On Wednesday evening, Sen. Joe Manchin, D-W.Va., and Senate Majority Leader Chuck Schumer, D-N.Y., put out a joint statement announcing the Inflation Reduction Act of 2022. The more than 700-page bill the two came to terms on includes $369 billion for “energy security and climate change.” If it passes, that substantial level of investment is projected to reduce carbon emissions in the U.S. by 2030 by 40 percent. “An initial review of the agreement indicates that this will mark a historic direct investment in renewable energy and will unleash hundreds of billions of private investment for moonshot projects,” Rep. Ro Khanna, D-Calif., told Ryan Grim after the deal was announced.
Khanna has spent months working with Manchin to keep him in talks. The bill also includes a 15 percent corporate minimum tax on companies with profits of more than $1 billion a year; $80 billion over 10 years for IRS tax enforcement; and an expansion of Affordable Care Act subsidies. Khanna joins Grim to discuss the negotiations and the significance of the bill.
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Ryan Grim: Welcome back to Deconstructed. I’m Ryan Grim.
And I know I told you I was mostly taking the summer off to work on a book, but I couldn’t resist coming back for this episode given the stunning news Joe Manchin and Chuck Schumer dropped on the world Wednesday afternoon.
So to quickly recap: About two weeks ago, Mitch McConnell warned that if Democrats continued pursuing a big climate package, then Republicans would blow up Manchin’s cherished bipartisan semiconductor legislation.
Newscaster: In a tweet, he said that he wants to be perfectly clear there will be no bipartisan USICA — that’s the name of the broader package that includes the money for the chips industry — as long as Democrats are pursuing a partisan reconciliation bill. So again, McConnell is saying he’s willing to block the money for the semiconductor industry if the Democrats move forward with a broader spending package.
RG: Manchin, fumed, calling McConnell as bad as the hostage-taking lefties in his own party. But days later, he announced he was walking away from the climate bill.
Now, on Wednesday, a little after noon, the Senate passed that semiconductor bill.
Sen. Majority Leader Chuck Schumer: This chips and science bill is going to create millions of good paying jobs down the road. It will alleviate supply chains. It will help lower costs. And it will protect America’s national security interests.
RG: Four hours later, Manchin and Schumer announced their deal on a climate bill. Republicans were so livid that they took their anger out on a veterans bill, voting to torpedo legislation that would extend health care coverage to vets who got cancer from burn pits. They had recently voted overwhelmingly to support that.
Sen. Jon Tester: Because we, in essence, yesterday took benefits away from the people who have been impacted by war that we set off to war. And we turn our backs and say: No, we’re gonna find an excuse to vote against our veterans while we wave the flag, talking about how great our fighting men and women are.
RG: So how did we get here and where does it go from here?
For that, I’m joined by Rep. Ro Khanna who has served as something of a progressive point person in dealing with Manchin throughout these negotiations.
Rep. Khanna, thank you so much for joining me on Deconstructed.
Rep. Ro Khanna: Ryan, it’s great to be back on.
RG: I wanted to start by asking how it was that you kind of became the guy that was talking with Manchin. There’s 435 members of the House, more than what, 220-plus Democrats in the House? What made it that it was you that was kind of texting and talking with Manchin throughout this?
RK: Well, you know, I had a relationship with Sen. Manchin going back to my first year in Congress, 2017. I went to Beckley, West Virginia with West Virginia Tech to help create a tech partnership and tech jobs in rural communities. As you know, that’s been a big theme of mine.
RG: That’s in your latest book, too.
RK: Yeah. So I sat down with Sen. Manchin before I went there. And he was very enthusiastic about it. He was very helpful, actually, in connecting me with Gordon G. And we just developed a relationship since then, in terms of that collaboration.
And then when the negotiations were happening, I would talk to him occasionally, and got the sense that he really was for the investment part of the innovation. And I believed that because of the enthusiasm that he had for Silicon Valley and technology, and so would go on TV here and there and say: I think he’s negotiating in good faith. This was at a time where everyone else was piling on him.
And I think he appreciated that. And that’s how we just started staying in communication and engaging on this.
RG: So when he walked away in December, he did that Fox Sunday interview.
Sen. Joe Manchin: I’ve always said this, Bret, if I can’t go home and explain it to the people of West Virginia, I can’t vote for it. And I cannot vote to continue with this piece of legislation. I just can’t. I’ve tried everything humanly possible. I can’t get there.
Bret Baier: You’re done. This is a no?
RG: He looked like he even shocked the host. He’s like: Wait a minute. Did I just make news here? You’re done with this.
Was there a break after that? Or how soon did talks begin again?
RK: I still remember he called me on New Year’s Day, this year, in 2022. And he was very upset, upset that he felt he was being unfairly blamed for walking away. And he said: Look, I’ve always been for the innovation parts of the bill. I’m always for the big climate spending parts of the bill.
And so I said: Look, I’m willing to engage. And I think if you can get there on the climate spending, on the hundreds of billions of dollars to have a moonshot in clean energy, which your piece in the newsletter points out brilliantly, that will unleash trillions of dollars of private sector innovation money from my district and others — venture capital, money, money in people who want to bet on the future.
I said to Sen. Manchin: If you can be for that, I believe we can get a framework, and I will work towards helping get progressives, and let’s continue to meet.
And then he actually was gracious. We talked a number of times; he invited me to be part of this bipartisan group. I was getting hammered by people on our own side saying: Why are you engaging with him? Why are you continuing to have a conversation?
But I wanted people to know, I wanted him to know, I wanted the White House to know that if we forget the investment that we would be able to get many progressive votes. And I thought climate was the most important thing, and if we didn’t get this, the whole thing would fall apart.
RG: And so his sort of working assumption was that if you don’t get the whole kit and caboodle that the left would walk away, and you were trying to tell him: No, actually, like there is a deal to be had here, the left in the house is a lot more willing to work with you than you might think.
Is that where he started?
RK: No, I think he wanted to work together. He was concerned, though, about whether it would be an all-or-nothing approach. And I think he trusted the working relationship we had and he said: OK, come into the conversation.
So I know what’s important to progressives. Now, I didn’t in any way represent that I was speaking for all progressives or for the caucus; it was more just a perspective. And what I kept emphasizing in those meetings is if we can get the significant clean energy investment, if that number is consequential, and if we can get the CO2 emissions, that I believe that progressives and House Democrats will support that, and we desperately need a climate deal.
And this was also — I chair the environment subcommittee, so I was in communication with environmental groups, with the NRDC, with Sunrise, with a lot of other other groups that have helped us. And some of them had their own red lines and their own concerns, and I would raise them in these conversations. But by and large, saying: We all want to get to a deal, because if we don’t get one in this Congress, who knows when we’ll be able to act on climate?
RG: And when you say the bipartisan talks, were those the attempts that Manchin made to put together a bipartisan energy deal?
RK: Yes! No, no, and I was in a number of meetings with Mitt Romney and Lisa Murkowski. I mean, it was a bipartisan effort.
But I knew early on, it was probably not going to go far when there was a clear opposition from Republicans to any form of tax credits towards clean technology. And that’s where I said: Look, that is the thing that we most need. The climate groups, the climate activists, the House progressives are most passionate about is the clean technology tax credits, clean technology direct investment. If you take that away, there is no deal. I mean, you’re not going to get a deal just on permitting reform. And that’s not going to meet the moment.
But I engaged. There were five, six, seven of those meetings. And I engaged because I think it was important for Manchin to feel that people were engaging him with respect, that he was being treated as negotiating in good faith. And that’s why I engaged.
Now, there have been a number of podcasts, etc.: What is Khanna doing? Why is he extending the benefit of the doubt to Manchin?
Kyle Kulinski: When he gets everything he wanted, and the thing still doesn’t get passed, that’s not an honest actor, Ro. That’s not an honest actor at all. That’s a guy who was playing you for a fool.
RK: And, you know, I didn’t think necessarily it would work out. And at times, I thought maybe I’d have egg on my face. But I guess what kept me going is my knowledge that Manchin really liked the innovation part of it and was always drawn by technology innovation and no problems with that spending and viewed that as actually critical to make sure we led and not other nations.
So that belief made me think that a deal was possible.
RG: What are meetings like that like? From covering the meetings, I remember when it’s announced that Manchin is going to be holding these, you hear a lot of Democrats saying: Well, this is an exercise that he just has to go through to kind of show to himself that a deal is not possible.
But when you’re in the room, and you have Republicans saying: Yeah, we’re not for any clean tax credits, what do you do for the rest of that meeting? Just as people? Once you’ve heard from Republicans that, yep, these are interesting energy talks, but we’re not doing anything like climate, how do you fill the time? What are those meetings like?
RK: Well, initially the talks were on NEPA reform and what we need on permitting.
RG: That was the permitting, right.
RK: But there’s reason even on the left as Ezra Klein and others have written that you want to make sure that for clean energy projects that there is appropriate permitting and that that is fast. And so not everything is perfect, and there could be reasons to have reform. And there was a sense of: What are the compromises that we’re going to make if we have this climate package and climate investment?
But I think as the talks kept going, it became clear that people like Mitt Romney just had a philosophical objection towards government tax credits or subsidies towards this clean technology industry. Of course, he ran on that, remember? He ran — famously — against Solyndra. So that became obvious. I think it became obvious to Sen. Manchin.
But I actually do believe that Sen. Manchin went into those talks in good faith wanting to get a bipartisan agreement. It became apparent pretty quickly — to some of the folks who were saying it from the outside, it was apparent even before the talks — that the Republicans just weren’t going to agree to the climate investment. But I believe it was essential to go through that process to have Sen. Manchin get to where he is.
RG: And let’s talk about the deal itself.
So on the climate side — climate and what he calls energy security — we’re talking, I think, $369 billion over the next 10 years, which I think every scientist would say that’s not adequate to meet 100 percent of the challenge. I would also say it is probably the biggest investment in climate in history, by any country.
So what was lost by taking the sticks out? Because as you said, Manchin was all for the carrots, but he didn’t like the sticks. And let’s talk a little bit about how this money can be leveraged by the private sector, particularly as a representative from Silicon Valley, you see this a lot. We have an economy since the 90s that’s basically been built on bubbles. And so I was thinking like [laughs] if we’re gonna have bubbles, let’s have a clean tech bubble. Let’s have billionaires throwing absurd amounts of money at absurd projects, and if one out of 100 of them take off, that could have exponential benefit to our climate efforts.
RK: Exactly. Well, first, this extends, for three years, the solar, the wind, the investment tax credit, and then it makes it, under Ron Wyden’s proposal, a clean energy tax credit for investment and production. And it’s an extraordinary tax credit that’s going to incentivize private sector dollars in building solar farms, in solar manufacturing here, in building wind farms, in offshore wind, in battery development, in lithium ion processing here, because a lot of the processing is done in China. I mean, all of those investments now are going to be incentivized.
And by the way to the folks who say: Well, there are permitting challenges, if you’re making it financially valuable to invest, that overcomes some of the permitting challenges. So it is going to unleash an extraordinary amount of investment, and it’s going to create new manufacturing jobs, it’s going to create a clean tech economy.
Now do I think that the original Build Back Better was good? Yes. Because we needed the restrictions on methane, which is one of the most harmful pollutants and one of the biggest causes of climate and that is not in the package. We needed, ideally, some sense of regulation of carbon emissions that were in the previous packages. As far as a positive, moonshot agenda goes, this isn’t enough. But it is, as you pointed out, by orders of magnitude the largest investment our country or any country has made in climate.
RG: So what about Kyrsten Sinema? What’s the mood in Congress around her?
RK: I don’t want to say anything to jinx things. [Laughs.]
RK: I mean, I just hope we get her vote at this point. I don’t want to take any shots. I don’t want to do anything. Let’s just get this passed.
RG: What about the House? It’s always a balancing act and the majority keeps shrinking. One of Gottheimer’s “unbreakable nine” retired to become a lobbyist recently, and he was replaced by Mayra Flores, a Republican. You have a pretty narrow margin. How many Democrats are serving in the House now?
RK: We have a four-seat majority? I mean, it keeps fluctuating, but I think it’s around four.
RG: So you can’t lose many votes on the left or the right.
Let’s start with the left. What’s your sense at this point? I had heard from somebody high up at Sunrise yesterday that they were looking at this and obviously it’s not everything they wanted, but they said it seemed like a deal worth taking. What’s your sense of, in the Progressive Caucus, whether or not this is a deal worth taking?
RK: Well, look, a lot of the environmental groups — Sunrise, the NRDC — have put out statements, put out tweets saying that it’s not ideal, but we’ve got to do this, that 40 percent reduction in emissions are very good. And quite a few of the environmental groups that we deal with are basically there. They have certain red flags, certain concerns, but are for it. I don’t want to say it’s unanimous. There are one or two groups that think that the permitting that has been promised to create more of a fossil fuel infrastructure, and they have significant concerns. But I would say the majority, at least two-thirds of the environmental groups that we work with, are for it.
And that the sense I’ve gotten, just talking to a few colleagues on the House floor and progressive colleagues, is this is something that people want to do. They want to get it done. We have Sen. Schumer actually talking to the Progressive Caucus today making the case. You wouldn’t have Schumer come to the Progressive Caucus so quickly if it wasn’t a desire to get this through.
I guess the difference is that the caucus has seen things fall through the cracks so many times; time is running out, we don’t want to leave the Congress without anything on climate. And this bill is not just window dressing. It’s not just saying: Oh, we did something for the sake of doing something. It is substantial. And just getting back to the conversations with Sen. Manchin or the conversations with the White House that I had, I always said: You have to have substantial investment on climate. If you lose that, you’re not going to get the votes. But if you have this substantial investment, I think things will fall into place.
RG: And then going back to Gottheimer and the unbreakable nine, this was this group that wanted to make sure that the infrastructure bill got through, a similar group had also been saying: No salt, no deal — if you don’t expand the salt deduction, which Trump and Paul Ryan had rolled back, which is a state and local tax deduction that if you have a decent income, and you own a home, and you live in New Jersey, or New York, or some other high-cost state, you saw a higher tax bill as a result of this, and this group has been saying no salt, no deal.
And I talked to somebody really close to Gottheimer last night who said that because this doesn’t really monkey around with individual tax rates, and it protects everybody making under $400,000, no changes in their taxes, that that he doesn’t think that Gottheimer, or Suozzi, or others who are in this no salt, no deal are going to hold the bill up.
On the other hand, this is like a 1-2-3-punch to a district like Gottheimer’s, because you’ve got Big Pharma negotiating, drug prices are coming down, you’ve got carried-interest, which hits private equity and hedge funds — that’s North Jersey right there. And then you have no salt.
So is there an appetite, you think, for some opposition in the House caucus? Or do you think that Pelosi has the capacity to kind of push this through given the turmoil that has gone through over the last year and a half?
RK: I think Manchin coming out for it makes it very hard for House moderates or centrists to oppose it. I think Manchin gave people much more room in the House. But when you say: Even Manchin is for it, there is a deal in the Senate, now you’re really gonna block it in the House? I think that’s much harder.
And to your point, this is not really a tax bill. I mean, it’s a bill that’s going to get corporations to pay tax that they owed. And people have been talking about closing the carried-interest loophole for over a decade. I mean, even Donald Trump ran on that. So I just don’t see Gottheimer getting much traction. And you know, we philosophically are in different camps, but he’s a shrewd political actor. And so I think he’s gonna see the tea leaves that this is not a fight that he would succeed in.
RG: And can we talk a little bit about the semiconductor bill as well, that played a big role in this?
How did you feel like that bill came out? And how much does it kind of overlay with your book — “Dignity in the Digital Age,” where you talked about making significant investments in the digital infrastructure of the future here in this country? And people can go back and listen to that episode from several months ago. I didn’t follow the ins and outs of the semiconductor legislation, but it’s a big deal: $52 billion is not nothing. What’s your final read on it?
RK: It’s a big deal. It’s $52 billion in semiconductors and $80 billion on fundamental science investment in AI and quantum computing — in clean technology, by the way, electronics manufacturing, synthetic biology.
Here’s the reason why this is so consequential: One of the biggest reasons we had the hollowing out of the working class, hollowing out of the middle class, 25 percent of loss of wealth since 1980 of the middle class in America, is that we let production go offshore, we offshored it. We basically were beholden to the Wall Street profits, to shareholder profits, all we cared about is lowering consumer prices, increasing profits, and we shipped off the country’s production.
We never did that in what built America’s economy. I mean, what won World War II was a victory of production. What built the middle class economy was mass producing cars, which we didn’t invent, but we mass produced — mass producing jets. We invented the semiconductor and then somehow we said: It doesn’t matter if we let the mass production go offshore.
This is the first step where we’re saying: No, production matters. We need a renewal of production. We need a renewal of new industry, the industries of the future, and this is going to create good paying, working class jobs. And the progressives have had a constructive role in this and saying: It can’t just be corporate welfare, it can’t just be handouts to industry, it’s got to be with strings of no stock buybacks. It has to be with no dividends. It has to be actually investing in creating factories that are creating good paying jobs.
And that was the bargain, actually, of FDR Democrats where you had massive federal investment with the private sector to produce things, but under conditions of good jobs for workers, under conditions of making things in the United States, and many of the CEOS, of course, back then, took $1. But they weren’t just going into CEO pay.
RG: And as I mentioned at the top of the show, McConnell knew that Manchin was a very strong supporter of this legislation and threatened to hold it hostage in order to kill the climate reconciliation talks.
What role do you think that played? Manchin very publicly was furious at that, and said: Basically, Mitch, this is not how you’re supposed to legislate. You vote on this piece of legislation based on its merits. He seemed as angry at Mitch as he was at the Progressive Caucus for holding up the bipartisan infrastructure bill.
Do you think that played a role in solidifying his support for climate reconciliation? Was that something of a McConnell-owned goal there? Because if you look at the timing, clearly they didn’t write this 700-page bill in four hours after the chips bill passed through the Senate. So they had come to a deal at some point before that, and held it until after the Senate could move that through so that McConnell couldn’t blow it up.
What’s your sense of how that played? Because I’m always fascinated by the way that personalities can become hinge-factors in history.
RK: Look, first, this is a time that Sen. Schumer deserves credit. I mean, there are many times where people on the left have been critical saying he’s getting outmaneuvered by McConnell.
RK: Here, it seems that he and Manchin basically outmaneuvered McConnell successfully, and had an answer to McConnell’s utterly cynical strategy, because McConnell voted for the chips bill, he knows that it’s good policy for America, he knows we need to build semiconductor factories here when China’s building 30 of them, Taiwan’s building 19, and — even with this bill — we’re gonna build 12. McConnell knows this is key. So he votes for it, and now he wants to sink it because he doesn’t want the president to get a win on climate or reconciliation?
So I applaud Schumer and Manchin. I don’t know this firsthand, and it’s speculation, but I believe that they were prudent not to announce the framework until chips passed because they didn’t want McConnell’s cynicism to kill it. I do think that they were going to get to a yes. I mean, that was my sense whenever I checked in with Manchin. I mean, it wasn’t 100 percent, but I didn’t think it would happen this soon. I thought it would be, probably, in September. And they were quite far along. And were able to get there right after chips, which is strategically smart.
I will say that the other thing that Sen. Schumer did is they had a lot of meetings between Chuck Schumer and Manchin, and it shows that you really have to roll up your sleeves and get into the details of the negotiation process to get these things done. So I think they both deserve credit.
RG: Last question. You had mentioned the criticism that you were getting from some of your allies on the progressive side for engaging so long and continuing to hold out hope for a deal with Manchin. How did that affect your thinking? Because you’re one of the you’re one of the members of Congress who does seem to engage more with the kind of progressive world than most. What was it like going through that and hearing the criticism? Was there anything that you wanted to say that you couldn’t, that you can say now? Or were you just hoping, man, Manchin better save me here by coming to a deal because otherwise I’m gonna look like a complete clown. [Laughs.]
RK: [Laughs.] Well, more the latter. And there were times I didn’t think that that would happen. But I guess I was just moved by, actually, people in the movement, some of the folks I was talking to at Sunrise and others saying: We have to do something on climate, we can’t come away with nothing, you keep going, you keep trying.
And a lot of people said: Why are you being so gracious to Manchin? Why are you saying, publicly, good things about him? But when you’re looking at negotiating, and you’re trying to get something done, usually insulting the person whose support you need isn’t effective.
And I guess my view is this: I am as bold about the direction of the progressive movement as anyone. I am for Bernie Sanders, Medicare for All. I’m for free public college. I had co-sponsored the THRIVE Act, which talked about $10 trillion of investment over the next 10 years is what we really need for a massive clean tech economy and building a new industrial base. I’m for student loan forgiveness of $50,000, not just $10,000.
But I am also a believer that we have to be progressives who get stuff done. And that we have to get stuff done not just aspirationally for when we have a progressive president and a progressive Congress, but also in the here and now. And this should be seen as a progressive win. There is no way we would have had anything near $300 billion in the ballpark of that if it weren’t for all of the activists, all of the environmental groups, all of the progressive momentum that made that a priority, that insisted that those numbers not just be $5 billion, or $10 billion, or $15 billion — the type of investments we’ve done in the past — but 10 times the order of magnitude. So I wanted to try to get that done, get a win.
And I think the progressives are a governing coalition and we should say that — we should aspire to that — because ultimately that’s what’s improving people’s lives.
RG: Well, Congressman Khanna, thank you so much for joining me.
RK: Thank you, Ryan.
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RG: Deconstructed is a production of First Look Media and The Intercept. Our producer is Zach Young. Laura Flynn is our supervising producer. The show was mixed by William Stanton. Our theme music was composed by Bart Warshaw. Betsy Reed is The Intercept’s editor in chief.
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