TOP ECONOMISTS: Inflation Reduction Act is “Fiscally Responsible”
The Package Will “Fight Climate Change” and “Bring Down Health Care Costs for Families”
In case you missed it, 126 top economists are saying that the Inflation Reduction Act moving through Congress is “fiscally responsible,” “will lower prices for American consumers amid high inflation,” and “is projected to reduce the federal budget deficit over a decade by about $300 billion.” Additionally, the legislation will help “fight climate change by encouraging transitions to lower-emission sources of energy,” will “quickly and noticeably bring down health care costs for families,” and "does not raise taxes on individual taxpayers at all.” Read more below: New York Times: Analysis Deems Biden’s Climate and Tax Bill Fiscally Responsible
An analysis by the Joint Committee on Taxation, a congressional nonpartisan scorekeeper for tax legislation, suggests that the bill would raise about $70 billion over 10 years. But the increase would be front-loaded: By 2027, the bill would actually amount to a net tax cut each year, as new credits and other incentives for low-emission energy sources outweighed a new minimum tax on some large corporations.
That analysis, along with a broader estimate of the bill’s provisions from the nonpartisan Committee for a Responsible Federal Budget, suggests that the legislation, if passed, would only modestly add to federal spending over the next 10 years. By the end of the decade, the bill would be reducing federal spending, compared with what is scheduled to happen if it does not become law.
And because the bill also includes measures to empower the Internal Revenue Service to crack down on corporations and high-earning individuals who evade taxes, it is projected to reduce the federal budget deficit over a decade by about $300 billion.
Maya MacGuineas, the president of the Committee for a Responsible Federal Budget […] had kinder words for the new package, saying it “manages to push against inflation, reduce the deficit, and, once fully phased in, it would actually cut net spending, without raising net taxes.”
Its centerpiece is a package of measures meant to fight climate change by encouraging transitions to lower-emission sources of energy, along with expanded health insurance subsidies and a move to reduce prescription drug costs for seniors by allowing Medicare to negotiate the prices.
[…] The bill would not raise taxes on middle-income people; the main tax increase in the analysis would fall on corporations, not individuals. […]
Congressional Democrats’ climate and health care package is getting a boost from a group of top economists, who wrote in a new letter that the so-called Inflation Reduction Act will lower prices for American consumers amid high inflation.
“This historic legislation makes crucial investments in energy, health care, and in shoring up the nation’s tax system. These investments will fight inflation and lower costs for American families while setting the stage for strong, stable, and broadly-shared long-term economic growth,” 126 economists said in a letter sent to congressional leadership Tuesday, which was first obtained by CNN.
The letter was signed by key economists including former Clinton Treasury Secretary Robert Rubin and Obama Treasury Secretary Jack Lew, Obama Labor Department chief economist Betsey Stevenson, Moody’s Analytics chief economist Mark Zandi, former Congressional Budget Office Director Doug Elmendorf, and Nobel prize-winning economist Joseph Stiglitz, among others.
“This started to come together late last week with some of the signatories connecting with each other to discuss how they could highlight the economic value of the bill and push back on some of the economic disinformation surrounding it,” a source familiar said of the letter.
The economists touted the bill’s historic $369 billion investments in combating the climate crisis and, they wrote, it will “quickly and noticeably bring down health care costs for families” by allowing Medicare to negotiate certain prescription drug prices, along with extensions to expanded Affordable Care Act subsidies.
Those investments, the group wrote, “would be more than fully paid for,” pointing to its provision to impose a 15% minimum tax on certain corporations.
“This proposal addresses some of the country’s biggest challenges at a significant scale. And because it is deficit-reducing, it does so while putting downward pressure on inflation,” the economists said.
A group of more than 120 economists is backing the climate, health care and tax package that Senate Majority Leader Charles Schumer (D-N.Y.) will bring to a vote this week.
The economists said in a letter addressed to Schumer, Speaker Nancy Pelosi (D-Calif.), Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader Kevin McCarthy (R-Calif.) that the Inflation Reduction Act will reduce prices for American families while making “crucial” investments in energy and health care.
They added that the legislation will quickly and noticeably lower health care costs by allowing Medicare to directly negotiate drug prices with pharmaceutical companies and capping out-of-pocket prescription drug costs at $2,000. And it will lower health insurance prices for 13 million Americans in expanding the provisions of the Affordable Care Act, they said.
The economists also said in the letter, first reported by CNN, that the investments the legislation would make would be “more than fully paid for” since the revenue to finance them would come from wealthy individuals and corporations.
The package would also make significant investments in climate programs, which Schumer and Sen. Joe Manchin (D-W.Va.) have said would reduce emissions by 40 percent by 2030, while devoting $300 billion to deficit reduction.
The economists said this would be the biggest step in fighting climate change yet and lower energy costs for families.
A Moody’s analysis found that the package will “nudge” inflation in the right direction and “meaningfully” address climate change.
Over the weekend, a congressional tax committee analyzed a portion of the tax Inflation Reduction Act Senator Joe Manchin struck with Senator Chuck Schumer and President Biden. Republicans inaccurately claimed the report shows the plan would increase taxes on the middle class. The plan in fact raises taxes only on corporations with an income over $1 billion. It does not raise taxes on individual taxpayers at all.
The JCT report simply does not find this at all. The false assertion that Manchin’s deal raises taxes on the middle class combines a series of fallacies.
Nor does this analysis vindicate the Republican claim that Biden would be violating his promise not to increase taxes on people earning less than $400,000. Biden campaigned on a promise to increase the corporate tax rate. To pass the plan he openly campaigned on would not break his promise. It would fulfill it.
President Biden hailed as "historic" the Senate Democrats' agreement on a bill to fight the climate crisis and decrease the cost of prescription drugs — key pieces of his domestic agenda.
[...] He said the legislation also would both reduce inflation pressure on the economy and serve as the most important investment the nation has ever made in energy security.
The bill includes about $300 billion in deficit reduction and $370 billion in energy and climate spending provisions.
The Inflation Reduction Act of 2022 is, as the name suggests, aimed at bringing down inflation. It would put billions towards climate spending and slash prescription drug prices. Rather than hiking taxes on individuals, or imposing a broad surtax on the ultra-wealthy — both previously proposed to cover spending — the package is narrowly targeting ultra-wealthy investors and corporations, while also stepping up IRS enforcement. That income will help pay for assistance to Americans who want to buy electric vehicles or make energy efficient upgrades to their homes.
For most taxpayers, the package actually contains credits to incentivize clean energy adoption. Taxpayers would be able to get thousands in rebates for energy efficient home improvements, such as electric heat pumps, stoves, and solar panels.
Beyond cutting climate pollution, the clean energy investments could also make a dent in inflation. According to Robbie Orvis, senior director at Energy Innovation, rising energy prices have driven roughly a third of the 9 percent rise in the overall Consumer Price Index this past year. By helping Americans become less reliant on fossil fuels, the spending helps ease the global oil crunch and cut consumer bills.