How Policy Got Done in 2022

This article appears in the October 2022 issue of The American Prospect magazine. Subscribe here.

Ten years before Joe Biden signed the centerpiece of the Democratic legislative agenda, the Inflation Reduction Act, Sen. Ron Wyden (D-OR) was thousands of miles from home, looking out at the dense forests of West Virginia from an oversized van. Depending on the outcome of the 2012 elections, either Wyden or his Republican counterpart, Lisa Murkowski of Alaska, would take over the leadership of the Senate Energy and Natural Resources Committee. Both of them came to the Mountain State at the invitation of a freshman Democrat not even two years into his term named Joe Manchin.

The committee leaders were asked to visit all of the energy projects West Virginia had to offer: wind, hydroelectric, shale gas, solar, and a strip-mining operation in the ancient southern coalfields. “At one point I almost said, ‘Are you sure? Tour coal plants?’” Wyden recalled.

But Manchin had heard about Wyden’s ability to work across party and ideological lines in the Senate. “You listen to everyone and you have ideas,” Manchin told him.

The energy facilities were spread out across the state, giving the senators lots of time to talk. Manchin told him that whenever energy and climate issues came up, his constituents felt like they were an afterthought, forced to succumb to greater priorities. Wyden, taking the opening, decided to bounce a concept off his colleague.

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For years, lawmakers interested in reducing greenhouse gas emissions had tried to use federal resources to boost the fortunes of specific types of energy production. What if, Wyden said, Congress shifted to a technology-neutral approach? As long as the energy produced drove down carbon emissions relative to the status quo, it would get the credit. “That means solar and wind, but you can do carbon capture, hydrogen, and nuclear?” Manchin asked. Wyden said that was the general idea. Nobody knew in the future what the big carbon reducers would end up being, Wyden explained. A tech-neutral approach could be driven by scientific breakthroughs, and stay in place until emissions receded.

Later that day, at a press conference in Charleston, Wyden referred to an idea that would use “tax funds to put people to work diversifying the country’s energy portfolio.” Democrats held the Senate in 2012, Wyden did take over the Energy Committee, and he and Manchin kept talking.

Last summer, Wyden took a look at a leaked document, a tentative agreement between Senate Majority Leader Chuck Schumer and Manchin on what was then called the Build Back Better Act. It included a line that Wyden recognized: “Spending on innovation, not elimination. Fuel neutral.” Wyden knew that was referring to the conversation he started with Manchin nine years earlier. “We met him where he is,” Wyden said.

Since World War II, Democrats have only had a handful of real windows for governing, most of which were bungled and botched. Harry Truman’s second term was marred by the unpopular Korean War. Jimmy Carter stumbled through a mostly unproductive presidency, Bill Clinton had two modest years, and Barack Obama had two modest years.

That policies must have decades of buildup before Congress can take them seriously is troubling in a world that doesn’t move at the same glacial pace.

The one exception was Lyndon Johnson’s Great Society, when an overwhelmingly Democratic Congress finally outvoted the senior Southern Dixiecrats who held most of the critical committees, and passed one progressive priority after another, from Medicare to federal education and housing funding to anti-poverty aid, and of course three civil rights laws. What all of the Great Society measures had in common was that they had been on the Democrats’ to-do list of unfinished business since the Roosevelt era three decades earlier. And though Joe Biden’s working majority in Congress is minuscule compared to LBJ’s, the same pattern held.

Most of the media tick-tocks about the Inflation Reduction Act focus on the final few weeks, when Manchin swung from rejecting the climate and tax provisions to embracing them, or the final few days, when Sen. Kyrsten Sinema (D-AZ) made demands as the price of her vote. But to really comprehend the IRA, you must go back further. Everything that made it into law, from tackling the climate emergency to improving the Affordable Care Act, from restaffing the IRS and taxing wealthy corporations to reducing the cost of prescription drugs, has origins like Wyden’s van trip to West Virginia, an extended backstory rooted in learning from failures, building coalitions, sacrificing important elements, and sometimes waging furious battles to reach consensus.

That policies must have decades of buildup before Congress can take them seriously is troubling in a world that doesn’t move at the same glacial pace. The thinned-out Inflation Reduction Act left behind a dysfunctional early child care system, an unaffordable higher-education system, a borderline immoral housing crisis, a nonexistent paid leave system, an inaccessible in-home elder care system, and a child poverty rate that is the highest in the developed world. All of these catastrophes were once addressed in Biden’s agenda, which shrunk from $4 trillion in spending to about $400 billion.

But structural factors and lawmaker comfort set the path of legislative policymaking in America. This restricts the ambition of new ideas, often submerging priorities through established systems like the tax code, and building unusual power centers in agencies without subject-matter expertise.

Over two dozen White House officials, key members of Congress, current and former Hill staffers, advocates, and experts detailed for the Prospect this long game of policy development, debate, and resolution. Whether you think the IRA is a world-historical achievement or a massive disappointment, it’s important to understand the dynamics that produce breakthroughs in Washington. Only then can the right lessons be drawn for the next time that window slides open.

SINCE THE MIDDLE EAST OIL EMBARGO OF 1973, presidents have been obligated to vow energy independence as a national-security imperative. Some forward-thinking Democrats wanted that shift to serve an additional goal: reducing carbon emissions. A freshman representative from Tennessee named Al Gore held the first hearings on global warming after his 1976 election. After NASA climate scientist James Hansen warned Congress in 1988 of the dangers of climate change, the desire to solve the challenge became more broadly shared. (Biden is fond of mentioning that he authored one of the nation’s first global warming bills, which established a presidential-level task force back in 1987.)

President Clinton’s effort to tax the heat content of energy (measured in British thermal units, or BTUs) passed the House but fell apart amid endless concessions to corporate lobbyists and intraparty sabotage. Under Barack Obama, Democrats labored to pass the Waxman-Markey Act, more comprehensive legislation that would have capped carbon emissions and established a system for less-polluting entities to trade allowances to higher emitters. But again, a Democratic White House compromised the proposal into mush, as a classic New Yorker article detailed. Obama’s team consistently gave away provisions for free that Democratic lawmakers wanted to use as trade for Republicans to support the bill; in the end, the White House did little to prioritize climate.

The big lesson Wyden took from Waxman-Markey’s failure was that putting a price on energy, however efficient economists believed it to be, just wasn’t a good rallying point. Even in blue states like Washington, prices on carbon could not pass in initiative campaigns. “As I talked to the moderates and conservatives in the Senate, they said, ‘This doesn’t add up for us. We just don’t really see a path to explaining how it would be good,’” Wyden told me. It also was too easy for industry to just carve themselves out of caps or mandates.

Wyden was in a unique position, as a senior senator on both the Energy and Natural Resources Committee and the Finance Committee, the main tax-writing panel. There was an existing architecture for boosting clean energy through the tax code. The production tax credit for wind energy was established in 1992, and extended and expanded 12 times thereafter. In 2005, an investment tax credit for renewables built on an existing ITC, and also limped through multiple reauthorizations.

“I set out from the beginning to get as close to throwing the energy provisions of the tax code in the garbage as I could,” said Wyden.

The short life spans and uncertain future made investors wary of dumping money into clean energy, only to have the tax benefits pulled later. “Renewables are temporary and the stuff Big Oil cares about is permanent,” Wyden said. “Why do tax [credits] for renewables have the shelf life of a carton of eggs?” A patchwork of 44 different energy tax measures, all with different timelines and rules, was difficult to decipher and impeded the flourishing of new technologies. Even with the downsides, renewables became cheaper than coal, but to accelerate an energy transition consistent with climate goals, investment incentives had to be fixed.

“I set out from the beginning to get as close to throwing the energy provisions of the tax code in the garbage as I could,” said Wyden. His bill, which took five years to construct, replaced all energy tax credits with three main buckets: clean electricity (including grid improvements), clean fuels, and energy efficiency in buildings. The credits would be technology-neutral: Anything that brought emissions down could qualify. They could be given as direct-pay grants to electric utilities that didn’t pay taxes, like public power operations and other tax-exempt facilities. And they would stay in place until an emissions target was reached, creating that long-desired certainty for investment.

The biggest enthusiasts thought the investment impact would far outstretch the government outlay. “When you score a tax credit, you say the tax credit is $1 billion,” said Reed Hundt, a former chair of the Federal Communications Commission who co-founded and chairs the Coalition for Green Capital. “You multiply them by 7, 8 times to get the investment number.” So a few hundred billion in tax credits would sum to trillions in investment, by his calculations.

This flipped the typical script used to defeat climate policy. Instead of taking fire for establishing a tax on energy, lawmakers could highlight the job creation potential, the prospect of America becoming a global export leader, and the resulting lower costs for heating and fuel. The framing dates back to Van Jones’s “green jobs” pitch of the 2000s. “The focus always kept coming back to this as an opportunity for domestic manufacturing that will make things,” Wyden said.

It also had a model that Democratic lawmakers could easily understand, and that could be quickly spun up. A Republican president can reverse regulations; taking money from industries that have already retooled would be a harder sell. “People are very comfortable building policy through the tax code,” said Jamal Raad, executive director of Evergreen Action, which has worked closely with the White House and Congress on climate policy. “The idea of a whole new program is scary. Lengthening and extending a tax credit that exists, or lifting up a state policy that worked … Something with a track record is so much easier and less scary for a politician.”

In a stroke of good fortune, Wyden became the top Democrat on the Senate Finance Committee in 2014, when Sen. Max Baucus (D-MT) was named U.S. ambassador to China. His concept was first introduced as part of comprehensive energy legislation in 2015, but would be split out as a Finance Committee bill, the Clean Energy for America Act, in 2017. The initial versions paired the emissions-driven incentives with the repeal of multiple fossil fuel tax breaks, totally redesigning the energy tax code.

Every two years, Wyden added new co-sponsors; Manchin never signed on, but his and Wyden’s staff shared ideas throughout. Wyden initially thought he could win Republican support, but Senate Republican Leader Mitch McConnell (R-KY) shut that down. Clean Energy for America had to incubate, waiting for its moment.

THE WYDEN BILL CAME AT A TIME when what everyone in Washington refers to as “the groups”—the collection of think tanks, single-issue advocates, and progressive organizations that signal priorities, and in many cases write policy—were spending the years after Waxman-Markey’s demise simmering with anger. Waiting until Democrats regained governing power in Washington again was incompatible with gloomy scientific assessments, raging floods, and extreme heat.

Many activists, desperate to raise awareness, grew militant: getting arrested in front of the White House by the hundreds, camping out for weeks to block pipeline construction, walking out of schools in protest. After Democrats won back the House in 2018, the Sunrise Movement immediately occupied incoming Speaker Nancy Pelosi’s office to demand prioritizing the climate emergency. Young people in particular signified rising concern about global warming among the party base. And large donors were perhaps even more convinced about the crisis, with a bigger megaphone to make it happen. Democratic lawmakers were hearing one imperative from the people they listen to the most: Act on climate.

The groups had motivation, momentum, money, and a seemingly endless supply of bodies for the fight. They didn’t have a plan, as Robinson Meyer detailed in a 2017 Atlantic article. They hadn’t pulled together anything on decarbonization that could forge both a policy direction and a slogan for action. Environmentalists were still talking about carbon taxes, standards, and mandates. There was no consensus about whether to push to ban the dirtiest types of energy or to subsidize the cleanest.

The slogan came first: the Green New Deal. But it was more aspiration than blueprint. Preparing for the next Democratic majority, the groups convened meetings of labor, environmental justice groups, and cross-factional green groups, from the left to the mainstream, to fill in the details. The conversations focused on common ground and past successes, and resulted in three basic priorities: investment, justice, and standards.

Though now thought of as a comprehensive welfare-state transformation to a zero-emission economy, the initial Green New Deal concept placed trillions of dollars in public investment at its core, in line with the New Deal’s expansion of industrial policy, through the Reconstruction Finance Corporation and other interventions. Investment had a modern proof of concept in the Obama stimulus package’s Energy Department loan program, which helped Tesla thrive and had begun to build a clean-energy industry. In addition, “green banks” providing capital for clean-energy technologies, which then-Rep. Jay Inslee had introduced as an amendment to Waxman-Markey, were being assembled in places like Connecticut and New York. And Congress had been granting tax credits to consumers to purchase electric vehicles since 2008.

An investment-led approach to lowering emissions could bridge divides within the party. The Democrats who would eventually champion green finance were people like Sens. Mark Warner (D-VA) and Chris Coons (D-DE), who are often viewed skeptically by the left. As one progressive involved with climate policy put it, “We call it industrial policy, they think of it as industry.”

The justice piece foregrounded displaced workers and frontline communities that have traditionally been brutalized by energy transitions. Inslee was now governor of Washington, and his 2019 clean-energy law tied its incentives to high workforce standards like prevailing wages and project labor agreements, aligning labor with the transition. Meanwhile, environmental justice in federal policy had often been relegated to executive orders, but activists wanted direct appropriations, with the goal of at least 40 percent of all climate spending flowing to marginalized communities, an idea known as “Justice40.”

The groups thought standards remained critical to reach emissions goals, though not with a price on carbon. Clean-electricity standards, requiring certain levels of zero-carbon energy by a date certain, had become popular at the state level. If the best way to realize a net-zero future was to make all electricity clean, while electrifying polluting sectors like transportation and buildings, the best way to ensure the transition was to set a specific date for zero-carbon power.

The presidential primary forced ambitions higher and created a pseudo think tank for the green revolution. “Multiple candidates with multiple climate plans, that had never happened before,” said Raad, who became a top official on the most climate-centric of those campaigns, for Inslee. “Something very generative came out of the ideas in the presidential campaign that built that consensus.” Plus, the need for economic recovery post-pandemic gave oxygen to green energy as a job creation engine. For a movement that had faced decades of defeats and inattention, the stars were aligning.

AFTER TWO SENATE VICTORIES IN GEORGIA gave Democrats the barest of majorities in the Senate, Wyden assembled the members of the Finance Committee and told them, “It’s time to go.” He knew he’d still have to appeal to Manchin, who was now chairing his old seat on the Energy and Natural Resources Committee. But Wyden had years of discussions to fall back on to earn Manchin’s trust. “I think with some of the other issues, everyone worked on the policy and hoped Manchin would come along in the end,” said one senior Finance Committee staffer. “With clean energy, particularly because of 2010, it was designed with him and other members of the caucus in mind.”

Parochial issues would eventually come into play. Manchin didn’t want to phase out existing fossil fuel subsidies that his industry friends coveted, instead preferring to layer the clean-energy tax credits on top. He also made sure that the investments covered carbon capture and hydrogen, technologies that could extend the life of fossil fuel production. (Industry CEOs brought up carbon capture when meeting with Wyden.) And he added a one-sentence rider that offers $700 million for methane emission reductions at “marginal” oil and gas wells; the biggest owner of these in the country, Diversified Energy Co., happens to have given Manchin more campaign donations than any other politician this election cycle.

Standards were another high-profile casualty. Because Republicans would reflexively oppose anything climate-related, Democrats had to use a process called budget reconciliation, a once-a-year way to avoid the Senate filibuster and clear legislation with a simple majority. But everything in reconciliation would also have to be primarily budgetary in nature, channeled into taxing and spending authorities.

Sen. Tina Smith (D-MN) had introduced a clean-electricity standard in 2019, but she had to transform it into a “clean electricity performance program” (CEPP), which would reward power companies that raised their percentage of clean electricity and penalize those that didn’t. Modelers estimated that this use of carrots and sticks would get the country to 82 percent clean electricity by 2030. Smith worked hard to get the caucus on board, but Manchin wouldn’t agree to paying utilities to go green and punishing them for using coal and oil. “He told me he just couldn’t get there,” Smith recalled.

There’s a strong case to be made that CEPP drew incoming industry fire away from the other elements of the proposal. Polluters concentrated opposition on standards, which had to die so the rest of the bill could live. “You don’t want to be the sacrificial policy,” Smith told me. “But at the end of the day you have to focus on results.”

Justice advocates fared a little better. Labor got bonuses written into the tax credits if recipients offered prevailing wages and used a threshold percentage of qualified apprentices. Domestic-content requirements for electric-vehicle rebates also leans the bill toward homegrown industry. Environmental justice groups secured extra tax incentives for “energy communities” that already host fossil fuel projects.

The White House estimates that $60 billion out of the $369 billion in climate funding goes toward environmental justice. But that sums to about 16 percent, well short of Justice40. There’s also one deviation from the “tech-neutral” principles of the policy: a measure that bars any leasing for renewable energy on public lands and waters unless millions of acres are first offered for leasing to oil and gas. More carbon dioxide will flow into the atmosphere as a result, particularly in poor communities of color. Rather than the investment/justice/standards model, the bill came out closer to investment/investment/investment.

In that context, the policy approach with the oldest pedigree was the one that held up. Wyden estimates that he got 90 percent of what he initially laid out in Clean Energy for America. “At the end, I talked to environmental folks in D.C. and Oregon,” he said. “And I’d say, ‘There will be a couple things in here we’re not going to like’ … I remember one group who said, ‘If you can get anything resembling what you wanted, it would be a big part of the future.’”

THE INFLATION REDUCTION ACT’S OTHER major policy advances shore up the signature achievement from the last Democratic window of opportunity, the Affordable Care Act. Even before that law was signed, it was clear that the insurance exchanges, designed for people who made too much money to qualify for Medicaid but weren’t offered coverage at work, were inadequately designed.

To save money in the ACA, premium subsidies to help people afford insurance phased out too quickly, with individuals making very low wages needing to pay thousands of dollars annually. In addition, only households making less than 400 percent of the federal poverty level (currently $54,360 for an individual and $92,120 for a family of three) qualified for subsidies. Go even one dollar over the “subsidy cliff,” and in some parts of the country, you would have to spend 20 percent or more of income on health insurance. Though Democrats were selling the program as universal, affordable coverage, it was neither.

As a candidate, Joe Biden made fixing the subsidies a primary plank of his health care plan, adopting a consensus hammered out over the intervening years. There were two broad principles: Make the subsidies more generous at the low end of the scale, and get rid of the subsidy cliff, so nobody on the exchanges would pay more than 8.5 percent of their income on health insurance. The American Rescue Plan, Biden’s early pandemic relief legislation, adopted the subsidy fix for two years. It attempted to fulfill a moral promise Democrats had made for decades, that the government would make sure that no American would be priced out of the health care system.

The Build Back Better Act would have made the subsidy fix permanent. When that faltered, enhanced subsidies were due to expire at the end of 2022. Exchange customers would get notices in October, just a month before midterm elections, informing them of massive cost spikes. Once Democrats figured out the political implications of creating their own October surprise, they found a way to insert it into the IRA, spending $64 billion to extend the subsidies to 2025.

The other unfinished business from the ACA was lowering prescription drug prices, a Democratic promise since at least Bill Clinton’s health care plan in the 1990s. Republicans under George W. Bush passed the Medicare Modernization Act in 2003, which in a backroom deal added a privatized prescription drug benefit to Medicare, but barred Medicare from actually negotiating pharmaceutical prices. Billy Tauzin, the Republican chair of the House Energy and Commerce Committee who negotiated the deal, resigned a few months later to become the head of PhRMA, the industry’s top lobbying group.

House Democrats promised in 2006 that they would pass Medicare negotiation for prescription drugs in the first 100 hours of regaining the majority, as part of their “Six for ’06” agenda. But Republican obstruction made Senate passage impossible. The ACA offered another opportunity, but President Obama opted to avoid criticism from the pharmaceutical industry, cutting a deal with them instead that maintained the ban on price negotiation, in exchange for an excise tax on drug revenues and allowances to reduce senior out-of-pocket costs.

The Inflation Reduction Act’s other major policy advances shore up the signature achievement from the last Democratic window of opportunity, the Affordable Care Act.

Continued failures in the face of a no-brainer reform that Democrats promised to secure year after year demonstrated the sheer power of the industry. Party leaders knew they had to actually accomplish this one thing, or risk having voters tune out all their promises.

Wyden, a longtime senior advocate who co-founded the Gray Panthers in Oregon before entering Congress, was again at the center of the solution. Though most media analyses of the IRA correctly praise Senate Majority Leader Chuck Schumer for doggedly getting Manchin to agree to a deal, on the policy side, politicians in the trenches like Wyden are mostly responsible for what advanced.

After becoming chair of the Finance Committee in 2014, Wyden sat down with one of the senior Republicans on the committee, Chuck Grassley, who flat-out said his party wouldn’t go for Medicare negotiation. “I said, ‘I don’t know how there can be a bill,’” Wyden recalled. “And Grassley looked at me and said, ‘You’re a smart guy, think something up.’” So Wyden designed a provision to cap the annual cost increase of any prescription drug to the rate of inflation. Prices for hundreds of drugs went up more than three times that on average. Under Wyden’s concept, the government would claw back anything above the inflation threshold. The hope was that, if drug companies wouldn’t see any benefit from jacking up prices, they would start to moderate. Wyden pitched it to Grassley, who said, “I hadn’t thought of that.”

The Wyden-Grassley bill, introduced when Grassley took over the committee in 2019, started with the inflation cap as a foundation, and added a limit on out-of-pocket expenses. Both of these only benefited seniors, major consumers of prescription drugs but not the entire population. And it just limited price increases; only negotiation could bring them down.

Designing Medicare negotiation became a pitched battle in the House. Throughout 2018, progressives had been building support for a proposal from Rep. Lloyd Doggett (D-TX), which would pull drug patents from companies if they refused to negotiate. But when Democrats regained the House majority, Pelosi’s powerful health care staffer Wendell Primus short-circuited that idea. His initial proposal relied on a third-party arbitrator to settle negotiations. Oddly, the arbitrator was pegged as the Government Accountability Office, which has no expertise in drug pricing or arbitration.

The plan was based on a 2008 study in Health Affairs and written by the think tank of former House stalwart Henry Waxman with a funding grant from the Arnold Foundation, a philanthropy effort run by a former hedge fund manager. It spoke to the relative poverty of policy ideas inside the Capitol, and the dominant role of the groups. But progressives balked at the arbitration measure as a giveaway to industry that would lead to higher prices. A compromise used a high excise tax on gross sales as the forcing mechanism for negotiation, an idea from then–Center for American Progress health adviser Topher Spiro.

Pelosi combined price negotiations with the Wyden-Grassley provisions in her bill, known as H.R. 3. But there remained several industry-friendly elements, intended to win the support of the Trump administration, which had paid lip service to lowering drug prices. Even though Trump had turned away from the bill by the end of 2019, the industry concessions stayed in, like a floor of only 25 drugs per year being negotiated at the outset. This suggested that the drug industry’s favorite Democrats, not Trump, were driving the outcome.

Progressives threatened to tank the bill without changes. The left’s top presidential candidates, Elizabeth Warren and Bernie Sanders, came out against Pelosi. In the end, progressives had modest success, getting the minimum drugs negotiated to increase to 50 by year two, and opening up prices from negotiation and the inflation cap to all payers instead of just Medicare. The bill passed the House in 2019, leashing the entire caucus to a consensus framework.

Drug price reform was a strong candidate for the Biden governing window, because unlike practically everything else Democrats proposed, it saved the government money that could offset other spending. But pharma-friendly Democrats went back on the deal. Their ringleader, Rep. Scott Peters (D-CA), said he’d only voted for H.R. 3 to advance the debate; now that it might actually become law, he wanted to water it down some more.

Peters, Kathleen Rice (D-NY), and Kurt Schrader (D-OR) were enough of a bloc on the House Energy and Commerce Committee to prevent the entire drug price reform from advancing. Peters unveiled an alternative plan that would only allow negotiation on drugs that had gone off-patent, preserving the patent monopoly that is the source of high industry profits. It also limited the inflation cap to Medicare. Senators like Sinema and Robert Menendez (D-NJ) were simultaneously weakening the bill from the Senate side.

The final compromise largely swallowed the pro-pharma concessions. Only ten drugs would get negotiation initially, up to 20 drugs in subsequent years. The reference price for negotiations became a percentage of the average manufacturer price in 2021, when prices were already high. Reconciliation rules meant that only public programs like Medicare could benefit. And patients won’t see the fruits of negotiations until 2026. With the votes of the holdouts needed for passage, progressives could only watch. “It’s about how much of a margin you have. Any one person can block stuff,” said Rep. Pramila Jayapal (D-WA), who personally fought to improve the bill for years.

Despite the fractious debate, the final agreement secured an elusive victory against the drug companies, breaking their aura of invincibility. Congress put itself on the hook for lowering drug prices, and can improve the mechanisms now in law to do so in the future. And by making H.R. 3’s design better—particularly by killing the arbitration idea—progressives made it easier to build on success. “The whole thinking at the time,” said a senior House staffer, “was we’re not governing now but what we pass in the House will be the basis.”

SINCE THE ADOPTION OF A CONSTITUTIONAL AMENDMENT establishing the right of government to impose income taxes in 1913, practically every administration has fiddled with them in some manner. Going into the 2020 election, the expectation was no different. Every Democratic candidate had devised a tax plan for repealing the Trump tax cuts, yielding trillions of dollars for their growing ambitions.

One of those candidates was Elizabeth Warren, and her campaign was a paradigmatic example of using the public spotlight to push policy solutions to the center of the discussion. Getting ideas on the agenda is difficult in a Senate where seniority is everything, and earned over decades. But as a presidential candidate, Warren could command a microphone, and mainline an idea.

On taxes, broad majorities agree that rich people and large corporations pay too little. Warren’s team could easily locate examples of companies like Amazon or Occidental Petroleum reporting billions in earnings and paying no taxes; the phenomenon had been reported on for decades. It was largely due to deductions and exemptions in the code that reduced tax liability, but the public read it as unfair.

The old way of thinking was that you could fix this in two ways: Close the loopholes, or impose higher nominal rates to capture more earnings. Instead, Warren put a new spin on an old idea: the corporate alternative minimum tax, which was part of the Reagan 1986 tax reform but was zeroed out by Donald Trump. She introduced the plan in April 2019 as the real corporate profits tax. Large corporations would have to pay a minimum rate, but it would be based on “book profits” reported to shareholders. “Corporate CEOs shouldn’t be able to brag to investors that profits are soaring while telling Uncle Sam they don’t owe a dime,” Warren told me.

The minimum tax presented to the public as relatively low and therefore reasonable. But even a low rate on the largest companies could take in $1 trillion over a decade, Warren’s team estimated. And tying it to book profits could reverse the usual dynamic: Corporations wanted to brag to investors about their terrific financial performance, so they would find it hard to underreport profits. Smaller businesses paid higher effective tax rates, so a minimum tax on large companies would also level the playing field.

During the 2020 primary, the talking point that Amazon paid no taxes became too irresistible to practically everyone, including the eventual winner, Joe Biden. It was one of his favorite talking points, and after the primary, he adopted a corporate minimum tax of 15 percent on companies earning over $100 million into his campaign platform. The Warren campaign had set the terms of the debate. “There’s no doubt that promoting this idea on the campaign trail helped increase its visibility and change hearts and minds both within the Democratic Party and among the American people,” said Warren.

The next hurdle was getting everyone underneath Biden to accept it. Careerists at the Treasury Department considered it inefficient and simplistic; if corporate taxes were a complex problem, the solution just had to be more complicated. Warren had to work to convince the president’s aides to keep the tax alive. Getting it into the president’s fiscal year 2022 budget was a big moment. Unfortunately, Treasury had hacked away at it, thinning it down to raising only $148 billion over a decade. But Warren saw its very inclusion as the key. “[It] was an important early show of support from the president that helped give the proposal strong momentum,” she said.

Warren went shopping for a partner who could appeal to the more moderate elements of the caucus, eventually approaching Sen. Angus King (I-ME). She told King that it was popular policy with a path to success, and his involvement would increase the odds. King decided to come aboard. Warren told me that the bill wouldn’t have become law without King, particularly due to his ability to get senators from across the Democratic ideological spectrum to listen to the idea on its merits.

Wyden, as Senate Finance Committee chair, placed all the options for raising revenue onto a menu, something that could be chosen from in the final compromise. But while Warren and King were building support last fall, a howitzer from Arizona blew a hole in that menu. Kyrsten Sinema said that she would not accept any increase in individual and corporate tax rates.

But the corporate minimum tax was not a rate increase. Warren saw her moment and made the leap to talk to Manchin and Sinema directly about her idea. She demurred at telling me the details of the conversations, but in talking about the book profits tax she’s always foregrounded the concept of fairness. “Today, the tax code is so riddled with holes that wealthy individuals and large companies persistently dodge paying anything regardless of marginal tax rates,” she said. “That’s not fair for families and businesses that do pay their fair share.”

In late October 2021, just six days after news leaked about the Sinema rejection of tax rate hikes, she released a statement saying that she could agree to the corporate minimum as a “commonsense step.” Manchin had already privately agreed to the concept three months earlier. By default, it became the most attractive item on the menu. Sinema hacked away at the details at the end, throwing in a few exemptions. Warren’s team believes that having to wait a year after the consensus moment exposed the tax to lobbyist regrouping. But the lobbyists couldn’t kill it once everyone was on board.

Every other tax policy that made it into the Inflation Reduction Act shared a similar, years-long trajectory. Democrats had been angry since 2017 that the Trump tax cuts failed to surge investment and mainly led to companies buying back their own stock to reward shareholders and executives. So they put a 1 percent buyback tax into the bill. This will likely prove too small to deter buybacks, and really only cuts the government in on the buyback scam. But it is a modest first step to taxing returns to shareholders, which are too transparent to be avoided.

Since Reagan, Democrats had despaired about an underresourced IRS, particularly after Tea Party Republicans took Congress in 2010. Significant effort went into defining the “tax gap,” the amount of taxes that went uncollected every year. The Senate Finance Committee got IRS commissioner Charles Rettig to admit in 2021 that the tax gap approached $1 trillion per year. An investment in the IRS to fund enforcement, it was proposed, would bring back hundreds of billions of dollars. That also made it into the bill.

Even a small provision requiring the U.S. to study a free public tax filing option had been a fight as far back as 2002, with the tax planning industry co-opting it into a program that relied on them and then making it harder for taxpayers to find it and avoid charges. Bills had been filed continuously in the 2010s, with free-file always getting dropped at the last minute.

Certainly, there were last-minute additions to placate lawmakers, like drought assistance for Arizona or the replenishment of the Black Lung Disability Trust Fund, which has unique benefits for Joe Manchin’s state. But broadly speaking, the final agreement deals with health care, which Democrats had been working on for a hundred years; energy, which Democrats had been working on for about 50 years; and taxes, which every president works on periodically. These issues have deep wells of policy networks, a common language that party members understand, and a consensus forged in the blood of decades of fights. Manchin might have thought he had free will when he narrowed the scope of Build Back Better to these items, but he was pulled by a strong current.

THERE ARE SERIOUS CONSEQUENCES to running a country this way. Policy having to prove itself over decades in the congressional octagon makes government inflexible to growing challenges. An opioid addict or a city manager whose water source has dried up doesn’t want to hear that it’ll take another few years to get everyone in Washington comfortable with solving the problem. “The reality is that we don’t have decades to address the existential threat of the climate crisis,” said Sen. Smith. The collateral damage of Capitol Hill’s sloth-like tendencies is real.

The slowness of Washington puts pressure on every window for governing. It’s in some ways unfair to force the narrowest Democratic majority in history to make up for the failures of 50 years of policy. But the leaders shouldering this burden helped institutionalize the tendencies that bog policy advances down in the mud.

The party’s history of incremental expansion—Social Security, Medicare, Medicaid, and many more programs started much smaller and built over time—means that a lot of policymaking just builds on existing structures, correcting errors and inadequacies. You see that in the IRA with fixing the inadequate subsidies in Obamacare, and fixing the clean-energy tax credits that failed to properly incentivize investment. Even the breakthrough Medicare negotiation on prescription drugs is rather weak, and will itself need to be improved over time, probably in the next window for Democratic governing.

This inch-by-inch manner of legislating dulls policy innovation. An institutionally conservative environment where lawmakers go with what they know means that approaches rarely get rethought. The ACA leaves intact the problem of most Americans relying on their employers for health insurance, in an era of ever fewer long-term jobs. But it’s familiar, and overhauling it would embarrass a previous generation of Democrats and the groups that designed it. So it stays in place, with minor improvements. It’s the familiar problem of path dependence.

More critically, because budget reconciliation is the only way to circumvent the filibuster, an enormous amount of policy gets pulled through the tax code. State “laboratories of democracy” can raise the profile of new approaches, but the path dependence flows more to making everything a tax credit, granting enormous power to the Treasury Department, which sets the tax rules through the IRS. “Treasury plays an important role of what is the economic policy of any given administration,” said one progressive leader. “The more you do stuff like this, the more it’s true.” That creates its own bias, as Treasury is the agency most wedded to an economic style of thinking about policy matters, one that often values efficiency over equality.

It’s become received wisdom that the tax code is more resistant to a changeover in power. Getting a tax-based clean-energy program in place, and getting businesses to commit to that reality, can forestall the inevitable efforts from Republicans to throw it out. This reveals a truth about Washington: Progress comes on the heels of getting one set of corporate interests to offset another. “I would love to have a new agency,” said the progressive leader. “But at some level, the political economy is so messed up, if you want to make things happen, using the tax credit, submerged state apparatus is superior for pragmatic reasons.”

The reconciliation escape valve, because it’s available only once a year, also leads to cramming dozens of items into a single bill. In the Great Society or New Deal eras, momentum grew through dozens of separate victories. The politics get trickier with one multitrillion-dollar bill that is impossible to explain. “It makes it harder to communicate what you’re actually accomplishing,” said Tré Easton, a former legislative aide to Sen. Patty Murray (D-WA), now a progressive strategist at the Battle Born Collective. “I work in this stuff and I still have trouble explaining these bills.”

Reconciliation was never intended to be a mechanism for domestic policy advancement, let alone the only one. The comprehensiveness of the initial $4 trillion Build Back Better package was both a strength, because everyone had a stake in it, and a weakness, because the ultimate price tag was going to be way too expensive for the tipping-point senator, Joe Manchin. Reconciliation rules also stipulate that all spending must zero out after the ten-year budget window. This is why you see a lot of policies in reconciliation sunset, to game that requirement, or start later, to reduce the overall cost. This just makes policy worse to satisfy an artificial Senate rule. It also forces lawmakers who want to boast about policy victories to explain why nobody will see the benefits for years.

Budget reconciliation was never intended to be a mechanism for domestic policy advancement, let alone the only one.

As a policy matter, reconciliation walls off regulatory measures from public investment, subordinating goals like clean air or climate mitigation to federal budgetary authority. “It’s not as efficient than if you had all of the tools at your disposal,” said Sen. Smith. “That is the cost of obstruction in the Senate that I think we have to go to work to fix.”

Killing the filibuster would solve a ton of policy problems. But even without it, lawmakers are just going to be more inclined toward policies with a track record that have been vetted and tested, even if it leads them down the same path repeatedly. Even slight variations on an existing theme, like Smith’s rebuilt-for-reconciliation clean-energy standard, encounter bumps in the road.

Sometimes, new trails can get plowed open. “When I first came to the Hill, climate was this lefty, fringe-y thing,” said a Senate leadership aide. “It’s where I give progressives a lot of credit. They take these ideas and they push.”

One progressive House staffer pointed to a moment in the House Education and Labor Committee markup for Build Back Better, when progressives and swing-district Democrats joined forces to ensure that the child care benefit capped expenses at 7 percent of income for all families. The bill initially had a means test at 150 percent of the state median income. The progressive/swing-district coalition got that eliminated. (The means test reappeared in the final version as a phaseout after three years, which became a huge point of contention that was ultimately changed again. Policy newness generates a lot of these dynamics.)

The child care policy ended up falling out of the bill, but the House staffer explained how getting the House on the record for universality will matter down the road. “It is where we start the next conversation when we have a trifecta with a bigger majority,” the staffer said. “We will be able to say, ‘Every House member passed a bill with universal child care.’” Similarly, the one-year enhanced Child Tax Credit in the American Rescue Plan, delivered monthly and able to reduce child poverty by an estimated 40 percent, helps build the case for making it permanent next time.

As Wyden explained to me, the act of losing prepares you for winning. He had a big policy loss in Build Back Better: the Billionaire Income Tax, a hybrid of a mark-to-market tax on annual asset gains that he had been pitching for years and Elizabeth Warren’s two-cent wealth tax from her campaign. The idea was killed within about 24 hours after it was floated. But Wyden thinks the work that went into crafting the idea into legislation will eventually pay off. “If you have a big idea, you’re persistent, you get the facts and stay at it,” he said.

That’s the position of family care advocates and child poverty advocates, building momentum for that next opening of the window. Wyden offered three pieces of advice: Figure out what went wrong, boil down the ideas that can get broad support, and build your coalition. “Call me old-fashioned, call it outdated,” he said, “but I think that’s what public service is all about.”