The ‘Inflation Reduction Act’ Won’t Actually Reduce Inflation
Complicated pieces of legislation rarely live up to the glitzy names scrawled across the first page. But even by that familiar standard, the Inflation Reduction Act of 2022 is going to disappoint anyone excited by its title.
The bill, introduced last week after a long-awaited deal was struck between Senate Majority Leader Chuck Schumer (D–N.Y.) and moderate Sen. Joe Manchin (D–W.Va.), was pitched as a way to lower costs for consumers while also reducing the federal budget deficit and spending billions on environmental initiatives meant to combat climate change.
It didn’t take long for a problem to present itself.
“The impact on inflation is statistically indistinguishable from zero,” concluded the Penn Wharton Budget Model (PWBM), a number-crunching policy center based at the University of Pennsylvania. In fact, if the bill’s passage had any impact on inflation in the short term, it would be to increase it very slightly until 2024, according to the group’s preliminary analysis, released on Friday.
Other parts of the Inflation Reduction Act would do what Manchin and Schumer claim. According to the PWBM report, the bill would reduce future deficits by a cumulative $247 billion over the next decade and would marginally reduce the national debt as a result. It would spend about $370 billion on new environmental and climate initiatives. It would pay for all that by raising taxes and by boosting IRS enforcement, in hopes of chasing down revenue that currently goes unpaid.
But again, the Inflation Reduction Act won’t actually reduce inflation.
The Schumer-Manchin deal also appears to violate President Joe Biden’s oft-repeated promise not to raise taxes on households earning less than $400,000 annually.
According to the Joint Committee on Taxation (JCT), a nonpartisan agency within Congress, the Inflation Reductio
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