Last Thursday, West Virginia Senator Joe Manchin put what appears to be the final nail in the coffin of Congressional Democrats’ tax agenda by announcing that he would not support a new reconciliation package that includes climate spending and tax increases on the rich. His opposition comes after months of negotiations (focused on tax reform at Manchin’s own request) in an effort to get some of President Biden’s Build Back Better agenda passed before the midterms.
Why did Manchin kill his party’s entire agenda? We’re sure it had nothing to do with the millions of dollars in campaign contributions he’s receiving from wealthy individuals and corporations in return for his obstruction.
If we’re to take Manchin at face value, in a radio interview on Friday, he cited concerns over inflation in explaining his opposition. He claimed that he wants to wait for July’s inflation numbers to be released before agreeing to any new climate investments or tax hikes. Manchin said, “…until we see the July inflation figures…let’s wait until that comes out so we know that we were going down the path that won’t be inflammatory to add more to inflation. Inflation is absolutely killing many, many people.”
Manchin is right to say that inflation is (figuratively) killing people. Last month, the Consumer Price Index climbed by a whopping 9.1%, the highest rate since November 1981. Americans are being financially crushed by soaring prices at the grocery store and gas pump and can’t afford to wait for relief.
But Manchin is categorically, absolutely, 100% wrong to suggest that taxing the rich and investing in clean energy would in any way be a path that would be “inflammatory to add more to inflation.” On the contrary, doing so represents one of the best paths forward to lower out-of-control consumer prices and give working Americans some desperately needed financial breathing room.
There are many contributing factors to inflation, but we are in this mess largely because aggregate demand has outstripped aggregate supply as the economy rebounds from the pandemic. This has led to backlogs in global supply chains and increased production costs, which in turn have fueled price hikes. Solutions to the crisis involve cooling demand and increasing the economy’s productive capacity to help supply meet the moment.
Taxing the rich is a fantastic solution to inflation as it can do both of these things – lower demand and increase supply – without harming virtually anyone. Taxing millionaires like us can help cool demand by decreasing the money supply in the economy. If and when that happens, we are so rich that we will barely notice the impact at all – unlike what the rest of America is feeling under interest rate hikes from the Fed. Even better, the revenue raised from the tax hikes could be used to help boost the economy’s productive capacity by investing in things like – surprise, surprise! – clean energy. If Manchin were actually concerned about gas prices, it would stand to reason that making American consumers less dependent on foreign gas would be a good thing.
It’s clear that Manchin using inflation as a reason to oppose the new reconciliation package is nothing short of a cop-out. And he knows it. All of the measures included in the bill were specifically designed to be deflationary in an effort to placate him and his concerns over inflation. The bill that he just rejected was written to help fight inflation! For him to now do an about-face at the eleventh hour is sad and disappointing – but not altogether surprising given how many times he’s done this.
There is now little hope for Democrats to pass Biden’s signature economic package before the midterms. Even if Manchin changed his mind after the August recess, Senate budget rules make it too difficult and time-consuming to realistically pass a reconciliation bill.
In killing almost the entire Democratic agenda, Manchin has shown that his true allegiance lies not with his West Virginian constituents or the American people but with his campaign donors. It’s not a coincidence that Manchin consistently comes out swinging against any green energy initiatives while also accepting more campaign contributions from oil, gas, and coal companies than any sitting Senator in Congress (and don’t forget that much of his own personal wealth comes from coal). It’s not surprising that Manchin doesn’t act in good faith on his promises to tax the rich because he is bankrolled by some of America’s most prominent billionaires.
If the fight over Build Back Better has taught us anything, it’s that the interests of the American people and the donor class are diametrically opposed. If we ever want to live in a country that works for all Americans, not just the ultra-rich, we need to treat this like the existential fight it is and make sure that politicians like Joe Manchin and the billionaires that fund him have no more say in how our country is run.