The two-week scramble that saved Democrats' climate agenda

WASHINGTON - Five days after talks collapsed around Senate Democrats' long-stalled package to combat climate change, temperatures were rising - literally and figuratively.

It was July 19, and an oppressive heat wave was blanketing the United States. Another shattered records throughout Europe, even melting the roads as cyclists competed in the Tour de France. And in Washington, Democrats were fuming, frustrated that a precious opportunity to respond to the climate crisis had once again slipped away.

At the center of the impasse was Sen. Joe Manchin, D-W.Va. A moderate swing vote and longtime budget hawk, Manchin had said the week before that he could support investments to tackle global warming, just not in the way Democrats had proposed them, and not while prices nationally were soaring. Instead, he wanted his party to wait - but Democratic leaders felt they were running out of time.

At the White House, President Joe Biden already had issued an ultimatum, telling members of Congress he would fire off new executive orders if they did not pass a law. In the Capitol, meanwhile, Democrats began to confront Manchin directly: Sen. Tom Carper, D-Del., for one, approached him during a vote on the Senate floor, brandishing a list of recent deadly climate catastrophes that warranted Manchin's attention.

Little did many Democrats know, however, Manchin was already back at the table - in another round of fierce discussions with Senate Majority Leader Chuck Schumer, D-N.Y. Soon, the steady mix of public pressure, private pleading and persistent negotiation would lead the two men to produce what once seemed unthinkable: a deal on the largest burst of climate-related spending in U.S. history that took nearly all of Washington by surprise.

The story of that breakthrough is one of intense talks and high emotions over a period of about two weeks, according to more than two dozen people familiar with the matter, many of whom spoke on the condition of anonymity to describe a process so secretive that few knew about it at the time. The journey spanned basement backrooms of the Capitol, countless hours of phone calls - and a virtual handshake that clinched the arrangement over Zoom, since the coronavirus had trapped Manchin at home.

For Schumer, the party's chief negotiator, a key to assuaging Manchin's concerns were policy sweeteners that boosted fossil fuels and coal-heavy West Virginia. But Manchin also spoke with a wide array of others - fellow Democrats, economists including Larry Summers, even executives like Bill Gates. They each delivered some version of the same message: If Democrats did not seize on a rare opportunity to combat climate change, the U.S. may never have another chance at it again.

Ultimately, though, Manchin came to agree with his own party, satisfied that Democrats' plans would not harm the economy. Explaining his decision, Manchin maintained at a news conference Thursday he never actually wavered in his engagement, even once "the dogs came after me." Schumer, for his part, seized on the magnitude of the moment, having finalized an agreement that had eluded Democrats for about a year.

"You're going to change the country for the better," he told Manchin in the hours before they released the bill late Wednesday afternoon. "This is going to be historic for the country."

Manchin and Schumer each declined interviews through their spokespeople. Senate Democrats hope to begin debating the bill as soon as next week.

If it is adopted, the so-called Inflation Reduction Act of 2022 would see nearly $370 billion in new climate and energy-related investments, aiming to foster new technology, cut back on emissions and satisfy Manchin's demand that the U.S. maintain support for fossil fuels.

It includes new and extended tax credits for solar, wind and other renewable energy, and more than $80 billion in rebates for home improvements and electric vehicles. It also sets aside $1.5 billion to curtail harmful methane emissions. And at Manchin's insistence, it mandates new oil and gas leasing in the Gulf of Mexico and off the coast of Alaska.

More than seven months later, Schumer and Manchin had resumed talks, but found themselves barreling toward the same disappointment - even as Democrats attempted to rethink their agenda in a smaller form. Despite consistent, productive discussions, Manchin informed Schumer on July 14 that he still could not support his own party's efforts to advance a sprawling proposal so quickly.

For Manchin, the primary concern was inflation. He withdrew his support after a government report showed the prices of gas, groceries and other goods had spiked by 9.1% in June, describing the development publicly as a "serious concern." Privately, the senator sounded even more dire alarms - telling a group of energy executives and other supporters at a Washington fundraiser, for example, that he could not support anything that worsened the economy.

In particular, Manchin took issue with the tax increases Democrats had proposed to pay for their new spending, including the investments on climate. While the senator himself had endorsed some of the revenue-raising ideas, including one proposal to raise more money and improve the solvency of Medicare, Manchin said the sum total of tax hikes threatened to exacerbate inflation.

"Can't we wait to make sure we do nothing to add to that? And I can't make that decision on basically taxes of any type and also on energy and climate," Manchin said during an interview on MetroNews TalkLine, a West Virginia radio show, a day later. "But I'm not going to do something, and overreach, that causes more problems."

Manchin's stance stunned Democrats. For weeks, many thought they were close to finishing a climate deal; aides on the Senate's top environment-focused committee, led by Carper, had even started drafting press materials announcing a breakthrough with Manchin when the news arrived.

Democrats did not want to squander their final opportunity to fulfill the pledges they had made to voters ahead of the 2022 election, so Schumer began work on a smaller measure - one focused on lowering prescription drug prices and insurance premiums. Biden endorsed the approach in a statement on July 15 that omitted any mention of Manchin, stressing: "The Senate should move forward, pass it before the August recess, and get it to my desk so I can sign it."

But some in the party, long frustrated by inaction on climate change, embarked on a pressure campaign targeting Manchin anyway. A wide array of Democrats including Sens. Carper and Christopher Coons of Delaware, Ed Markey of Massachusetts, John Hickenlooper of Colorado, Tina Smith of Minnesota, and Ron Wyden of Oregon each worked with their aides to canvass environmental groups, energy companies and economists who might have be able to change Manchin's mind.

Some Democrats enlisted the likes of Summers, a former treasury secretary who had been warning about inflation for a year, to make the case to Manchin that climate spending would not imperil the economy. Others targeted Gates, the former Microsoft chief executive who has a number of clean-energy investments. He eventually rang the West Virginia senator to make the case for climate investments; his office declined to comment.

Hickenlooper, meanwhile, turned to top executives from PG&E, DuPont and other firms. "They were kind of mopey," the senator recalled in an interview, though he urged them to call Schumer and Manchin and encourage them to keep pursuing a deal. "You can sit on your hands, or be useful," Hickenlooper said.

A few tried more personal outreach. Only weeks earlier, Coons had huddled with Manchin on a trip to Brussels and Switzerland, discussing policy during hours of conversation. So Coons broached the topic of the fast-warming planet on Monday, July 18, making a direct plea to Manchin during a closed-door meeting in the Hart Senate Office Building.

Coons then told Manchin: "I can't think of a better way for you to prove them all wrong than to sign off on a bold climate deal. Prove every critic wrong."

Manchin thought for a second, the source said, then responded, "It would be like hitting a homer in the bottom of the ninth, wouldn't it?"

Quietly, Manchin that very day seemed to be angling for a deal. The senator's staff in the morning had approached Schumer's aides, offering a new counterproposal: Democrats could try to pass a bill in August, including money for climate change.

The entreaty set the stage for a hushed meeting between the two lawmakers that afternoon in the labyrinthine basement of the Capitol, in a conference room Schumer did not even realize at first was his. They left with a handshake agreement to at least try again before the August recess. Recalling it later, Manchin told reporters his message to the majority leader was that he hadn't "walked away," adding: "This is ridiculous. We can recalibrate, see if something can be done."

"He said, 'Can we work together and try to put together a bill?' And I said, 'As long as we finish in August,'" Schumer later told reporters.

"I went down and listed about a dozen situations around the world, of what's going on in England, what's going on with Antarctica . . . countries where lakes are drying up, they don't have water to feed livestock," Carper said. "I gave it to him on the floor."

Similarly unnerved, the White House had started eyeing action it could take without Congress to address climate change, seeking to make good on Biden's threat. Privately, aides began exploring whether to declare a national climate emergency, a directive that could have opened the door for the administration to pursue new regulations or redirect funding in response to rising emissions.

Biden ultimately did not issue the policy when he delivered a major climate address in Somerset, Mass., the following day, instead announcing action to combat extreme heat. Congressional aides later said they learned the administration had backed away from the emergency, partly out of fear it could upset the already delicate negotiations over a spending package - even one narrowly focused on health care.

Piece by piece, Schumer and Manchin continued to cobble together a potential agreement into last weekend, even when the West Virginia senator contracted covid, which threatened to keep him out of the Capitol for days. Unaware of the progress, Republicans in Washington appeared to take a premature victory lap.

That Sunday, July 24, Manchin dialed into a conference call joined by Stephen Moore, an economic adviser to Trump, and about a dozen conservative economists, media figures and business leaders. They profusely thanked Manchin "for saving the country" by resisting Democrats' plans, Moore later recalled to The Washington Post. Manchin told the group he supported one of Democrats' tax plans, a proposal to impose a rate on businesses that pay nothing to the government. But he also criticized Democrats' spending ambitions - leaving conservatives convinced that Manchin remained opposed to acting.

By Wednesday afternoon, now bonding over their shared, recent covid diagnoses, the two men clinched their deal and set about briefing Democratic leaders and the White House - during which Biden thanked Manchin over the phone for seeing it through. Schumer and Manchin then publicly revealed it to the shock of Washington, hailing their progress in a joint statement "after years of many in Washington promising, but failing to deliver."

The breakthrough arrived about two weeks after Democrats thought their climate aspirations were doomed - and exactly a year to the day that Schumer tried to work out with Manchin a framework for a smaller spending package. That endeavor, enshrined in a document eventually made public, previously earned derision from Schumer's own caucus; now, Democrats on Capitol Hill were ready to rejoice.

"I'm like, holy s---, this is fantastic," said Smith, adding that she learned about the deal when Schumer called her while the Minnesota senator was presiding on the Senate floor. "There was a small group of people working hard to keep the door open, specifically to address the concerns Senator Manchin had around inflation."

The news came as an even greater surprise to Republicans, who that day were huddling with Senate Minority Leader Mitch McConnell of Kentucky to plan how they could further stymie Democrats' agenda. Aides, operatives and lawmakers discussed ways to force uncomfortable votes on a key element of Democrats' plans, an attempt to lower prescription drug costs, that might win the support of another Democratic moderate, Sen. Kyrsten Sinema of Arizona.

Adding to the sting, Manchin and Schumer announced the agreement hours after the Senate voted to adopt a second, unrelated bill provisioning more than $50 billion for semiconductors. McConnell previously had threatened that measure, suggesting Republicans could obstruct it if Democrats moved forward with their spending ambitions. The GOP leader's office did not respond to a request for comment.

Some at the White House were kept in the dark, too. "The White House staff were in the same position almost everyone in D.C. was: Complete surprise and a level of delight about an unexpected win. They'd resigned themselves to a loss," said one outside adviser, speaking on the condition of anonymity to describe private conversations with senior administration officials.

Instead, a jubilant Schumer on Thursday took to the podium in the Senate studio: "For years, decades even, many in Washington have promised to address the biggest challenges facing the nation only to fail to deliver," he said.

Manchin, meanwhile, explained his decision Thursday by noting that Democrats had satisfied his primary concerns: They had devised a package that protected fossil fuels, promoted energy independence and added or preserved key provisions that benefit coal-heavy West Virginia.

At least one of the tax credits for electric vehicles hinges on domestic production requirements that some observers in Congress and elsewhere believe may benefit firms in Manchin's home state. Another program that pays power providers for clean-energy production appears to be most generous when it comes to hydrogen and carbon-capture technology, according to experts, two advancements Manchin long has supported.

And Schumer worked out an agreement with Biden, House Speaker Nancy Pelosi, D-Calif., and Manchin that would see Congress vote in the coming months on rules that ease federal permitting rules for pipelines and other infrastructure in the coming months. Many of the details have not yet been made public, though climate hawks on Capitol Hill generally praised the final result.

Schumer, for his part, acknowledged to reporters that he personally would have "never put these provisions in the bill," adding that Democrats needed "50 votes."

"Part of Manchin's brand is meeting and talking with everyone throughout the ideological spectrum; he's been doing that even when nothing was going on," said Steve Clemons, a friend of Manchin's for more than a decade. "I am unaware that anyone substantially moved him; he has been consistent with what he wanted to do the whole time, and he got what he'd been asking for."

Initially, Manchin had said he wanted to see another round of inflation figures before he supported new climate spending and tax increases. But reams of data furnished to him - including nonpublic sources of information, provided by the Penn Wharton Budget Model - left him confident that "I'm not adding to inflation," the senator said Thursday.

Democrats also agreed to remove some of their more aggressive plans to impose new taxes that target millionaires at home and companies that take advantage of foreign tax havens. They preserved a proposal that would impose a minimum tax on corporations that currently pay no taxes while empowering the Internal Revenue Service to pursue tax cheats.

Schumer quickly set about selling the measure to Democrats, who must stay united if they hope to overcome a GOP filibuster. Some have yet to react publicly - including Sinema, who has also raised concerns about tax increases. But Schumer on Thursday did not express concern, telling reporters that "members are reviewing the text . . . and we expect to move forward next week."

"I didn't walk away," Manchin said. "I just told them, I can't do what we've been doing at that level."

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