Inflation Reduction Act: Will Never Reduce Inflation

Joe Biden signed into law the horrific Inflation Acceleration Act – which, as you know, increases government taxes and spending by roughly ANOTHER $750 billion. One of the groups that betrayed taxpayers and fiscal sanity in this fight was the inaptly named Committee for a Responsible Federal Budget. To believe this bill will lead to a “responsible federal budget” is about as divorced from reality as to believe that this is an “inflation reduction act.”

Yet here is the statement that Maya McGuineas of CFRB put out to the press:

• This legislation focuses on lowering health care and energy costs, raising revenue, and reducing deficits and is exactly what the doctor ordered.

• Senator Manchin deserves tremendous credit for pushing this fiscally responsible reconciliation bill.

I'm speechless. The Heritage Foundation reports that the bill will INCREASE the deficit by “at least $110 billion through 2031.” The bill raises $300 billion for corporate give-always for the climate change industrial complex, includes a massive expansion in the entitlement state with the added Obamacare subsidies, and fails to cut even a penny from a single domestic program.

Sadly, the CFRB has a history of supporting multi-trillion dollar bailout bills and CFRB OPPOSED the Trump tax cut of 2017 – which ended up RAISING revenues and helped create the strongest American economy in decades.

CFRB has again exposed itself as "bipartisan." Bipartisan? They supported the most partisan bill in modern times: every Democrat voted for this bill and not a single Republican, CFRB is now officially a front group that gives aid and intellectual support to the tax and spend forces on Capitol Hill.

Prices Surge 8.5 Percent

By Jack Crowe

National Review

Inflation surged 8.5 percent in July compared to the same month last year, down slightly from the four-decade high reached in June, the Labor Department announced Wednesday.

The Consumer Price Index, a key measure of the cost of goods and services, dropped slightly due to a decline in record-high fuel prices which drove the previous month’s historic inflation spike. The increase also beat expectations as economists surveyed by Dow Jones expected headline CPI to increase 8.7 percent year-over-year in July.

Excluding volatile food and fuel prices, core inflation rose 5.9 percent annually and 0.3 percent monthly.

The average national fuel price stood at $4.010 per gallon as of Wednesday, down from a record-high $5.016 in mid-June.

Despite the slight relief offered by declining fuel prices, the Federal Reserve is still expected to further raise interest rates to bring inflation closer to its target of 2 percent.

Voters across the country consistently rank inflation as one of their top priorities going into November’s midterm elections. Republicans have consistently highlighted the Biden administration’s aggressive spending, arguing that the $1.9 trillion Covid-relief bill passed weeks after Biden took office overheated an already hot economic recovery.

While Biden has repeatedly denied that the package contributed to record inflation, even calling the idea “bizarre,” the moniker attached to the Democrats’ latest spending bill — The Inflation Reduction Act — at least nods toward voters’ concerns, though non-partisan analysts have said the legislation’s impact on inflation will be negligible.

The $433 spending bill, which passed the Senate over the weekend and is expected to be signed by Biden this week after passing the House, includes $369 billion for climate initiatives and another $80 billion to double the size of the IRS. It also imposes a 15 percent corporate tax on businesses worth more than $1 billion.

Markets reacted positively to the Wednesday CPI numbers, with Dow Jones up more than 500 points as of 8:50 a.m. CDT and government bonds down sharply.

Inflation Reduction Act Will Not Reduce Inflation

From the Tax Foundation. Full analysis here. 

Reconciling the reconciliation bill: The Inflation Reduction Act, successor to the House-passed Build Back Better Act of late 2021, has been touted by President Biden to, among other things, help reduce the country’s crippling inflation.

Among the major tax changes are a 15 percent corporate minimum tax, drug price controls, IRS tax enforcement, and a tax hike on carried interest to pay for increased spending on energy and health insurance subsidies as well as deficit reduction. See a more comprehensive list here.

According to our model, the bill would raise about $304 billion in net revenue from 2022 to 2031, but would do so in an economically inefficient manner, reducing long-run economic output by about 0.1 percent, eliminating about 30,000 full-time equivalent U.S. jobs, and reducing average after-tax incomes for taxpayers across every income group in the long run.

What about inflation? On balance, the long-run impact on inflation is uncertain but likely close to zero.By reducing long-run economic growth, the bill may worsen inflation by constraining the productive capacity of the economy.
By increasing spending faster than it raises revenue between 2023 and 2025, the bill would increase deficits and worsen inflation, especially in the first two years. See our full analysis.

See Also: Heritage Foundation Says Taxes Would Hit Both Rich and Poor

New Legislation Will Raise Taxes on Everyone

Families earning less than $400,000, according to Joe Biden were not going to pay even “a dime of new taxes” under his tax plan. 

This was Joe Biden’s signature promise. It was the 2020 campaign’s equivalent to George H W Bush’s “read my lips, no new taxes” pledge back in 1988. 

Anyone who believed Joe probably deserves to pay more taxes. 

Anyway, here are the facts. Congress’s official budget and tax scorekeeper, the Joint Committee on Taxation, finds taxes rising in every income bracket. It’s a $17 billion a year whack at the lower and middle-class Americans.