Democratic Senator Joe Manchin.

Democratic Senator Joe Manchin.Credit:AP

Manchin and fellow Democrat Schumer said the measure would raise $US739 billion ($1 trillion) in revenue over 10 years,the biggest chunk coming from a 15 per cent minimum corporate tax.

It would spend $US369 billion on energy and climate initiatives and $US64 billion to extend expiring federal subsidies for people buying health insurance. That would leave more than $US300 billion to reduce federal deficits over the decade.

The Senate would consider the sweeping package next week,said Schumer and Manchin,who had negotiated for months and had seemed deadlocked over anything but a far smaller measure.

Senate Majority Leader Chuck Schumer.

Senate Majority Leader Chuck Schumer.Credit:AP

Tellingly,Democrats were calling the measure “The Inflation Reduction Act of 2022”.

Polls show that inflation,as embodied by petrol prices that surpassed $US5 per gallon before easing,have been voters’ chief concern. For months,Manchin’s opposition to proposed,larger packages has been premised in part on his worry that it would fuel inflation.

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Manchin’s resistance had long derailed broad legislation on the proposal’s issues.

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Manchin,one of the most conservative Democrats in Congress,just last week said he would only agree to far more limited legislation curbing prescription drug costs and extending federal subsidies for healthcare costs.

He said he was open to considering a broader compromise on environment and tax issues after Congress returned from a summer recess in September,an offer that many Democrats thought dubious.

There was no immediate explanation why Manchin had suddenly agreed to the far broader package.

In December,his resistance derailed a wide-ranging $US3.5 trillion,10-year social and environment bill that was Biden’s top domestic priority.

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In his statement,Manchin said the new measure “would dedicate hundreds of billions of dollars to deficit reduction by adopting a tax policy that protects small businesses and working-class Americans while ensuring that large corporations and the ultra-wealthy pay their fair share in taxes.”

News of the agreement came hours after the Senate passed sweeping legislation to subsidise the domestic semiconductor chip industry with several Republican votes.

Last month,top Senate Republican Mitch McConnell promised to block the “Chips bill” as it is known,unless Democrats abandoned their plans for a reconciliation bill like the one Manchin and Schumer outlined. The House will vote on that bill on Thursday,but Republicans don’t have the votes to block it on their own.

Republicans were quick to criticise the move. “I can’t believe that Senator Manchin is agreeing to a massive tax increase in the name of climate change when our economy is in a recession,” Senator Lindsey Graham said.

McConnell also criticised the bill,saying it would “kill many thousands of American jobs”.

AP,Reuters

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