bill — such as by turning it from deficit raising to deficit lowering — it was solely Ms. Sinema’s demands that drastically weakened the tax portion of the resulting legislation.”

The Inflation Reduction Act, Rattner notes, contains “no increase in the egregiously low corporate income tax rate, no reversal in overly generous deductions for businesses” and “no rise in income tax or capital gains rates paid by the wealthy.”

“Wealthy individuals escaped essentially unaffected by the new legislation,” Rattner observes. “Ms. Sinema even objected to closing the indefensible carried interest loophole, through which many private equity executives and some hedge fund managers pay only a 23.8 percent tax rate on gains achieved on their share of investors’ capital…. On the expenditure side of the ledger, we lost the chance to enact many other worthy initiatives, like continuation of the expanded child tax credit; tuition-free community college; parental leave and an augmented earned-income tax credit.”

In 2022, Biden finds himself in a similar position to Obama in 2010: Democrats still have a majority in the U.S. House of Representatives, but may not have it much longer. And Rattner warns that if Republicans retake the House in the 2022 midterms, Biden won’t have a chance to get any significant economic reforms through Congress in 2023.

“With Mr. Biden’s popularity at a low ebb and Democrats expected to lose control of at least the House in November, we’ve blown the chance for even greater transformational legislation,” Rattner laments. “It was a missed opportunity of extraordinary scale.”

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