U.S. Congress Passes Inflation Reduction Act Despite Harsh Criticism
In spite of harsh criticism from Republicans and other groups, the U.S. House of Representatives passed the so-called Inflation Reduction Act on Friday, just a few days after it had been approved by the Senate.
The legislation has been criticized by some as not doing enough to tamp down inflation, which is currently at a 40-year high.
There are an estimated 437 billion U.S. dollars in new spending contained in the 730-page package, of which 369 billion dollars are devoted to the fight against climate change and to promoting green technologies.
Democrats argued that although the bill will allegedly generate 737 billion dollars in new revenue over the next ten years, the massive spending will be offset by 737 billion dollars in new spending.
U.S. Congress Passes Inflation Reduction Act Despite Harsh Criticism
As part of the bill, Medicare would be able to negotiate the prices of 100 drugs, among other reforms that Democrats claim will bring in 265 billion dollars in revenue.
Additionally, the 15 percent minimum tax on corporations is expected to generate a total of 222 billion dollars in revenue as a result of the new tax.
As a result of the passage of the Inflation Reduction Act in the House, families will be able to enjoy lower prescription drug prices, lower health care costs, and lower energy costs in the future,” U.S. Vice President Joe Biden tweeted on Friday morning.
According to the Democrats, the bill will lower inflation, as they are expecting it to raise new revenue and reduce the deficit through the raising of new revenue.
In spite of this, Republicans slammed the bill as a “hoax on the American people,” calling it a blatant fraud.
Republican Representative Nicole Malliotakis said during a press conference on Friday that calling the measure the Inflation Reduction Act is a lie.
‘You can’t tax and spend your way out of an inflation crisis,’ said Kevin McCarthy, the House Minority Leader, who blamed the policies of the Biden administration for the most severe inflation in four decades.
According to the Tax Foundation, a nonprofit think tank, this bill may actually worsen inflation by constraining the ability of the economy to produce goods and services for a longer period of time, thereby reducing long-run economic growth.
In a letter to Congress signed by 200 economists, it was argued that the proposed government spending of over 400 billion dollars would immediately cause inflation by increasing demand, while the supply-side tax hikes would constrain supply by dissuading investment, thereby draining the private sector of much-needed resources, as Fox News reported earlier this month.
It was reported that Robert Heller, former president of the Federal Reserve Board from 1986-1989, Nobel laureate Vernon Smith, former Chair of the Council of Economic Advisers Kevin Hassett, and former Director of the Office of Management and Budget Jim Miller are among the signers of the letter.
In fact, a number of economists have stated that government spending, along with supply chain bottlenecks and global energy shortages, has been a major cause of inflation in recent years.
There is no evidence that the act will have a meaningful effect on inflation in the near future.
According to the Penn Wharton Budget Model of the University of Pennsylvania, the Inflation Reduction Act is expected to result in a very small increase in inflation during the first few years, up to 0.05 percent points in 2024 as a result of the law.
However, these point estimates are not statistically different from zero, which indicates that there is a very low level of confidence that the legislation will have any effect on inflation, according to the report.
According to the average of polls compiled by Real Clear Politics, skyrocketing inflation has significantly hurt Biden’s approval rating, which stands at 40.3 percent, close to his all-time low, according to Real Clear Politics.
While doubts and criticisms exist, Democrats’ ability to pass such sweeping legislation may be perceived by the party’s base as an indication of competence and may prove to be a boon for them in the upcoming midterm elections, as Democrats attempt to retain control of both houses of Congress.
In a statement to Xinhua, Professor Christopher Galdieri, an assistant professor at Saint Anselm College, said the bill “helps fight the perception that the party and the administration are in a state of flux.”
The House passes the Inflation Reduction Act
The Democrats in Congress did not receive the support of a single Republican in the U.S. Congress. There was a final passage by the House on Friday of a $740 billion package of legislation that included historic investments in renewable energy development, a minimum tax on large corporations, and a landmark requirement that Medicare negotiates the price of a set of prescription drugs directly with the government.
As a result of the Inflation Reduction Act (IRA), Democrats and outside groups have hailed it as one of the most significant climate action measures ever passed by the U.S. Congress. Despite the fact that the package includes substantial handouts for the fossil fuel industry as well as a number of tax incentives and subsidies for renewable energy, it could substantially reduce greenhouse gas emissions.
A reconciliation bill was passed by the Senate along party lines last weekend, and the final vote in the House took place on Friday night, with every single member of the Democratic caucus voting in favor and every single member of the Republican caucus voting against.