What is the Inflation Reduction Act?
A bill aimed to address climate change was enacted by the Senate Democrats, weeks after discussion to resurrect the bulk of the Senate’s election-year agenda. On August 7, 2022, the Senate passed the Act using the budget reconciliation process. This required the support of all 50 Democrats as well as the tie-breaking vote of Vice President Harris because none of the 50 Republican senators supported it.
Democrats claim the bill, known to be the Inflation Reduction Act, will address the primary economic worry of Americans. Republicans, on the other hand, argue that the new spending will aggravate inflation. According to NPR, “The nonpartisan Congressional Budget Office says, though the bill has a ‘negligible’ effect on inflation in 2022 and into 2023.”
Tackling Climate Change
According to John Locke, “Inflation is at 9.1%, the economy is in a recession, and after a year of back and forth, Senators Joe Manchin (D-WV) and Chuck Schumer (D-NY) agreed to a massive tax and spending bill.”
The Inflation Reduction Act will not stop inflation; on the contrary, it will exacerbate it.
Ultimately the cause of inflation is the printing of money and deficit spending. Because economies are based on the idea of supply and demand, if the money supply increases more quickly than the output, then inflation will occur, as households will have more cash to spend on goods causing the market to increase the prices of goods.
Now, while the Inflation Reduction Act bill is increasing in numbers, more attention is being put on this, rather than on other deficits that require attention. Democrats, however, will continue to prolog all their green spending programs and Obamacare subsidies past the deadline specified in the legislation, which will increase the overall cost.
Who is paying for it?
Democrats intend to use penalties against corporations, increased IRS tax collection powers, and inflated medicine prices to pay for this massive undertaking.
The Inflation Reduction Act establishes various tax measures, one of which is the corporate alternative minimum tax (AMT), allotting a minimum tax of 15% to large corporations. The tax will likely apply to some of the world’s largest companies and corporations and hurt the economy by immensely increasing costs while reducing the number of available jobs.
Democrats criticize companies as if they were dodging taxes rather than merely exploiting the law to their advantage to lengthen business cycles. The implementation of AMT will raise expenses for businesses, resulting in reduced worker wages and higher prices for consumers. Additionally, the higher tax burden would deter investment and decrease production. There is no such thing as “inflation reduction” because lower productivity results in fewer goods and services, putting upward pressure on pricing.
The Inflation Reduction Act also promises to raise billions of dollars for drug price reform; however, by doing so, it allows for the negotiation of prescription drug prices, prevention of significant medical innovation, implementation of price limits on drug companies, etc. In time, this will have a negative effect on the economy by decreasing the supply and financial support for drug development and research.
By expanding the IRS, an organization with a history of political corruption, the measure pledges to generate $124 billion in more revenue. The plan is to spend $45.6 billion on criminal investigations, digital asset monitoring, and compliance efforts, but only $3.2 billion on taxpayer services. Increased IRS operations would cost an additional $25.3 billion.
In the first four years of implementation, the measure will increase budget deficits, causing more inflation in the foreseeable future. Ergo, this will be unaffordable and unmanageable for struggling households.
Because the bill is not the $3.5 trillion plan the progressives originally desired, some may criticize the legislation as being mild and moderate; however, this “Inflation Reduction Act” will only increase the cost of inflation.