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So-Called Inflation Reduction Act Taxes and Spends, Won’t Reduce Inflation Like a horror movie monster seemingly finished off at the end returning for a sequel, the Democrat tax-and-spend reconciliation bill that once appeared dead has returned in the summer of 2022. Originally dubbed “Build Back Better,” this monster bill now goes by the “Inflation Reduction Act.” The text, however, shows that it does no such thing. Instead, it seeks to implement provisions of the Green New Deal, impose socialist price controls, raise taxes, and empower the Internal Revenue Service. Analysts have already dispensed with the idea that the so-called Inflation Reduction Act would meaningfully reduce inflation. According to the Penn Wharton Budget Model, “The impact on inflation is statistically indistinguishable from zero.” In fact, the model finds that the bill would continue to push inflation upward until 2024. So the bill does not do what its title says it does, rendering it an example of George Orwell’s Doublespeak. But what do its authors and supporters say it will do? Senate Majority Leader Chuck Schumer (D-NY) tweeted: “The Inflation Reduction Act of 2022 will be the largest package on climate change ever passed by Congress.” The text of the bill supports this contention of Senator Schumer more than it supports the idea of inflation reduction. But the provisions he has in mind will hurt Americans already struggling to cope with soaring costs and unreliable energy while providing negligible benefits to the environment. Shelling out billions of dollars to subsidize solar and wind power will not make those power sources more reliable. At the same time, the bill targets reliable and affordable fossil fuels with more taxes. More power plants using fossil fuels will close, but wind and solar will not be able to meet the resulting demand. Handing out billions of dollars in “environmental justice” grants will be little comfort to Americans who cannot be sure their power will stay on. Senator Joe Manchin (D-WV), one of the bill’s negotiators, argues that these provisions are balanced out by a commitment from Senator Schumer, House Speaker Nancy Pelosi, and President Biden to pass permitting reform separately, apparently including accelerating completion of the Mountain Valley Pipeline (MVP). There is reason to doubt, however, that these reforms will get enough support from his side of the aisle to become law. Further, many Virginians I know who live in the path of the MVP are opposed to its completion. Progressives may be happy to take what Senator Manchin offers them now and object to his permitting reforms later. Another major Democrat priority included in this bill is price controls on prescription drugs. I agree that drug prices are too high and have worked on legislation with Democrats and Republicans to address the problem. The approach to drug prices taken in this bill, however, threatens to harm medical innovation without actually solving the price problem. The bill’s authors call the price controls “negotiations,” but the negotiations take the form of telling drug companies that they have to come to terms or else be subject to punitive tax rates. When Democrats pushed similar legislation in the House of Representatives, I noted that this provision would run afoul of the Constitution’s takings clause prohibiting the taking of private property for public use without just compensation. After I made that point, the nonpartisan Congressional Research Service agreed with my analysis that this provision was unconstitutional. In addition to their unconstitutionality, these price controls would lead to less investment in medical innovation, reducing the number of treatments and cures available to patients. That outcomes counts as a significant cost to taxpayers. To pay for these schemes, Democrats opted to raise taxes and expand the Internal Revenue Service. The bill would spend $80 billion for the IRS to hire 87,000 new agents to go through the returns of ordinary Americans. A corporate minimum tax would fall heaviest on manufacturing and producing industries such as coal. President Biden pledged not to raise taxes on Americans making under $400,000, but citizens of all income levels would feel the hand of government falling heavier upon them. Reducing inflation should be a priority of the Biden Administration and congressional Democrats. After all, they did so much to cause the problem. But bringing back the same old agenda and calling it inflation reduction is an insult to the Americans now pressured by surging costs and shrinking real wages. If you have questions, concerns, or comments, feel free to contact my office. You can call my Abingdon office at 276-525-1405, my Christiansburg office at 540-381-5671, or my Washington office at 202-225-3861. To reach my office via email, please visit my website at www.morgangriffith.house.gov. |
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