Manchin says he won’t support new climate spending or tax hikes on wealthy

Sen. Joe Manchin III, D-W.Va., told Democratic leaders on Thursday he would not support legislation that contains new spending on climate change or new tax increases targeting wealthy individuals and corporations, marking a massive setback for party lawmakers who had hoped to advance a central element of their agenda before the midterm elections this fall.

The major shift in negotiations -- confirmed by two people familiar with the matter who requested anonymity to describe the talks -- threatens to upend the delicate process to adopt the party's signature economic package seven months after Manchin scuttled the original, roughly $2 trillion Build Back Better Act, which President Biden had endorsed.

But Manchin did tell Democratic leaders he is open to revising federal laws that might lower prescription drugs costs for seniors, the two people said. And the West Virginia moderate expressed support with Senate Majority Leader Chuck Schumer, D-N.Y., the party's chief negotiator, for extending subsidies that could help keep health insurance costs down for millions of Americans, one of the sources said.

"Political headlines are of no value to the millions of Americans struggling to afford groceries and gas as inflation soars to 9.1%," said Sam Runyon, a spokeswoman for Manchin. "Senator Manchin believes it's time for leaders to put political agendas aside, reevaluate and adjust to the economic realities the country faces to avoid taking steps that add fuel to the inflation fire."

» READ MORE: Democrats race to reach deal to prevent spike in health premiums

A spokesman for Schumer declined to comment.

The stunning setback late Thursday came despite weeks of seemingly promising negotiations between Schumer and Manchin in pursuit of a broader deal that would have delivered on the very promises that secured Democrats control of both chambers of Congress and the White House in 2020. Without Manchin, the party cannot proceed in the narrowly divided Senate, since they need all 50 votes, plus Vice President Harris's tiebreaking vote, to use the special process known as budget reconciliation to overcome Republicans' expected filibuster.

To win over Manchin, Democrats previously had surrendered their most prized proposals, from offering paid family and medical leave to providing child care, free prekindergarten and other tax benefits to low-income Americans. But the cuts still have proved insufficient for the austerity minded moderate, who in recent days had grown ever more skittish amid reports of record-high prices. This week, new data showed that inflation rose 9.1 percent last month compared to a year earlier, prompting Manchin to tell reporters on Wednesday that he would be "cautious" about any new federal spending.

Without a sweeping economic package, party lawmakers for months have warned the costs would be great -- leaving families in a financial bind while imperiling Democrats' ability to retain the House and Senate in November. Many Democrats felt they also might be squandering a generational opportunity to address climate change before the balance of power in Washington shifts.

But Manchin's opposition left Democrats in a difficult political bind: They must decide between pressing him after months of false starts or accepting what would still be significant changes to the law lowering health care costs for millions of Americans. A package addressing health care, for example, could spare roughly 13 million people from higher insurance costs in January if lawmakers act swiftly.

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Similar trade-offs previously prompted Biden's top aides to deliver a stinging rebuke of Manchin, though the White House late Thursday did not immediately respond to a request for comment.

On climate, Democrats once thought they had a historic opportunity to radically transform the country, reduce pollution, incentivize cleaner, greener energy and put more electric vehicles on the road. They had hoped to seize on their rare majorities to deliver the investments necessary toward fulfilling Biden's goal, reducing carbon emissions to half of their 2005 levels come 2030. Their push had taken on added urgency when gas prices spiked after Russia's invasion of Ukraine.

But Manchin, who represents coal-heavy West Virginia, initially opposed their most audacious plans, including efforts to punish the worst polluters. In more recent talks, Schumer and his colleagues set about trying to woo the longtime holdout over a scaled-back approach -- including tax credits to spur clean energy, incentives to encourage the purchase of electric vehicles and limited penalties on the producers of harmful methane gas. But the plan, which The Washington Post previously reported, soon fell apart, surprising Democratic aides who for days thought they were close to a resolution.

On taxes, meanwhile, Democrats already had to forgo their original plans to unwind the tax cuts implemented under President Donald Trump in 2017 after another moderate in their ranks, Sen. Kyrsten Sinema, D-Ariz., objected to the idea.

Yet Manchin long has called for significant changes to the tax code. Only days ago, he signed onto one of many Democrat-backed plans to raise more revenue from the wealthiest taxpayers: a policy that would have helped extend the financial solvency of Medicare by closing a loophole that allows high earners to shelter income, one of the people familiar with the matter said. But the senator by Thursday appeared to change course. And he expressed new resistance to some of the party's other plans targeting wealthy individuals and corporations, the source added.

However, Manchin told business executives this week in a closed-door meeting that he would support a package focused on a combination of lowering health care costs and raising money toward deficit reduction. That would include a new proposal that empowers the government to negotiate drug prices on behalf of Medicare recipients, as well as a second effort to extend existing tax subsidies that reduce insurance costs for millions of Americans who purchase insurance through state and national exchanges set up by the Affordable Care Act.

Manchin told the group that he was eyeing roughly $200 billion in deficit reduction as part of the package. But it was not immediately clear how that could be achieved if tax hikes were off the table.