On August 12, in a major legislative victory for Joe Biden and the Democratic Party, the U.S. Senate passed the ‘Inflation Reduction Act’ (IRA) of 2022.
The sweeping $750 billion bill addressed everything from taxing wealthy corporations and improving health care, to the largest renewable energy investment in American history. President Biden signed the bill into law four days after Vice President Kamala Harris cast the tie-breaking vote that ended nearly 19 hours of debate. It is widely recognized as a significant win for the Biden administration and has since earned him the title of “one of the most consequential legislative presidents since LBJ” (CNN).
Let’s take a moment to break down the good and bad of the new law…
- Historic climate investment: $369 billion to reduce carbon emissions by 40% by 2030.
- Environmental justice: $60 billion invested, eg. clearing pollution in disadvantaged communities.
- Drought resiliency: $4 billion towards drought pummeling in the West.
- Energy bills: cut by $500 to $1,000 per year for average Americans.
- Affordable Care Act: Investment of $64 billion to extend.
- Health care: costs reduced by $800/year for the average enrollee.
- Extended Medicare benefits: Free vaccines (2023), $35/month insulin (2023).
- Lower prescription drug prices
- Tax: 15% corporate minimum tax, IRS tax enforcement.
- Protects families/small businesses making $400,000 or less.
- Jobs: Over $60 billion was invested to create millions of domestic manufacturing jobs.
Fossil Fuels: The law fails to address fossil fuel extraction and burning, a significant cause of the climate crisis. Greenpeace suggests the new law “falls woefully short of what is needed to stay below 1.5℃ of global temperature rise.”
No Effect On Inflation: Despite its name, and a statement by Biden claiming the contrary, it seems the IRA will have little to no impact on inflation. This is according to an early study by the Penn Wharton Budget Model (PWBM), a non-partisan research organization at the University of Pennsylvania. Moreover, according to the Congressional Budget Office (CBO), the new law could even nudge inflation upward.
Stripped Social Programs: The new law doesn’t include Biden’s social agenda in the original ‘Build Back Better‘ legislation. CNN notes how
The Dems abandoned earlier proposals for universal pre-kindergarten and subsidized child care, paid family and medical leave, free community college and expanded child tax credits, among other initiativesCNN
Income Tax: Campaign donors were favored over everyday voters in classic Democrat fashion, as a raise on personal income taxes was also abandoned. The CNN article notes, “with no meaningful tax increases on the rich, the federal government will continue to run chronic and rising budget deficits as a share of GDP.”
West Virginia Senator Joe Manchin, a surprise supporter of the IRA, slipped in a nasty fossil-fuel clause as part of the compromise which opens up millions of acres of public land for oil and gas production. According to Greenpeace, the IRA thus “continues to sacrifice historically underserved communities that have been systematically oppressed by colonialism and environmental racism.”
Manchin is also pushing for Congress to pass the “permitting reform bill” which would expedite oil and gas permits, boosting the fossil fuel industry.
Despite some drawbacks, the Inflation Reduction Act is undoubtedly a positive step toward energy security, medical accessibility, and financial accountability. While The Wilderness Society has hailed it “a breakthrough on climate,” Greenpeace highlights its importance as “the most significant investment into renewable energy in American history.”
In the White House Ceremony announcing the law, the President told the audience:
Making progress in this country, as big and complicated as ours, clearly, is not easy. It’s never been easy. But with unwavering conviction, commitment and patience, progress does come.CNN
Click here to learn more about different types of inflation and their causes.