Yesterday the House passed the Inflation Reduction Act of 2022, sending it to President Biden’s desk, where he’s sure to sign it.
While it’s imperfect and, as with all legislation, contains several compromises, it’s a major legislative win for the Democrats. A party that, a few weeks ago, seemed in disarray. The Dems are not used to passing much impactful legislation, unfortunately, so this one will hit them hard.
The name of the bill is a bit misleading, I think, after all the changes. It’s core actions are less about inflation than they are about climate action, health care, and taxes.
Let’s be honest, this is the largest climate legislation passed in the US, with $370B dedicated to climate action and energy. Much needed steps to getting us closer to our carbon reduction goals.
It empowers Medicare to negotiate prescription drug prices, leveraging huge buying power to drive down drug prices. It also expands health insurance subsidies started under the Affordable Care Act.
All of this is to be funded by changes to minimum corporate tax on companies with book profits over $1B in recent years, funding for the IRS to chase tax dodgers (especially those making over $400k/ year), and a 1% excise tax on stock buybacks.
In all, it’s estimated to drive down the deficit by $120B (CBO rating) - $300B, depending on the estimate.
And what about inflation? Unclear. Penn Wharton Business School predicts it might not help with inflation until 2024, while others disagree. But it won’t have a big impact on inflation, though some say it will help the Fed by having policy aligned with the Fed’s goals.
Is your head swirling yet? I’m sure it is for the Dems trying to figure out what to do with these feeling of passing major, impactful legislation.
But I think it’s progress.
