President Biden on Tuesday triumphantly signed his centerpiece $740 billion climate-and-tax legislation, a Democrats-only measure whose title purports to reduce inflation but won’t lower prices quickly, if at all.
At a bill-signing ceremony at the White House, the president touted the legislation’s provisions to lower the costs of prescription drugs and to lock in health insurance premiums under the Affordable Care Act. He also made clear that he views the package as the best hope for his party to stave off disaster in the November midterms.
“In this historic moment, Democrats sided with the American people, and every single Republican in the Congress sided with the special interests,” Mr. Biden said. “Remember, every single Republican in Congress voted against this bill. Every single one voted against tackling the climate crisis. That’s the choice we face.”
He then signed the measure into law and handed the pen to Sen. Joe Manchin III, West Virginia Democrat, whose support made Mr. Biden’s win possible.
The bill signing caps more than a year of negotiations to secure support from moderate Democrats in the Senate and seals a significant legislative victory for Democrats’ climate and health care agenda.
But the first problem with Democrats’ claim of reducing inflation, many economists say, is that there are economic forces beyond the reach of the White House and Congress.
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For example, the new law includes electric-vehicle tax credits of up to $7,500 to address climate change, but automakers just announced price hikes for new electric vehicles of roughly the same amount.
Ford is raising the sticker price between $6,000 and $8,500 for its electric vehicles — the F-150 Lightning Pro will sell for $46,974, a $7,000 increase from last year’s model. GM last month raised the price of its electric Hummer by $6,250.
Global energy prices, too, are out of the hands of Washington.
Another problem is the likelihood of the administration, and Congress, making spending decisions over the next few months or years that would change the current forecasts of the law’s impact on inflation.
For example, a potential move by Mr. Biden to cancel student debt across the board before the midterm elections could undermine any inflation-reducing value of the legislation, according to the nonpartisan Committee for a Responsible Federal Budget.
“Simply extending the current repayment pause through the end of the year would cost $20 billion — equivalent to the total deficit reduction from the first six years of the [law], by our rough estimates,” the group said Tuesday. “Cancelling $10,000 per person of student debt for households making below $300,000 a year would cost roughly $230 billion. Combined, these policies would consume nearly 10 years of deficit reduction from the Inflation Reduction Act.”
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Deficit reduction is one of the administration’s main claims about the bill’s inflation-fighting power.
The nonpartisan Congressional Budget Office said the law will have a negligible impact on inflation this year. Economists at JPMorgan Chase & Co. said it will have “almost no effect” on inflation or economic output for the next one to two years.
Republicans said the measure will worsen the economy by boosting government spending, which they blame for inflation that hit 9.1% in June.
“Democrats’ policies have torn down the savings, the stability, and the lifestyles that families worked and sacrificed for years to build up,” Senate Minority Leader Mitch McConnell, Kentucky Republican, said in a statement Tuesday. “The effect of this one-party government has been an economic assault on the American middle class.”
Republican National Committee Chairwoman Ronna McDaniel said, “With the stroke of a pen, Joe Biden will guarantee congressional Democrats’ careers will come to an end. Biden and Democrats raised taxes on hardworking Americans and gave $80 billion to the IRS to hire 87,000 new IRS agents. Americans will never forget that Biden and Democrats raised taxes during a recession.”
The economy has had two straight quarters of negative growth, one of the conditions for an informal definition of a recession. The unemployment rate has remained very low, although the number of workers has fallen by about 400,000 since March in a troubling trend.
The law creates a new 15% minimum tax for hundreds of large corporations. The measure also will end up forcing some taxpayers who earn less than $400,000 per year to pay about $20 billion in new taxes over the next decade, according to the nonpartisan Congressional Budget Office. The measure also sets aside $80 billion to hire tens of thousands of IRS agents.
Mr. Biden has pointed to 130 economists who support the measure as pro-growth and anti-inflationary. But the America First Policy Institute, which is stocked with allies of former President Donald Trump, has gathered 369 economists and other analysts who say the $433 billion in new spending will only worsen inflation that is running at a 41-year high.
“Even the one superficially appealing aspect of the bill — deficit reduction — is likely to prove illusory due to implausible spending phaseouts,” they wrote to congressional leaders. “We agree with the urgent need to reduce inflation, but the ‘Inflation Reduction Act of 2022’ is a misleading label applied to a bill that would likely achieve the exact opposite effect.”
Nevertheless, the measure caps a string of legislative victories for Mr. Biden and congressional Democrats, who face an election in which the president’s party typically loses seats in Congress.
In addition to passing the long-stalled spending bill, Congress has in recent weeks shuttled through a $280 billion science and technology bill which includes a $52 billion payout to semiconductor manufacturers, sweeping health care benefits for veterans exposed to hazardous toxins in the line of duty and the nations first new guns control bill in decades.
Senate Majority Leader Charles E. Schumer, New York Democrat, called it “one of the most productive stretches in Senate history.”
“Democrats have shown real change is possible,” Mr. Schumer said.