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Reconciliation bill includes nearly $80 billion for IRS funding

Charles P. Rettig, commissioner of the Internal Revenue Service, testifies during the Senate Finance Committee hearing titled The IRS Fiscal Year 2022 Budget, in Dirksen Senate Office Building in Washington, DC, June 8, 2021.

Tom-Williams | Pool | Reuters

Senate Democrats on Sunday passed their climate, health and tax package, including nearly $80 billion in funding for the IRS.

Part of President Joe Biden’s agenda, the Inflation Reduction Act allocates $79.6 billion to the agency over the next 10 years. More than half of the money is meant for enforcement, with the IRS aiming to collect more from corporate and high-net-worth tax dodgers.

The remainder of the funding is earmarked for operations, taxpayer services, technology, development of a direct free e-file system and more. Collectively, those improvements are projected to bring in $203.7 billion in revenue from 2022 to 2031, according to recent estimates from the Congressional Budget Office.

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IRS audits have plunged over the past decade, with the biggest declines among the wealthy, according to a May 2022 report from the Government Accountability Office.

The audit rate for Americans making $5 million or more dropped to about 2% in 2019, compared to 16% in 2010, the report found. The agency said it is working to improve these numbers.

However, if the Inflation Reduction Act is approved by the House and signed into law, it will take time to phase in the added IRS funding, explained Garrett Watson, a senior policy analyst at the Tax Foundation. The Congressional Budget Office only estimates about $3 billion of the $203.7 billion in revenue for 2023.

“We didn’t get to this state with the agency overnight, and it will take longer than overnight to go in the right direction,” he said.

IRS: We won’t boost ‘audit scrutiny’ on the middle class

While advocates applaud the enhanced IRS budget, opponents argue the beefed-up enforcement may affect more than wealthy Americans, violating Biden’s $400,000 pledge.

“My colleagues claim this massive funding boost will allow the IRS to go after millionaires, billionaires and so-called rich ‘tax cheats,’ but the reality is a significant portion raised from their IRS funding bloat would come from taxpayers with income below $400,000, ” Sen. Mike Crapo, R-Idaho, ranking member of the Senate Finance Committee said in a statement.

IRS Commissioner Charles Rettig said the $80 billion in funding would not increase audits of households making less than $400,000 per year.

“The resources in the reconciliation package will get us back to historical norms in areas of challenge for the agency — large corporate and global high-net-worth taxpayers,” he wrote in a letter to the Senate.

“These resources are absolutely not about increasing audit scrutiny on small businesses or middle-income Americans,” he added.

More than two-thirds of registered voters support increasing the IRS budget to strengthen tax enforcement on high-income taxpayers, according to a 2021 poll from the University of Maryland.

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The market’s big winners and losers in climate, health and tax bill

US Senate Majority Leader Chuck Schumer (D-NY) walks outside the US Capitol in Washington, US August 2, 2022.

Jonathan Ernst | Reuters

Want to know what the Inflation Reduction Act means for the market’s biggest companies, as well as for your wallet? When it comes to politics, you always have to follow the money – and remember that the devil is in the details.

The Senate on Aug. 7 passed the bill that’s designed to fight climate change, make significant tax changes, trim the federal deficit, cut drug prices for Medicare recipients and extend expanded health insurance subsidies under the Affordable Care Act. As it moves to the House of Representatives, the roster of the winners and losers under the bill is coming into sharper focus even before it goes to President Joe Biden.

For both winners and losers, the impact is more modest than you would think, given the sheer size of numbers being bandied about. That’s because of details like strings attached to some of the new or extended tax breaks, or the schedule for implementing Medicare’s negotiations with big pharmaceutical companies over drug prices.

Changes will be more gradual than many headlines imply.

Beginning with the biggest-dollar provisions of the ten-year package of spending and tax cuts, these are some of the effects American corporations and citizens will see from the law. The two biggest changes are the bill’s deficit reducers – just two provisions of the law that account for 80% of its $300 billion in deficit reduction, according to Moody’s Analytics.

Losers: Big tax-avoiding corporations

Members of the Patriotic Millionaires hold a federal tax filing day protest outside the apartment of Amazon founder Jeff Bezos, to demand he pay his fair share of taxes, in New York City, May 17, 2021.

Brendan McDermid | Reuters

The biggest provision by far of the package is the $313 billion Moody’s Analytics says will be raised over 10 years by imposing a 15% minimum tax on corporate profits for businesses that earn at least $1 billion a year.

The law also cracks down on the practice of letting companies announce one set of profit figures to investors, while using another set of numbers that include tax loopholes to show the government. This happens by applying the 15% rate to the “book rate” profits companies disclose to Wall Street, says the liberal-leaning Roosevelt Institute.

The institute says 55 big companies paid no net federal taxes in 2020, including names like Nike, Salesforce.com, Archer Daniels Midland and Fedex. They would have owed $8.5 billion in 2020 at the standard corporate tax rate of 21%, the institute said.

A report by the Center for American Progress says 19 companies in the Fortune 100 alone paid little or no tax in 2021. Among companies that paid 6% or less, as calculated by liberal-leaning think tank: Amazon, Exxon Mobil, AT&T, Bank of America, and both Ford and General Motors. All of them will likely be paying more.

Losers: Drug companies (but not as much as you think)

Participants hold signs as then-Democratic US presidential candidate US Sen. Bernie Sanders (I-VT) spoke at a news conference to introduce the “Medicare for All Act of 2019” on Capitol Hill in Washington, April 10, 2019

Aaron P. Bernstein | Reuters

The government will save $288 billion by negotiating over drug prices, Moody’s says, and that’s a win for senior citizens – but some experts say the change will be more gradual and phased in than many consumers expect.

That’s because the law will only let Medicare negotiate over a few drugs in the early years of the law’s implementation. Medicare will only be able to haggle over 10 drugs in fiscal 2026, and new drugs will not be subject to negotiation for nine to 13 years after their market introduction, said Tricia Neuman, executive director of the Program on Medicare Policy at the Kaiser Family Foundation .

“Savings are exponentially smaller than under the [2019] House bill, which covered many more drugs,” Neuman said. That bill would have let Medicare negotiate terms with 25 top drugs initially, and expanded faster.

One win for seniors is a $2,000 annual cap on their contribution to prescription spending. Most recipients now spend less, but cancer patients can easily spend $10,000 or more, according to a 2019 study. That gives Medicare recipients certainty about drug expenses, Neuman said.

The impact on companies isn’t completely clear because it’s not known yet exactly which drugs will be the first subjected to price negotiations, Neuman said. In 2020, Medicare spent more than $1 billion on each of nearly 40 drugs. Bristol Myers Squibb’s blood-clotting treatment Eliquis ($9.9 billion), Bristol Myers Squibb’s cancer treatment Revlimid ($5.4 billion), and Johnson and Johnson’s blood-clotting drug Xarelto ($4.7 billion) top the list.

What about the spending part of the bill?

Among so-called spending in the bill is actually targeted tax cuts, which the congressional Joint Committee on Taxation calls tax expenditures. One of the three biggest ones in this package, which together account for three-fourths of the $313 billion in tax breaks, is an extension of existing health-care law.

It would extend the subsidies for health insurance under Obamacare that were increased during the Covid pandemic, keeping the benefit hikes from expiring Dec. 31.

People who buy insurance through Obamacare are among the winners. An estimated $64 billion of the package will be in the form of tax credits for people who buy health insurance on Internet exchange markets like Healthcare.gov, according to Moody’s. These credits subsidize the cost of coverage for people whose employers don’t offer benefits and who make too much to be eligible for Medicaid, and were expanded in Covid relief legislation to make policies more affordable.

The provision extends the credit for three years, adding nothing to the deficit after fiscal 2026, Moody’s says. Without it, an estimated 3.1 million Americans would have lost health care coverage, estimates the Center on Budget and Policy Priorities.

Winners: Car companies (but maybe not Tesla)

GM launched ‘EV Live,’ a free online platform that connects electric vehicle owners or consumers who have questions about zero-emissions cars and trucks with an expert who can answer them.

Courtesy: GM

The other big headlines on the “spending” side of the bill are the extension of the $7,500 consumer income tax credit for the purchase of new electric vehicles, and the addition of a new, $4,000 credit for buying a used EV. But the details of the bill make assessing short-term winners and losers complicated.

First, the bill caps the price of eligible new cars at $55,000, excluding the most popular version of Tesla’s Model 3 (as well as all Model S and X vehicles). Trucks and vans can get the credit if they cost less than $80,000. Even that’s a modest win for Tesla, which has not offered its buyers any tax credits since it used up the 200,000 credits it was allotted under existing law. Most or all vehicles from startups like Lucid Motors and Rivian are also excluded under the new bill, at least until they introduce planned cheaper models.

“The Model 3 is right on the border,” said Chris Lafakis, energy economist at Moody’s Analytics.

More crucially, the bill includes requirements for domestic manufacturing of EVs and their battery components to qualify for the extended credit. As written, the law requires that 40% of battery components be sourced from factories in the US or its free-trade agreement partners; that batteries are US made by 2029; and that Chinese components and minerals be phased out beginning in 2024.

Right now, it is not clear if any US battery plant can meet the law’s requirements. To keep the credits flowing once the law takes effect next year, the Biden administration will have to waive some provisions of the soon-to-be-approved law.

One unexpected effect of the law will be to highlight a comment Tesla CEO Elon Musk made on the EV maker’s most recent conference call, and has made before, that coming demand for EVs will make the next half-decade a great time to be an entrepreneur mining or refining the lithium that powers electric vehicle batteries. The law’s buy-American provisions will only add to those pressures.

“It is basically like minting money right now. There’s, like, software margins in lithium processing right now,” Musk said on the recent earnings call. “So I would really like to encourage, once again, entrepreneurs to enter the lithium refining business. You can’t lose.”

Winners: Utilities and homeowners

A wind farm shares space with corn fields in Latimer, Iowa, US

Jonathan Ernst | Reuters

About a third of the tax breaks in the bill — up to $113 billion — are to extend tax credits to encourage production of renewable electricity plants, which have four times as much share of the US market as they did a decade or so ago.

That’s a boon to utilities, which either build plants themselves or buy power from independent operators, Lafakis said. Utilities will also benefit from selling more power as electricity fuels more cars, trucks and appliances, thanks to tax breaks in the law.

More reliance on renewables should also benefit rate payers, since new wind-electricity plants are now much cheaper than new plants that burn coal or natural gas, according to the investment bank Lazard. In some cases, a new wind plant with existing tax subsidies can be cheaper than even continuing to run a coal plant that’s already in use, Lazard said.

Ratepayers who own their own homes may also claim tax credits for shifting more of their home appliances to using electricity, which can be powered by renewables, rather than natural gas. Since most makers of electric hot water heaters and stoves also make gas models, it’s not clear whether the law will cause any major shifts in market share.

“The clear winners are clean energy, solar and other renewables,” said Robert Haworth, senior investment strategy director at US Bank Wealth Management. “And it works hard to make sure there’s not too much disincentive for fossil fuels.”

Winners: Hedge funds (for now)

Losers: Public company shareholders

US Senator Kyrsten Sinema (D-AZ) waits for an elevator to go to the Senate floor at the US Capitol in Washington, US August 2, 2022.

Jonathan Ernst | Reuters

The last minute deal with Arizona Sen. Kyrsten Sinema to gain her vote for her made Democrats drop a plan to impose ordinary income taxes on bonuses that hedge fund and venture capital managers make, closing a loophole that lets these financiers pay lower capital-gains rates on money they never put at risk.

Instead, the plan imposes a 1% tax on stock buybacks – a corporate finance tactic companies use to increase earnings per share by reducing the number of shares outstanding with excess cash.

Proponents of the buyback tax, like Vermont Senator Bernie Sanders, argue that companies can put their cash to work investing more in plants and higher salaries. Opponents say it will hurt returns of retirement plans and pension funds.

Companies in the Standard & Poor’s 500 stock index spent $850 billion on buybacks last year.

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Congressman and Louisiana House member Buddy Leach dies

BATON ROUGE, La. (AP) — Anthony Claude “Buddy” Leach Jr., who spent a term in the US House and ran the budget committee in the Louisiana House before leading the state Democratic party, has died. He was 88.

Leach died Saturday, according to a statement by Louisiana Gov. John Bel Edwards that did not include a cause of death.

Leach was elected to the Louisiana House three times starting in 1968 before winning a term in 1978 in the US House from the state’s 4th District along the state line with Texas. The Democrat lost his reelection bid in 1980 to Buddy Roemer, who was at the time a Democrat also.

Leach would return for one term in the Louisiana House in 1983, serving as chairman of the Ways and Means Committee.

Leach unsuccessfully ran for governor in 2003 and state treasurer in 1987. His last public role was two years as chairman of the Louisiana Democratic Party starting in 2010.

Leach was born in 1934 in Vernon Parish and served in the US Army from 1956 to 1959.

Edwards said Leach was a strong leader with a big heart who generously supported his wife’s Louisiana First Foundation to help children.

“Buddy Leach dedicated his life to serving our great state. From the Louisiana Legislature to Congress to his many civic contributions he, Buddy worked to make life better for all Louisianans, ”Edwards said in a statement. “When I decided to run for governor, he was one of the first people to encourage me.”

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Biden steps out of the room and finds legacy-defining wins

WASHINGTON (AP) — Over five decades in Washington, Joe Biden knew that the way to influence was to be in the room where it happens. But in the second year of his presidency, some of Biden’s most striking, legacy-defining legislative victories came about by staying out of it.

A summer lawmaking blitz has sent bipartisan bills addressing gun violence and boosting the nation’s high-tech manufacturing sector to Biden’s desk, and the president is now on the cusp of securing what he called the “final piece” of his economic agenda with the sudden resurrection of a Democrats-only climate and prescription drug deal. And in a counterintuitive turn for the president who has long promoted his decades of Capitol Hill experience, Biden’s aides chalk up his victories to the fact that he’s been publicly playing the role of cheerleader rather than legislative quarterback.

“In a 50-50 Senate, it’s just true that when the White House takes ownership over a topic, it scares off a lot of Republicans,” said Sen. Chris Murphy, D-Conn. “I think all of this is purposeful. When you step back and let Congress lead, and then apply pressure and help at the right times, it can be a much more effective strategy to get things done.”

Democrats and the White House hope the run of legislative victories, both bipartisan and not, just four months before the November elections will help resuscitate their political fortunes by showing voters what they can accomplish with even the slimmest of majorities.

Biden opened 2022 with his legislative agenda at a standstill, poll numbers on the decline and a candid admission that he had made a “mistake” in how he carried himself in the role.

“The public doesn’t want me to be the ‘President-Senator,’” he said. “They want me to be the president and let senators be senators.”

Letting the senators be senators was no easy task for Biden, whose political and personal identities are rooted in his formative years spent in that chamber. He spent 36 years as a senator from Delaware, and eight more as the Senate’s president when he was valued for his Capitol Hill relationships and insights from him as Barack Obama’s vice president.

As Biden took a step back, he left it to aides to do much of the direct negotiating. His legislative strategy, instead, focused more on using his role as president to provide strategic jolts of urgency for his agenda both with lawmakers and voters.

In the estimation of many of his aides and advisers, leaving the Senate behind was key to his subsequent success. The heightened expectations for Democrats, who hold precarious majorities in Congress but nonetheless have unified control of Washington, were dragging Biden down among his supporters of him who wanted more ambitious action.

The sometimes unsavory horse-trading required to win consensus often put the president deep in the weeds and short on inspiration. And the dramatic negotiating breakdowns on the way to an ultimate deal proved to be all the more tantalizing because Biden himself was a party to the talks.

In the spring of 2021, Biden made a big show of negotiating directly with Sen. Shelley Moore Capito, RW.Va., on an infrastructure bill, only to have the talks collapse over the scope of the package and how to finance it. At the same time, a separate bipartisan group had been quietly meeting on its own, discussing how to overhaul the nation’s transportation, water and broadband systems. After the White House gave initial approval and then settled the final details with senators, that became the version that was shepherded into law.

The president next tried to strike a deal on a sweeping social spending and climate package with Sen. Joe Manchin, going as far as inviting the West Virginia lawmaker to his home in Wilmington, Delawareuntil the conservative Democrat abruptly pulled the plug on the talks in a Fox News interview. Manchin would later pick up the negotiations again, this time with just Senate Majority Leader Chuck Schumer, DN.Y., and the two would eventually reach an agreement that is now on the verge of Senate approval after more than a year of legislative wrangling.

In late 2021, White House aides persuaded the president to clamor up about his conversations with the Hill, as part of a deliberate shift to move negotiations on his legislative agenda out of the public eye. The West Wing, once swift with the news that Biden had called this lawmaker or invited that caucus to the White House for a meeting, kept silent.

The new approach drew criticism from the press, but the White House wagered that the public was not invested in the details and would reward the outcomes.

Biden and his team “have been using the bully pulpit and closely working with Congress to fight for policies that lower costs for families and fight inflation, strengthen our competitiveness versus China, act against gun violence” and help veterans, said White House spokesman Andrew Bates . “He also directed his Cabinet, senior staff and legislative team to constantly engage with key lawmakers as we work together to achieve what could soon be the most productive legislative record of any president” since Lyndon Johnson.

Some of the shift, White House aides said, also reflected the changing dynamics of the COVID-19 pandemic, which kept Biden in Washington for most of 2021; his meetings of him with lawmakers amounted to one of the few ways to show he was working. As the pandemic eased and Biden was able to return to holding more in-person events with voters and interest groups, he was able to use those settings to drive his message directly to people.

The subtle transformation did not immediately pay dividends: Biden’s approval rating only continued to slide amid legislative inertia and soaring inflation.

Yet in time, Biden’s decision to embrace a facilitating role rather than being a negotiator in chief — which had achieved mixed success — began to pay off: the first substantive gun restrictions in nearly three decades, a measure to boost domestic production of semiconductor computer chips, and care for veterans exposed to toxic burn pits.

White House officials credit Biden’s emotional speech after the school shooting in Uvalde, Texas, with helping to galvanize lawmakers to act on gun violence — and even his push for more extensive measures than made it into the bill with giving the GOP space to reach a compromise. And they point to a steady cadence of speeches over months emphasizing the need to lower prescription drug costs or to act on climate with keeping those issues in the national conversation amid the legislative fits and starts.

In turn, both Democratic and GOP lawmakers say that Biden removing himself directly from the negotiations empowered senators to reach consensus among themselves, without the distraction of a White House that may have repeatedly pushed for something that would be unattainable with Republicans or could be viewed as compromising by some Democrats.

“The president kind of had said that we’re staying out,” Sen. Rob Portman, R-Ohio, said, referring to the gun talks earlier this year. “I think that was helpful.”

Being hands off, however, by no means meant the administration was absent.

Rather than be in the room as a gun deal was coming together, White House aides stayed by the phone, explaining how the administration would likely interpret and regulate the law that senators were drafting. Murphy spoke with White House officials every day, and when the Connecticut senator met personally with Biden in early June to offer an update, the president never gave him an ultimatum on what he was or was not willing to sign — continuing to defer to lawmakers.

At another point during the gun negotiations, rumors flew that the administration was considering barring the Pentagon from selling certain types of surplus ammunition to gun dealers, who then sold the ammunition commercially, according to two people familiar with the deliberations. But Republicans, chiefly Sen. John Cornyn, R-Texas, urged the White House to scrap those plans because it would run counter to the parameters of what the gun negotiators had discussed, said the people, who spoke on condition of anonymity to discuss details of private negotiations.

The White House eventually did so, issuing a statement to a conservative publication that no such executive order on ammunition was under consideration.

On the semiconductor package that Biden plans to sign into law Tuesday, the administration organized classified briefings for lawmakers that emphasized how China is gaining influence in the computer chip sector and the national security implications. Republicans were regularly in touch with Commerce Secretary Gina Raimondo, a Biden Cabinet official who has developed warm relationships across the aisle.

And on the Democrats’ party-line climate and health care package, Manchin has emphasized that it is impossible to craft legislation of this magnitude without White House input, although he did not deal with Biden directly until near the end, when the president called to let Manchin know the White House would support his agreement with Schumer, according to an official with knowledge of the call.

Biden also stayed out of the last-minute deliberations involving Sen. Kyrsten Sinema, D-Ariz., and she and the president did not speak even as Democrats finalized an agreement that accommodated her demands.

“In his heart, Joe is a US senator,” said Sen. Jon Tester, D-Mont., the chief Democratic author of the burn pits legislation who also helped hash out the infrastructure law last year. “So he understands allowing this to work is how you get it done.”

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In wake of floods, typical barbs at Kentucky political event

FANCY FARM, Ky. (AP) — While Kentucky Gov. Andy Beshear was consoling families displaced by historic flooding in the mountains of eastern Kentucky, Republicans at the state’s premier political event on the other side of the state were campaigning to oust him from office in 2023.

GOP candidates speaking at the Fancy Farm picnic in western Kentucky bashed the Democratic governor’s record earlier in this term, especially his handling of the COVID-19 pandemic. But they also offered support for recovery efforts that Beshear is leading in the wake of historic flooding and tornadoes.

While his challengers aimed zingers at him, Beshear spent the day meeting with families displaced by flash flooding that swamped the Appalachian region more than a week ago, killing 37. Beshear visited two state parks where some of the suddenly homeless took refuge.

“Today I’m at our state parks, spending time with our eastern Kentucky families who have been displaced from the catastrophic flooding,” Beshear posted on social media. “These Kentuckians have been through the unimaginable. My priority is being there for them.”

Last December, deadly tornadoes tore through parts of western Kentucky. The political speaking at the annual Fancy Farm picnic — the traditional start of the fall campaign in Kentucky — took place about 10 miles (16 km) from Mayfield, which took a direct hit from a tornado.

Living up to the event’s reputation for edgy attacks, Republicans wanting to unseat Beshear took aim at restrictions that the governor imposed on businesses and gatherings in response to the COVID-19 pandemic. The governor has said his actions of him saved lives at a perilous time when vaccines were not available. The state’s GOP-dominated legislature reined in the governor’s virus policymaking power in a case settled by the state’s Supreme Court.

GOP gubernatorial hopeful Ryan Quarles referred to Beshear as the “shutdown governor.”

“He shut down our economy,” said Quarles, the state’s agriculture commissioner. “I’ve shut down our ‘mom and pop’ stores. He killed countless jobs and kept the big box stores open.

“Folks, just because we lived through a global pandemic doesn’t mean that our rights, our freedoms and liberties should be tossed out the window,” he added.

In his speech, Kentucky Democratic Party Chairman Colmon Elridge came to the defense of Beshear, who consistently receives strong approval ratings from Kentuckians in polls. Elridge praised Beshear’s efforts in leading recovery efforts in tornado-ravaged western Kentucky and said he’ll do the same for flood victims in the state’s Appalachian region.

“Once again, our governor is showing through his actions how we show up in moments of devastation and embrace our fellow Kentuckian, not as Democrats or Republicans, but as Kentuckians,” Elridge said.

The governor is highlighting his management of the state’s economy in asking voters for a second term. Kentucky has posted records for job creation and investments during his term and recently posted its lowest-ever unemployment rates.

Beshear was already a committed no-show for the state’s premiere political event. The governor initially planned a visit to Israel that coincided with the Fancy Farm picnic. I canceled that trip after the massive flooding hit eastern Kentucky.

The Fancy Farm stage was dominated by Republican officeholders — reflecting the GOP’s electoral dominance. The event is a rite of passage for statewide candidates, who are tested in stump-style speeches in the August heat while facing taunts and shouts from partisans from the other party.

The political attacks were punctuated by calls for continued public support for people rebuilding from tornadoes and facing the same daunting task in flood-ravaged areas.

“We might be sharing a few laughs today, but whether we’re Republican or Democrat, know that we are with you,” said GOP gubernatorial hopeful Daniel Cameron. “When natural disasters strike, we take off our partisan hats and we root for each other. We help repair and we help rebuild.”

Cameron then shifted into promoting his candidacy. I have touted his endorsement from former President Donald Trump and his work from him as the state’s attorney general in defending Kentucky’s anti-abortion laws and fighting Biden administration policies in court.

“I am the best candidate and the only candidate that can beat Andy Beshear next fall,” Cameron said.

Two other GOP gubernatorial candidates also made pitches to the crowd and a statewide television audience that watched — state Auditor Mike Harmon and state Rep. Savannah Maddox.

The still-emerging 2023 governor’s race is already overshadowing the state’s top-of-the-ticket race this year — the contest between Republican US Sen. Rand Paul and Democratic challenger Charles Booker. Paul was unable to attend the picnic because of Senate duties.

Also missing from the political speaking Saturday was Kentucky’s most powerful Republican, Senate GOP leader Mitch McConnell. A picnic mainstay for decades, McConnell relishes the verbal combat but also missed the event because of Senate duties. In a Senate speech Saturday, McConnell said the federal role in the long recovery for flood-damaged areas in his home state will grow once the rebuilding begins.

“Soon I’ll visit the region myself to meet with flood victims and listen to their concerns,” McConnell said. “Then I’ll take what I hear from my constituents back to Washington and ensure we stand by their side as we rebuild bigger and better than before.”

Biden declared a federal disaster to direct relief money to hard-hit Kentucky counties.

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Senate parliamentarian OKs most of Dems’ drug price controls

WASHINGTON (AP) — The Senate parliamentarian narrowed Democrats’ plan for curbing drug prices but left it largely intact Saturday, Democrats said, as party leaders prepared to start moving their sprawling economic bill through the chamber.

Elizabeth MacDonough, the chamber’s rules arbiter, also gave the green light to clean air provisions in the measure, including one limiting electric vehicle tax credits to those assembled in the US, Democrats said.

The nonpartisan official’s rulings came as Democrats planned to begin Senate votes Saturday on their wide-ranging package addressing climate change, energy, health care costs, taxes and even deficit reduction. Party leaders have said they believe they now have the unity they will need to move the legislation through the 50-50 Senate, with Vice President Kamala Harris’ tiebreaking vote.

MacDonough said provisions must be removed that would force drugmakers to pay rebates if their prices rise above inflation for products they sell to private insurers. Pharmaceutical companies would have to pay those penalties, though, if their prices for drugs bought by Medicare rise too high.

Dropping penalties on drugmakers for increasing prices on private insurers was a clear setback for Democrats. The decision reduces incentives on pharmaceutical companies to restrain what they charge, increasing costs for patients.

Erasing that language will cut the $288 billion in 10-year savings that the Democrats’ overall drug curbs were estimated to generate — a reduction of perhaps tens of billions of dollars, analysts have said. But other restrictions on rising pharmaceutical costs survived, including letting Medicare negotiate costs for the drugs it buys, capping seniors’ out-of-pocket expenses and providing free vaccines.

The surviving pharmaceutical provisions left Democrats promoting the drug language as a boon to consumers at a time when voters are infuriated by the worst inflation in four decades.

“This is a major victory for the American people,” Senate Majority Leader Chuck Schumer, DN.Y., said in a statement. “While there was one unfortunate ruling in that the inflation rebate is more limited in scope, the overall program remains intact and we are one step closer to finally taking on Big Pharma and lowering Rx drug prices for millions of Americans.”

Senate Finance Committee Chairman Ron Wyden, D-Ore., said that while he was “disappointed” the penalties for higher drug prices for privately insured consumers were dropped, “the legislation nevertheless puts a substantial check on Big Pharma’s ability to price gouge.”

The parliamentarian’s decision came after a 10-day period that saw Democrats resurrect top components of President Joe Biden’s domestic agenda after they were seemingly dead. In rapid-fire deals with Democrats’ two most unpredictable senators—first conservative Joe Manchin of West Virginiathen Arizona centrist Kyrsten Sinema — Schumer pieced together a broad package that, while a fraction of earlier, larger versions that Manchin derailed, would give the party an achievement against the backdrop of this fall’s congressional elections.

The parliamentarian signed off on a fee on excess emissions of methane, a powerful greenhouse gas contributor, from oil and gas drilling. She also let stand environmental grants to minority communities and other initiatives for reducing carbon emissionssaid Senate Environment and Public Works Committee Chairman Thomas Carper, D-Del.

She approved a provision requiring union-scale wages to be paid if energy efficiency projects are to qualify for tax credits, and another that would limit electric vehicle tax credits to those cars and trucks assembled in the United States.

The overall measure faces unanimous Republican opposition. But assuming Democrats fight off a nonstop “vote-a-rama” of amendments — many designed by Republicans to derail the measure — they should be able to muscle the measure through the Senate.

House passage could come when that chamber returns briefly from recess on Friday.

“What will vote-a-rama be like. It will be like hell,” Sen. Lindsey Graham of South Carolina, the top Republican on the Senate Budget Committee, said Friday of the approaching GOP amendments. He said that in supporting the Democratic bill, Manchin and Sinema “are empowering legislation that will make the average person’s life more difficult” by forcing up energy costs with tax increases and making it harder for companies to hire workers.

The bill offers spending and tax incentives for moving toward cleaner fuels and supporting coal with assistance for reducing carbon emissions. Expiring subsidies that help millions of people afford private insurance premiums would be extended for three years, and there is $4 billion to help Western states combat drought.

There would be a new 15% minimum tax on some corporations that earn over $1 billion annually but pay far less than the current 21% corporate tax. There would also be a 1% tax on companies that buy back their own stock, swapped in after Sinema refused to support higher taxes on private equity firm executives and hedge fund managers. The IRS budget would be pumped up to strengthen its tax collections.

While the bill’s final costs are still being determined, it overall would spend more than $300 billion over 10 years to slow climate change, which analysts say would be the country’s largest investment in that effort, and billions more on health care. It would raise more than $700 billion in taxes and from government drug cost savings, leaving about $300 billion for deficit reduction — a modest bite out of projected 10-year shortfalls of many trillions of dollars.

Democrats are using special procedures that would let them pass the measure without having to reach the 60-vote majority that legislation often needs in the Senate.

It is the parliamentarian’s job to decide whether parts of legislation must be dropped for violating those rules, which include a requirement that provisions be chiefly aimed at affecting the federal budget, not imposing new policy.

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Associated Press writer Matthew Daly contributed to this report.

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Sinema gives her nod, and influence, to Democrats’ big bill

WASHINGTON (AP) — Sen. Joe Manchin sealed the deal reviving President Joe Biden’s big economic, health care and climate bill. But it was another Democratic senator, Kyrsten Sinema of Arizonawho intently, quietly and deliberately shaped the final product.

Democrats pushed ahead Friday on an estimated $730 billion package that in many ways reflects Sinema’s priorities and handiwork more than the other political figures who have played a key role in delivering on Biden’s signature domestic policy agenda.

It was Sinema early on who rejected Biden’s plan to raise the corporate tax rate from 21% to 28%, as she broke with the party’s primary goal of reversing the Trump-era tax break Republicans gave to corporate America.

Sinema also scaled back her party’s long-running plan to allow Medicare to negotiate lower drug prices with the pharmaceutical companies as a way to reduce overall costs to the government and consumers. She limited which drugs can be negotiated.

Her insistence on climate change provisions forced the coal-state Manchin to stay at the table to accept some $369 billion in renewable energy investments and tax breaks. She also is tucking in more money to fight Western droughts.

And it was Sinema who in one final stroke gave her blessing to the deal by extracting an ultimate demand — she forced Democrats to drop plans to close a tax loophole that benefits wealthy hedge fund managers and high-income earners, long a party priority. Instead, the final bill will keep the tax rate at 20% instead of hiking it to the typical 37%.

“Kyrsten Sinema’s proven herself to be a very effective legislator,” said Sen. Mark Warner, D-Va., who has negotiated extensively with his colleague over the past year, including on the tax loophole.

In a 50-50 Senate where every vote matters, the often inscrutable and politically undefinable Sinema puts hers to use in powerful ways. Her negotiating at the highest levels of power — she appears to have equal access to Biden, Senate Majority Leader Chuck Schumer and even Senate Republican leader Mitch McConnell — has infuriated some, wowed others and left no doubt she is a powerful new political figure.

While other lawmakers bristle at the influence a single senator can wield in Congress, where each member represents thousands if not millions of voters, Sinema’s nod of approval late Thursday was the last hurdle Democrats needed to push the Inflation Reduction Act forward. A final round of grueling votes on the package is expected to begin this weekend.

“We had no choice,” Schumer told reporters Friday at the Capitol.

Getting what you want in Congress does not come without political costs, and Sinema is amassing a balance due.

Progressives are outraged at their behavior, which they view as beyond the norms of sausage-making during the legislative process and verging on an unsettling restacking of party priorities to a more centrist, if not conservative, lane.

Progressive Rep. Ruben Gallego is openly musing about challenging Sinema in the 2024 primary in Arizona, and an independent expenditure group, Change for Arizona 2024, says it will support grassroots organizations committed to defeating her in a Democratic primary.

“The new reconciliation bill will lower the cost of prescription drugs,” Gallego wrote on Twitter last weekend. “@SenatorSinema is holding it up to try to protect ultra rich hedge fund managers so they can pay a lower tax.”

In fact, on the left and the right, commentators lambasted her final act—saving the tax breaks for the wealthy. Some pointed to past legislative luminaries—the late Sen. Robert Byrd, for example, used his clout to leave his name on roads, buildings and civic institutions across the West Virginia hillsides. They scoff at Sinema establishing her legacy of her in such a way.

“Astonishing,” wrote conservative Hugh Hewitt on Twitter. “@SenatorSinema could have demanded anything she wanted — anything that spent money or changed taxes — and with that leverage for Arizona she choose … to protect the carry interest exemption for investors. …Not the border. Not the country. A tax break. wow.”

Democratic former Clinton-era Labor Secretary Robert Reich wrote, “The ‘carried interest’ loophole for billionaire hedge-fund and private-equity partners is now out of the Inflation Reduction Act, courtesy of Kyrsten Sinema.

“She’s up in 2024. Primary her and get her out of the Senate.”

But Sinema has never cared much about what others say about her, from the time she set foot in the Senate, breaking the rules with her whimsical fashion choices and her willingness to reach across the aisle to Republicans — literally joining them at times in the private Senate GOP cloakroom.

The Arizona senator seeks to emulate the maverick career of John McCain, drawing on his farewell address for her maiden Senate speech, and trying to adopt his renegade style alongside her own — a comparison that draws some eyerolls for its reach and scope.

Still, in her short time in the Senate, Sinema has come herself to be a serious study who understands intricacies of legislation and a hard-driving dealer who does not flinch. She has been instrumental in landmark legislation, including the bipartisan infrastructure bill Biden signed into law last summer.

“There’s not been a bipartisan group that she’s not been a part of,” Warner said.

In the end, the final package is slimmer than Biden first envisioned with his lofty Build Back Better initiative, but still a monumental undertaking and a bookend to a surprisingly productive if messy legislative session.

The bill would make health care gains for many Americans, capping pharmacy costs for seniors at $2,000 out of pocket and providing subsidies to help millions of people who buy health insurance on the private market. It includes what the Biden administration calls the largest investment in climate change ever, with money for renewable energy and consumer rebates for new and used electric cars. It would mostly be paid for by higher corporate taxes, with some $300 billion going to deficit reductions.

On the climate provisions, a priority for Democrats, Sinema may have played a role in keeping the sweeping provisions in the bill, when Manchin was less inclined to do so.

Environmental leaders, who have been involved in talks on the bill since last year, said Sinema has helped shape the bill all along. She was especially helpful last year when she made it clear she supports the climate and energy provisions, and her commitment to climate issues has remained steadfast, environmentalists said.

She tacked on her own priority, money to help Western states dealing with droughts, in the final push.

Jamal Raad, executive director of Evergreen Action, an environmental group that has pushed for the climate bill, said: “Senator Sinema needed money for drought relief to help her constituents stave off the worst effects of climate change. If that’s what was needed to gain her support from her, then good on her.

At home in Arizona, business allies that have been crucial to Sinema’s efforts to build an independent image have cheered on her willingness to resist party pressure over the tax increases.

The Arizona Chamber of Commerce and Industry and the National Association of Manufacturers ran ads against the deal, though they didn’t target Sinema by name, and bent her ear in a phone call this week.

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Associated Press writers Matthew Daly in Washington and JJ Cooper in Phoenix contributed to this article.

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GOP Rep who voted to impeach advances in Washington primary

OLYMPIA, Wash. (AP) — Republican Rep. Dan Newhouse, who voted to impeach Donald Trump, advanced Friday to the general election following days of vote counts in Washington state’s primary, but fellow Republican Rep. Jaime Herrera Beutler saw her advantage against an opponent endorsed by Trump rapidly shrink to within recount territory with thousands of votes left to count.

Both drew interparty challenges due to their vote to impeach Trump following the Jan. 6 attack on the US Capitol.

Newhouse, the four-term incumbent in the 4th Congressional District in central Washington and Democrat Doug White were essentially tied, with each capturing about 25% of the vote on a crowded ballot. White also advanced to the fall ballot. Loren Culp, a Trump-endorsed former small town police chief who lost the 2020 governor’s race to Democrat Jay Inslee, was at about 21%.

In the 3rd Congressional District in southwestern Washington, Democrat Marie Perez was the top vote getter, with 31% of the vote. Herrera Beutler, who had about 24% on Tuesday night, dropped to 22.6% Thursday night, 257 votes ahead of Joe Kent – ​​a former Green Beret endorsed by Trump — who was at 22.5%.

A mandatory recount would occur if the margin of votes between the No. 2 and No. 3 candidates is less than half of 1% and closer than 2,000 votes.

Because Washington is a vote-by-mail state and ballots just need to be in by Election Day, it often takes days to learn final results in close races as ballots arrive at county election offices throughout the week.

An estimated 35,000 votes are left to count, and the three counties where votes remain to be counted — the majority of it in the 3rd District’s largest county, Clark, — won’t update their tallies again until late Monday afternoon. Counties have until Aug. 16 to finish their count and for canvassing boards to certify the results, followed by certification by the secretary of state by Aug. 19.

Under Washington’s primary system, all candidates run on the same ballot, and the top two vote getters in each of Tuesday’s races advance to the November election, regardless of party.

Of the 10 House Republicans who voted for Trump’s impeachment, four opted not to run for reelection. Michigan Rep. Peter Meijer was defeated in a primary Tuesday by Trump-endorsed John Gibbs and Rep. Tom Rice of South Carolina lost to a Trump-endorsed challenger in June. Rep. David Valadao of California — which has an open primary like Washington — survived a primary challenge. Rep. Liz Cheney of Wyoming is bracing for defeat in her Aug. 16 primary against a Trump-backed rival.

In another key match in the 8th Congressional District, incumbent Democratic Rep. Kim Schrier advanced to the November ballot with more than 47% of the vote, and will face former state attorney general candidate Matt Larkin in November.

With about 17% of the vote, Larkin edged out King County Council Member Reagan Dunn, a former federal prosecutor whose mother once held the seat. Dunn granted the race Thursday. The district is a key target of GOP efforts to retake control of the House.

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Democrats’ big package: What remains in and what’s out?

WASHINGTON (AP) — It’s nowhere near the $4 trillion proposal President Joe Biden first launched to rebuild America’s public infrastructure and family support systems but the compromise package of inflation-fighting health care, climate change and deficit reduction strategies appears on track toward Senate votes this weekend.

The estimated $740 billion proposal, struck by two top negotiators, Senate Majority Leader Chuck Schumer and holdout Sen. Joe Manchin, the conservative West Virginia Democrat, includes some hard-fought party priorities. But the final touches came this week from Sen. Kyrsten Sinema, D-Ariz., who put her handiwork on the latest revisions.

What’s in, and out, of the Democrats’ “Inflation Reduction Act of 2022” as it stands now:

LOWER PRESCRIPTION DRUG COSTS

Launching a long-sought goal, the bill would allow the Medicare program to negotiate prescription drug prices with pharmaceutical companies, saving the federal government some $288 billion over the 10-year budget window.

Those new revenues would be put back into lower costs for seniors on medications, including a $2,000 out-of-pocket cap for older adults buying prescriptions from pharmacies.

The money would also be used to provide free vaccinations for seniors, who now are among the few not guaranteed free access, according to a summary document.

HELP PAY FOR HEALTH INSURANCE

The bill would extend the subsidies provided during the COVID-19 pandemic to help some Americans who buy health insurance on their own.

Under earlier pandemic relief, the extra help was set to expire this year. But the bill would allow the assistance to keep going for three more years, lowering insurance premiums for people who are purchasing their own health care policies.

‘SINGLE BIGGEST INVESTMENT IN CLIMATE CHANGE IN US HISTORY’

The bill would invest nearly $374 billion over the decade in climate change-fighting strategies including investments in renewable energy production and tax rebates for consumers to buy new or used electric vehicles.

It’s broken down to include $60 billion for a clean energy manufacturing tax credit and $30 billion for a production tax credit for wind and solar, seen as ways to boost and support the industries that can help curb the country’s dependence on fossil fuels. The bill also gives tax credits for nuclear power and carbon capture technology that oil companies such as Exxon Mobil have invested millions of dollars to advance.

The bill would impose a new fee on excess methane emissions from oil and gas drilling while giving fossil fuel companies access to more leases on federal lands and waters.

A late addition pushed by Sinema and other Democrats in Arizona, Nevada and Colorado would designate $4 billion to combat a mega-drought in the West, including conservation efforts in the Colorado River Basin, which nearly 40 million Americans rely on for drinking water.

For consumers, there are tax breaks as incentives to go green. One is a 10-year consumer tax credit for renewable energy investments in wind and solar. There are tax breaks for buying electric vehicles, including a $4,000 tax credit for purchase of used electric vehicles and $7,500 for new ones.

In all, Democrats believe the strategy could put the country on a path to cut greenhouse gas emissions 40% by 2030, and “would represent the single biggest climate investment in US history, by far.”

HOW TO PAY FOR ALL OF THIS?

The biggest revenue-raiser in the bill is a new 15% minimum tax on corporations that earn more than $1 billion in annual profits.

It’s a way to clamp down on some 200 US companies that avoid paying the standard 21% corporate tax rate, including some that end up paying no taxes at all.

The new corporate minimum tax would kick in after the 2022 tax year and raise some $258 billion over the decade.

The revenue would have been $313 billion, but Sinema insisted on one change to the 15% corporate minimum, allowing a depreciation deduction used by manufacturing industries. That shaves about $55 billion off the total revenue.

Money is also raised by boosting the IRS to go after tax cheats. The bill proposes an $80 billion investment in taxpayer services, enforcement and modernization, which is projected to raise $203 billion in new revenue — a net gain of $124 billion over the decade.

The bill sticks with Biden’s original pledge not to raise taxes on families or businesses making less than $400,000 a year.

The lower drug prices for seniors are paid for with savings from Medicare’s negotiations with the drug companies.

WHAT’S CHANGED IN RECENT DAYS?

To win over Sinema, Democrats dropped plans to close a tax loophole long enjoyed by wealthier Americans — the so-called “carried interest,” which under current law taxes wealthy hedge fund managers and others at a 20% rate.

The left has for years sought to increase the carried interest tax rate, hiked to 37% in the original bill, more in line with upper-income earners. Sinema wouldn’t allow it.

Keeping the tax break for the wealthy deprives the party of $14 billion in revenue they were counting on to help pay for the package.

In its place, Democrats, with Sinema’s nod, will impose a 1% excise tax on stock buybacks, raising some $74 billion over the decade.

EXTRA MONEY TO PAY DOWN DEFICITS

With some $740 billion in new revenue and around $433 billion in new investments, the bill promises to put the difference toward deficit reduction.

Federal deficits spiked during the COVID-19 pandemic when federal spending soared and tax revenues fell as the nation’s economy churned through shutdowns, closed offices and other massive changes.

The nation has seen deficits rise and fall in recent years. But overall federal budgeting is on an unsustainable path, according to the Congressional Budget Officewhich put out a new report this week on long-term projections.

WHAT’S LEFT BEHIND

This latest package after 18 months of start-stop negotiations leaves behind many of Biden’s more ambitious goals.

While Congress did pass a $1 trillion bipartisan infrastructure bill for highways, broadband and other investments that Biden signed into law last year, the president’s and the party’s other key priorities have slipped away.

Among them is a continuation of a $300 monthly child tax credit that was sending money directly to families during the pandemic and is believed to have widely reduced child poverty.

Also gone, for now, are plans for free pre-kindergarten and community college, as well as the nation’s first paid family leave program that would have provided up to $4,000 a month for births, deaths and other pivotal needs.

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Associated Press writer Matthew Daly contributed to this report.

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Democrats say they’ve reached agreement on economic package

WASHINGTON (AP) — Senate Democrats have agreed to eleventh-hour changes to their marquee economic legislation, they announced late Thursday, clearing the major impediment to pushing one of President Joe Biden’s paramount election-year priorities through the chamber in coming days.

Sen. Kyrsten Sinema, D-Ariz., a centrist seen as the pivotal vote in the 50-50 chamber, said in a statement that she had agreed to revamp some of the measure’s tax and energy provisions and was ready to “move forward” on the bill.

Senate Majority Leader Chuck Schumer, DN.Y., said he believed his party’s energy, environment, health and tax compromise “will receive the support of the entire” Democratic membership of the chamber. His party needs unanimity and Vice President Kamala Harris’ tie-breaking vote to move the measure through the Senate over certain solid opposition from Republicans, who say the plan’s tax increases and spending would worsen inflation and damage the economy.

The announcement came as a surprise, with some expecting talks between Schumer and the mercurial Sinema to drag on for days longer without guarantee of success. Schumer has said he wants the Senate to begin voting on the legislation Saturday, after which it would begin its summer recess. Passage by the House, which Democrats control narrowly, could come when that chamber returns briefly to Washington next week.

Democrats revealed few details of their compromise, and other hurdles remained. Still, final congressional approval would complete an astounding resurrection of Biden’s wide-ranging domestic goalsthough in a more modest way.

Democratic infighting had embarrassed Biden and forced him to stop down a far larger and more ambitious $3.5 trillion, 10-year version, and then a $2 trillion alternative, leaving the effort all but dead. Instead, Schumer and Sen. Joe Manchin, the conservative maverick Democrat from West Virginia who derailed Biden’s earlier efforts, unexpectedly negotiated the slimmer package two weeks ago.

Its approval would let Democrats appeal to voters by boasting they are moving to reduce inflation — though analysts say that impact would be minor — address climate change and increase US energy security.

“Tonight, we’ve taken another critical step toward reducing inflation and the cost of living for America’s families,” Biden said in a statement.

Sinema said Democrats had agreed to remove a provision raising taxes on “carried interest,” or profits that go to executives of private equity firms. That’s been a proposal she has long opposed, though it is a favorite of Manchin and many progressives.

The carried interest provision was estimated to produce $13 billion for the government over the coming decade, a small portion of the measure’s $739 billion in total revenue.

It will be replaced by a new excise tax on stock buybacks which will bring in more revenue than that, said one Democrat familiar with the agreement. The official, who was not authorized to discuss the deal publicly and spoke on condition of anonymity, provided no other detail.

Sinema said she had also agreed to unspecified provisions to “protect advanced manufacturing and boost our clean energy economy.”

She noted that Senate parliamentarian Elizabeth MacDonough is still reviewing the measure to make sure no provisions must be removed for violating the chamber’s procedures. “Subject to the parliamentarian’s review, I’ll move forward,” Sinema said.

The measure must adhere to those rules for Democrats to use procedures that will prevent Republicans from mounting filibusters, delays that require 60 votes to halt.

Schumer said the measure retained the bill’s language on prescription drug pricing, climate change, “closing tax loopholes exploited by big corporations and the wealthy” and reducing federal deficits.

He said the bill “addressed a number of important issues” that Democratic senators raised during talks. He said the final measure “will reflect this work and put us one step closer to enacting this historic legislation into law.”

Left unclear was whether changes had been made to the bill’s 15% minimum corporate tax, a provision Sinema has been interested in revising. It would raise an estimated $313 billion, making it the legislation’s largest revenue raiser.

That levy, which would apply to around 150 corporations with income exceeding $1 billion, has been strongly opposed by business, including by groups from Sinema’s Arizona.

The final measure was expected to include assistance that Sinema and other Western senators have been trying to add to help their states cope with epic drought and wildfires that have become commonplace. Those lawmakers have been seeking around $5 billion but it was unclear what the final language would do, said a Democrat following the bargaining who would describe the effort only on condition of anonymity.

The measure will also have to withstand a “vote-a-rama,” a torrent of nonstop amendments expected to last well into the weekend, if not beyond. Republicans want to kill as much of the bill as possible, either with the parliamentarian’s rulings or amendments.

Even if their amendments lose — as is certain for most — Republicans will consider it mission accomplished if they force Democrats to take risky campaign-season votes on touchy issues like taxes, inflation and immigration.

Democratic amendments are expected as well. Progressive Sen. Bernie Sanders, I-Vt., has said he wants to make his health care provisions stronger.

The overall bill would raise $739 billion in revenue. That would come from tax boosts on high earners and some huge corporations, beefed-up IRS tax collections and curbs on drug prices, which would save money for the government and patients.

It would spend much of that on initiatives helping clean energy, fossil fuels and health care, including helping some people buy private health insurance. That would still leave over $300 billion in the measure for deficit reduction.

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