President Biden said Thursday that a deal with West Virginia senator Joe Manchin III on energy, taxes and health care would ease inflation and lower the cost of living for American families. That important promise helped Senator Nakamichi join the bill to carry the remnants of the president’s vast domestic agenda.
Controlling inflation has become a top priority for Democrats and Mr. Biden. Biden’s approval rate is declining as Americans face rising costs of food, gas, rent and other goods and services. With some policy measures under his direct control to defeat the rapid price increase, Mr. Biden sought to describe the new package as an economical ointment to return money to the consumer’s notebook.
It remains to be seen how this package, known as the Inflation Reduction Act, can mitigate the fastest price increases in 40 years. However, for many economists, the overall effect is modest and may not be felt for months or years, but taxes and other provisions may help alleviate some price pressure. I agreed.
The Plans focus on tax incentives and spending programs of approximately $ 370 billion It aims to encourage consumers, businesses and utilities to switch to low-emission energy sources on the road and in electricity. It also saves about $ 300 billion in federal spending achieved by empowering Medicare to negotiate lower prescription drug prices, as well as health insurance premiums for 13 million people insured by the Affordable Care Act. It also includes funds to reduce it.
Biden said the health savings from these moves will reach $ 800 per family per year, and energy supplies will reduce families’ energy bills by “hundreds of dollars.”
New spending and tax credits will be offset by a $ 313 billion tax increase on large multinational corporations that are currently reducing taxes to less than 15% of the effective tax rate, as well as corporate and high crackdowns by the Internal Revenue Service. Earn individuals to avoid taxes. It will raise more than it spends, and it will have the effect of reducing the federal budget deficit by $ 300 billion.
As a result, the bill could help mitigate inflation in two ways. Reducing the federal budget deficit should, at least to some extent, reduce consumer spending power in the economy. High-income earners can cost money, especially through tax increases and large corporations. Investing in emerging low-emissions sectors could help accelerate growth and help the economy run more efficiently.
“To combat inflation, we want policies that increase supply and reduce demand, and this does both,” pressured lawmakers to support policies that reduce deficits. President Maya McGuinneas of Washington’s Responsible Federal Budget Center is calling. “Almost all of these policies will fight inflation on their own, and on the net, the whole package will definitely do.”
Manchin told reporters Thursday that the law was guaranteed by independent experts to curb sharp price increases. “It will actually reduce inflationary pressures on the economy,” Biden said in a statement at the White House, adding that “in the long run it will also strengthen our economy.”
But even supporters of the bill, many outside experts were constrained by their estimates of how the package would reduce inflation above 9% in June. They said the scale of the deficit reduction was relatively small compared to the economy as a whole, and that tax increases would not start to hurt people or businesses until next year at the earliest.
Inflation FAQ
What is inflation? Inflation is the loss of purchasing power over time. So tomorrow the dollar won’t fall as much as it does today. This is usually expressed as an annual change in the prices of daily necessities and services such as food, furniture, apparel, transportation and toys.
“This law will reduce inflation,” said Jason Furman, an economist at Harvard University and former chairman of the White House Economic Advisory Board under former President Barack Obama. “I don’t think it will go down significantly.”
Economists from the White House and the Treasury have not yet analyzed the impact of the agreement on inflation, a senior government official said Thursday. One external forecast from the University of Pennsylvania’s Pennsylvan budget model estimates that the plan will add 0.05 percent points to the country’s inflation rate in 2024, but deduct a quarter percentage point each year in later years. I am.
Alexander Arnon, Associate Director of Policy Analysis for Budget Models, said: “From an inflationary point of view, it’s pretty small.”
Cecilia Rouse, chair of Biden’s Economic Advisory Board, said in an interview Thursday that the plan would make a “significant contribution” to the government’s broader efforts to reduce inflation. This includes government efforts to eliminate the pandemic-stricken supply chain and the rapid movement of the Federal Reserve to raise interest rates to cool the economy by spending money on borrowing and spending. ..
Mr Rouse said the effects of the bill could begin to appear in economic data, which could change the way the Fed raises rates. “It can make a huge difference in their own policy making,” she said. Their lives will be easier — they will be able to begin to relax their own policies. “
At a press conference on Thursday, Treasury Secretary Janet L. Yellen urged Congress to pass the bill “immediately,” she said, which would help reduce the cost of American families.
“For many households, I think they are making a very important contribution to reducing the cost of prescription drugs, which are a very serious burden on households,” said Yellen.
The Treasury Secretary added that the bill’s measures to reduce the deficit are a “proper contingency” to the Federal Reserve’s rate hike. Yellen said there was no shared “numerical estimate” of the extent to which the law would affect inflation and how quickly it would come into effect.
The deal blinded White House and Treasury officials on Wednesday night, but their disappointment was that Yellen’s measures to bring the United States into compliance with a global tax treaty mediated by more than 130 countries around the world. It was not included.
The agreement requires countries to adopt a world minimum tax of 15 percent. The proposed corporate minimum tax on the domestic “book income” of large corporations will not make the United States consistent with that agreement. Manchin said it would put US companies at a competitive disadvantage.
Mr Manchin’s willingness to support the bill followed months of deliberation on the impact of the bill on inflation. Democrats, White House officials, and outside advisers such as Obama’s former Treasury Secretary Lawrence H. Summers upheld Manchin’s law, which could help mitigate price increases. I asked you to do it.
“I talked with Senator Manchin and other Senators about inflation and the risks of inflation, and how policies can boost or reduce inflation,” Summers said in an interview. “I hope the conversation has become fruitful.”
Mr Summers added that he believes the bill is “anti-inflation” because of supply, demand and pricing.
“For economic growth and efficiency reasons, I think reducing the budget deficit will drive investment,” Summers said. “Promote efficient resource allocation by leveling the corporate tax competition and drive investment with clean energy incentives. For basic progressive goals, make healthcare more affordable. I think it will be. “
However, corporate groups have already expressed opposition to tax reforms, and some tax experts believe that the law could actually drive inflation.
Rohit Kumar, head of PwC’s Washington Tax Policy Group, said the new minimum tax would give Americans more money in the form of tax credits, while making manufacturers more expensive to invest in factories and equipment. I said I would. He suggested that this dynamic could push up prices.
Kumar, a former aide to Kentucky Republican Senator Mitch McConnell, said:
