Finance / Government Watch / Politics

Here’s the Truth About What ‘Inflation Reduction Act’ Would Do

Inflation

As Senate Democrats achieve their goal of jamming  through the so-called Inflation Reduction Act, reality is becoming clear: The bill will likely increase near-term inflation, depress household incomes, and produce the long-term deficits that fuel long-term inflation.

Using the Congressional Budget Office’s latest scoringestimates of the most recent changes, and accounting for very expensive gimmicks, it’s likely that the bill will produce deficits.

The cumulative deficit would be around $52.5 billion over the next four years, at least $110 billion through fiscal year 2031, and more beyond. That would mean adding to near-term and long-term inflationary pressures, in contrast to what proponents such as Sen. Joe Manchin, D-W.Va., claim.

In short, the bill is about as far away from a genuine Inflation Reduction Act as possible. Though it would be harmful under any circumstances, signing it into law during a period of stagflation would be the worst possible timing.

The Inflation Reduction Act utilizes three major sets of common congressional gimmicks to mask its true costs: cherry-picked expiration dates, ignoring net interest costs, and indirect tax burdens.

As one very costly example, the bill would extend for three more years “temporary” Obamacare subsidies that were supposed to expire this year. That brings to mind the wisdom of the late economist Milton Friedman, who once observed, “Nothing is so permanent as a temporary government program.”

Despite the Obamacare subsidies being peddled as temporary, extending them was among the first provisions of the Inflation Reduction Act that Senate Democrats committed to voting for. It just goes to prove something the everyone knows: There are certain taxpayer-funded handouts and giveaways that seem to always get extended in perpetuity.

To keep the reported cost of the provision down, a three-year expansion was chosen because it is what they could afford on paper. However, accounting for political reality, these subsidies will likely cost at least  $146.5 billion more than what is being reported through fiscal year 2031.

That would be further compounded by Congress yet again delaying implementation of the Trump-era Medicare rebate rule, a move that shifts federal costs further into the future and arbitrarily reduces the portion of the costs included in the budgetary window. While the future costs would remain real, they would conveniently slip under the radar of the formal score.

Yet another overestimation of savings presented by the bill’s authors is a claim to $204 billion in increased revenues from cracking down on tax fraud.

While increased enforcement activity might result in higher revenue collections, estimates are highly speculative. Because the actual results are so uncertain, such revenues are not included in official cost estimates under the bipartisan scorekeeping guidelines.

The deficits created by the bill, and the fact that they are front-loaded, would increase federal net interest costs by more than $14 billion—a fact that is not reflected in the formal CBO estimates.

In total, the bill would add at least $110 billion to the federal deficit through fiscal 2031.

To put that level of spending in perspective, $110 billion is roughly four-and-a-half times NASA’s annual budget, or nearly the cost of the ships in six U.S. Carrier Strike Groups. In this case, however, the $110 billion will be used to buy more inflation.

When the federal government runs a deficit, it eventually must be paid back. That’s either done through job- and wage-killing taxes or by way of the Federal Reserve printing new money to finance the deficits.

During the height of the COVID-19 pandemic, the Fed financed 56% of new federal debt with trillions upon trillions of newly created dollars. Those dollars devalued paychecks and Americans’ lifetime savings.

When the federal government attempts to print its way out of fiscal irresponsibility, it does so by imposing an inflation tax on every American household.

With that precedent, no one can be certain of how much the federal government will use new taxes or new money creation to cover deficits. The expectation of future money printing causes immediate inflationary pressures as people act now to mitigate such future possibilities.

As such, the deficits created by the Inflation Reduction Act would simply be the newest addition to the current inflation tax.

To add insult to injury, almost every provision of the bill will bleed the bank accounts of American families. Tragically, the deficit- and inflation-increasing aspects of the Inflation Reduction Act are only the beginning of its burdens.

In these provisions we find the third set of gimmicks; namely, indirect tax burdens. Despite President Joe Biden’s assurances, the tax and price-control burdens of the Inflation Reduction Act will fall squarely on families trying to make ends meet.

Companies are combinations of workers, tools, and institutional knowledge that when brought together can produce the goods and services we need and enjoy. As such, companies can’t absorb a tax. They only direct how American households will feel it.

The bill’s business-tax hike will leave companies with no choice but to cut wages, increase consumer prices, or cut future investments in a growing and prosperous economy. The bill’s requirement that the government get a deal on drug prices will simply mean that drug prices will go up for families and that research budgets for new lifesaving drugs will be slashed.

The stock-buyback tax will trap capital with stagnant companies and will prevent investors from reallocating those funds to new, growing, and innovative ventures. The $80 billion IRS slush fund in the bill will go to “enforcement” activities that will likely target low-income families and minority populations.

In reality, this bill is a litany of policies aimed at scoring political points that has been recklessly and hurriedly slapped together. If it’s signed into law as expected, long after the press conferences and congressional pats on the back have faded into distant memory, it’s inflationary, tax, and other burdens will continue to haunt every American household.


Reprinted with Permission from - Daily Signal by - Richard Stern

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P2burner
1 month ago

Is it just me, or does Schumer have the most smug, slappable face in the Senate?

Grace
1 month ago

OH Goody ! Every American family will get their own IRS tax collector living in their extra room.

patriot
1 month ago

This should be called The Inflation Increase Bill as that is what it will do in the near term.
Republicans have to rein in the Democrap idiots. Obama raised America’s debt to over 20 Trillion dollars, more debt than all previous America’s presidents combined, even from WWI & WWII.
Bidum learned from Obama and has continued raising America’s debt to now over 30 Trillion while continuing printing money at a rapid pace.
That is inflation, and it has now put us in a recession. We better hope that it doesn’t put us in a depression. Vote for Republicans only. Kick out all the Democraps.
Anyone who voted for Manchin or Sinema should be very disappointed and vote them out!

tika
1 month ago

it seals the dems demise.

DonS
1 month ago

Wrong title: President Joe Biden??? It IS DICTATOR Joe Biden!!

Walter
1 month ago

I am sick of Manchin and the rest of the corrupt Democratic Communists. They sold the American legal citizens out. How much did Schummer give him to turn coat on this issue. There is no inflation deduction. Even Bernie Sanders said this, and yet he voted for this bill. Hypocrites one and all. We the American citizens will have to pay for all this bogus Democratic crap. Big businesses will simply pass the cost on to us and reduce their employment personnel. More of our jobs will go back overseas. Perhaps all these new 85,000 IRS new personnel, ARE YOU KIDDING ME! will start investigating Joe & Hunter Biden along with Mr. Pelosi and the rest of the corrupt politician’s tax records. I am for that. If they are guilty, remove them immediately from office, confiscate their bank accounts and put them in a hard-core prison. Bottom line: We have no representation. Who is running and ruining our Great Country, and why is Congress allowing this?

Kathleen Brown
1 month ago
Reply to  Walter

Someone keeps voting in these corrupt democrats, so those people need to look in the mirror and stop putting those people in power!

Walter
1 month ago
Reply to  Kathleen Brown

Totally agree. I just can’t imagine how many people vote for these corrupt hypocrites. I think many people believe they will get something for free, or perhaps they don’t like someone’s disposition. Supporting our Constitution and taking action that is best for our country seems not to be not considered these days by many of these idiots. Look what they voted for. All this corruption. Nothing is free.

papayec
1 month ago
Reply to  Kathleen Brown

Election fraud is how Rats gain office. The only way to defeat them is through massive conservative voter turnout and massive volunteering for poll work and informing the public.

MJB
1 month ago
Reply to  Kathleen Brown

Manchin better get his resume ready cause the people of WV will send him packing. Going along with Schumer and company is a big time mistake. A coal mining, energy producing state and he wimps out. At one time he was a respected politician. He’s put the nail in that coffin. When the people of West Virginia see the results of the “Inflation Reduction” bill, They’ll vote him out of office. All of us really need to pursue term limits for these people. You’re not doing the job, “you’re fired!”

papayec
1 month ago
Reply to  Walter

The new IRS agents will mainly audit and frame low-income conservatives who can’t afford decent lawyees.

Rod Noll
1 month ago

Unfortunately, the entire Democrat Party has lost its way and turned into the Socialist Communist Party . Everyone of them need to be voted out of office ! We need a Tidal Wave of change in November !

Rik
1 month ago

Truth is: the Inflation INDUCEMENT Act should be the correct name of this increased piece of DONKEY POX Hoodwinked Legislation forced upon Middle Class Americans by Chucky Schlmiel and Nancy “Bella Lagosi” Pelosi, the blood sucking vampiress, Congressional Leaders of today’s so-called Democratic Party Socialist/Communist Leadership Policies!

Old Silk
1 month ago
Reply to  Rik

The time is coming, and soon, when we are going to see all that they have done to America for the past 50 years that some of them have been there.

Jeb
1 month ago

We the people are screwed. Anyone have any ideas on how to not get totally beat up by this?

Boz
1 month ago
Reply to  Jeb

Seventeen Seventy Six

Legally present
1 month ago

Just got back from the store, boneless/skinless chicken breast under President Trump WAS around 1.89 a pound, today it is 3.29/pound, onions were .89/1.19 lb. for sweet onions today it’s 1.69 for the same onions. milk WAS 189 – 2.09/gallon, now it’s 3.69 or MORE /gallon, a HUGE section of frozen foods was completely bare.

Old Silk
1 month ago

An additional $75.00 to $150.00 per month at the grocery store, depending on whether I need cleaning goods. I will not be one of the ones eating bugs and foraging, but I think it would be okay if the World Economic Forum members eat bugs and forage.

David
1 month ago

It was just a matter of time and bribery/extortion before they got to Manchin or Sinema. If they had not turned these two they definitely could have turned a few Rinos.

Legally present
1 month ago

Meanwhile down at the border the invaders are getting prepaid credit cards, new clothes, free phones, and on and on, oh and have a FREE baby (American citizen) and you are home free. The legal citizens get to pay for all this garbage. WHO has had their medical insurance reduced 2,500.00/year as Obamacare promised?? I can tell you it has INCREASED for My FREE Medicare old premium was 105, now it’s 175, PLUS the over 630.00 EVERY month for our supplement you know the part Medicare doesn’t pay, and that’s with NO dental, eye, or prescription coverage.

Old Silk
1 month ago

With the unaffordable care act that was rammed through to our detriment in an election year, just like this inflation causing ram through, premium went from $120 per month with a small deductible to $1,200 per month with a $12,000 annual deductible, and people swore that was wrong until they saw it themselves.

William C Smith
1 month ago

“Build Back Better” refers not to existing conditions but to conditions the perpetrators intend to create to cripple the economy, destabilize the financial conditions for every unsuspecting citizen and, since the money is not in a federal bank for check-writing and will require years to accumulate and re-distribute, the achitects of this political manuever count upon the economic devastation they are imposing to become campaign issues to be seized upon in future election cycles for them to promise to repair all the damge they intend to cause, and relieve those citizens of the effectrs of their political mischief. (Said without cuss words, hall monitors.)

VIRGIL V SNODDY
1 month ago

Yet again another Tax and Spend fiasco by The US Federal government on both sides’ of the aisle, both the Republicans and Democrats.
Our Children will pay for this and then their children’s Children.

Mandatory Federal TERM LIMITS…
Mandatory Federal BUDGET…

ENOUGH SAID!!!

David Millikan
1 month ago

It does absolutely nothing for the United States of America and AMERICAN Citizen’s.
What it does is ILLEGALLY and UNCONSTITUTIONALLY
DESTROY the UNITED STATES of AMERICA leaving FASCIST liberals in TOTAL CONTROL.
That’s FASCISM.
Top LIE is Global Warming BS.

Paul
1 month ago

Absolute, pure insanity….

llyoop
1 month ago
Reply to  Paul

But of course, and exactly what else sould you expect from this gaggle of clueless anti-american scum that dare to refer to themselves as legislators responsible for the governance of our once great country! The only saving grace of this latest flawed attempt at passing laws is that it just shortens the timeline before enough pissed off legal citizens decide its time to take this country back with a real insurrection, and this one isn’t gonna be so peacefuL!

Arlene
1 month ago

The democrats want citizens to be so poor we have to be dependent on the government for everything. That’s communism folks and it’s a horrible way to live. Wake up America!

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