Senator Joe Manchin (D-WV) once again gave life to the moribund Build Back Better discussions Wednesday by outlining a new, slimmed-down version of the bill that he could support.  According to Politico:

Manchin said that if Democrats want to cut a deal on a party-line bill using the budget process to circumvent a Republican filibuster, they need to start with prescription drug savings and tax reform. He envisions whatever revenue they can wring out of that as split evenly between reducing the federal deficit and inflation, on the one hand, and enacting new climate and social programs, on the other — “to the point where it’s sustainable.”

“If you do that, the revenue producing [measures] would be taxes and drugs. The spending is going to be climate,” Manchin said.

Two observations come to mind.  First, Manchin’s comments about moving this smaller package under reconciliation, and with Democrat votes only, is a material change from his recent suggestions that Congress start over with a “clean sheet of paper.”  This concession increases the odds that some sort of package succeeds.  As Politico described it:

Though he prefers everything in Congress to be bipartisan, Manchin said he has “come to that conclusion” that changing the tax code to make the rich and corporations pay their fair share can only be done with Democratic votes. To enact Manchin’s vision, Democrats would also have to bargain with Sen. Kyrsten Sinema (D-Ariz.) who last year steered the party toward surtaxes and corporate minimum taxes — and away from raising individual and corporate tax rates.

On the other hand, his idea of largely limiting the bill to climate provisions moves in the opposite direction, as do his ideas about what those provisions should be:

Manchin, who also chairs the Senate Energy Committee, said that the climate portion of any theoretical bill will look different now that Russia is invading Ukraine. He’s calling for the U.S. to ban oil imports from Russia and ramp up domestic energy production, including fossil fuels. He would support big clean energy investments in a potential deal, he said, but wants domestic oil, gas and coal production to still be a big part of the mix.

This “all of the above” strategy on energy is likely several steps too far for most Democrats.  So is devoting half the bill’s savings to deficit reduction.  As The Hill reported this morning:

Sen. Kirsten Gillibrand (D-N.Y.) on Thursday said she will try to convince Manchin that funding for expanded child care, pre-kindergarten and a national paid family leave program shouldn’t be left out of whatever budget reconciliation package Democrats might put together later this year.

Democrats have been trying to “convince” Manchin about this for a year now.  As we’ve witnessed, it is a non-starter.  As Politico notes:

As far as whether [Manchin] thinks his party finally understands his parameters for joining the talks, he said that Democrats “know where I am. They just basically think that I’m going to change.”

What’s the bottom line?  Manchin’s concessions on the procedural question reopened the door for a narrow bill to be considered later this year, but his ideas on energy policy may have closed it just as quickly.  For private companies, even a narrow bill presents an enormous amount of tax policy risk, however, so this newly energized discussion is something we will be following closely.