Bill’s Back…Better?

The remains of President Biden’s Build Back Better agenda were revived with last week’s Senate passage of the Inflation Reduction Act, which is expected to become law.

Here’s the view from our experts on what the bill means in the near and short term for Americans: 

• The climate and clean energy provisions in this bill take the type of meaningful action on climate that the market—and Democrats—have been demanding for some time. While the package does not adopt mandatory reduction targets—and the full effect of many of these provisions won’t be felt before the midterms—getting this bill across the finish line will likely check the box on climate action for many voters. 

• Democrats have directly decreased health care expenses for millions of Americans while upholding the promises of the ACA at a time of rising costs in many sectors. While passage of the bill offers Democrats some much needed momentum, its impact on the midterms is unclear; most of its health provisions won’t go into effect before next year.

The bill’s climate provisions:

• Adopt a graduated scale for some clean energy tax credits.

• Adopt, for the first time, a series of technology-neutral, performance-based energy credits, creating flexibility for any technology to claim a credit if certain emissions reduction thresholds are met.

• Include credits that will spur growth in targeted sectors, including hydrogen, sustainable aviation fuel and energy storage. 

• Include $60 billion in environmental justice funding.

After years of piecemeal extensions, energy tax policy will remain largely static for the next 10 years (barring Congressional action), allowing project sponsors and technology developers to plan against a longer-term horizon. 

Health care-wise, the bill:

• Extends Affordable Care Act (ACA) health insurance premium tax credits through 2025, greatly increasing health insurance affordability for many Americans.

• Allows Medicare to negotiate lower prices for some high-cost prescription drugs starting in 2026.

These provisions will decrease costs for seniors and help millions of Americans avoid higher health care premiums. Democrats’ attempts to cap the out-of-pocket cost of insulin broadly, however, were blocked.

On the heels of House Speaker Nancy Pelosi’s historic Taiwan visit last week, FGS Global teams in Shanghai, Beijing, Hong Kong, Washington and Berlin offer their outlook on its ramifications for global tensions and the business environment at large.

• Our assessment is a U.S.-China military conflict over Taiwan is unlikely in the near future, but the next few years – some say the next 1,000 days – will continue to generate uncertainty.  

• China announced large-scale military exercises surrounding Taiwan in response to the visit.

• Despite these actions and associated warnings from each side, the U.S. and China are demonstrating they want to avoid a serious conflict over Taiwan.

• Nonetheless, the visit heightened the sense of distrust and strategic competition that now frames the U.S.-China relationship. Taiwan will remain an issue that could lead to conflicts between the two countries, both deliberate and accidental.  

• Pelosi’s visit will reinforce Chinese suspicions of U.S. intentions towards Taiwan. And China’s military activities will strengthen the U.S.’s doubts that China’s intends to unify with Taiwan by "peaceful" means. 

• Looking ahead, tensions over Taiwan will intensify as each side moves to test the other and defend its red lines. Actions by either side—coupled with charged rhetoric—will cast uncertainty over the investment climate in both Taiwan and China. 

• Companies should: 

  • Closely consider the geopolitical environment shaping the business environment

  • Understand the risks to their value chains in both Taiwan and mainland China (and for Chinese companies, their U.S. investments) and 

  • Engage in scenario planning. 

The investment climate for foreign companies will remain officially unchanged, though less positive and welcoming in the immediate future. But the cost of getting it wrong will be exceptionally high. 

Read the full analysis here.

Until last night, it seemed both Biden and Trump had reasons to celebrate ahead of the midterms and a potential rematch in 2024. But even an FBI raid may not dampenRepublicans’ support of the former president. 

In welcome news for Democrats:

• The Senate passed Biden’s long-awaited Inflation Reduction Act, addressing key Democratic priorities like climate change, healthcare costs and some corporate taxes.

• Amid record inflation, gas prices have fallen for 50 straight days and are approaching an average of $4 per gallon. 

• The July jobs report showed a gain of 528,000 jobs—more than double what economists had been predicting. 

• Despite the U.S. economy logging two consecutive quarters of negative GDP – which typically indicates the economy is in a recession – other important indicators contradict this conclusion. Non-farm payrolls, personal consumption and real personal income have all continued to grow, if at slightly reduced rates, for much of the past six months.  

• Kansas’ surprising abortion referendum victory indicates widespread political energy around the issue.

On the other hand:  

• During one of the year’s busiest primary weeks, several Trump allies—particularly in Arizona and Michigan—saw victories, and others outperformed expectations. 

• A number of Republican candidates who deny the outcome of the 2020 presidential election also won their primaries Tuesday night, securing nominations for governor, Congress, and other offices in Arizona, Michigan, and Missouri. 

• Additionally, three of the ten GOP lawmakers who voted to impeach Trump were on the ballot Tuesday. Washington Representative Dan Newhouse (R-WA) eked out a victory, but Rep. Jamie Herrera Butler (R-WA) is facing defeat, while moderate freshman Representative Peter Meijer of Michigan was narrowly ousted in his primary. 

• In last Tuesday’s only primary where two incumbents faced each other due to redistricting, moderate Rep. Haley Stevens (D) defeated progressive House colleague Rep. Andy Levin (D) in Michigan’s 11th District.