The Democrats are obviously pushing through this bill to advance their agenda prior in the November midterm elections in the hope of consolidating their support.
Given that inflation is the number one concern expressed by most American’s right now, they decided to call it the “Inflation Reduction Act”.
So how on Earth does one spin spending more money and increasing taxes will lead to reduced inflation?
This is my interpretation of how this is supposed to happen.
First off around half the money is to be spent on tax credits and incentives to try to expedite the clean energy agenda. Given that energy costs are a significant contributor to inflation, presumably this is meant to alleviate this pressure in the longer term, but I don’t see how this is meant to help in the 2022 to 2024 timeframe.
The 2nd chunk of money is apparently to place caps on drug prices and to repeal the drug rebate rule (which it is hoped would reduce Medicare Part D costs). I am not sure that capping costs will have the desired impact as these generally lead to shortages.
The 3rd leg of the strategy is to introduce a 15% minimum corporate tax rate and spend lots of money collecting taxes from folks that have not paid the IRS what they are owed. The idea is to use this money to offset the deficit incurred by the other two initiatives. Presumably the thinking is that this money is already owed, so it won’t negatively impact the economy. I don’t think it works like that.
Bottom line is I’m not buying that this will do anything but increase inflation, but perhaps I am overlooking something?