Democrats achieved a major victory this past summer when Congress passed the Inflation Reduction Act (IRA), a modified version of the Biden administration’s Build Back Better plan. Among its aims, the IRA will attempt to curb rising levels of inflation by reducing the federal deficit. It will also increase spending on climate change and clean energy solutions as well as address prescription drug and tax reform.
Biden, who signed the bill into law in mid-August, called it “one of the most significant laws in our history.” He added during the signing ceremony that with this new law, “the American people won and the special interests lost.” The roughly $700 billion bill — which was passed by a 220-to-207 vote in the House and passed in a 51-50 party-line vote in the Senate — will be funded through new taxes, including a 15% tax on corporations and a 1% tax on stock buybacks, as well as revenue from increased Internal Revenue Service enforcement.
The bill is highlighted by the nation’s largest investment in technology to fight climate change, with almost $250 billion in tax credits to incentivize clean electricity as well as to encourage Americans to purchase electric vehicles and improve the energy efficiency of their homes.
“All of the experts are saying we’re very close to the point of no return,” said Rep. Robert C. “Bobby” Scott (D-Va.), chairman of the House Education and Labor Committee, referring to the looming threat of climate change, which the bill aims to curb. “If we don’t do something soon, we might not be able to save the planet.”
California Gov. Gavin Newsom (D) likewise said the bill would be “essential to protecting people from the worst impacts of climate change and accelerating our transition to a clean energy future.” In addition to its climate investments, the bill also includes provisions to tackle rising health care costs, including the establishment of Medicare’s ability to negotiate prescription drug costs for the first time.
“Too many people have been facing impossible choices because of skyrocketing drug costs, like skipping meals or skipping their medication, just to make ends meet — all while drug companies are jacking up prices and raking in massive profits,” Sen. Patty Murray (D-Wash.) said at an event in support of the bill’s passage. “
We’ve made the first huge step, and it’s going to make a real difference.” The bill will also cap spending on prescription drugs for Medicare recipients at $2,000 annually and will extend Affordable Care Act premium subsidies until the end of 2025. They had been set to expire at the end of 2022 after being established in the American Rescue Plan.
Critics voiced concern over its future effects on the economy, especially businesses’ ability to hire and innovate when they have to pay more in taxes. Many Republicans cited rising inflation and the potential dangers of pouring more money into the economy in their opposition to the bill.
“The U.S. economy faces recessionary trends, rising costs of doing business, supply chain delays and historically high gas prices. Adding a substantial tax burden would make it even more difficult for America’s job creators to grow their business and fully recover from the economic effects of the COVID-19 pandemic,” said Kristen Swearingen, vice president of legislative and political affairs for Associated Builders and Contractors, in a statement.
The National Association of Manufacturers (NAM) also opposed the bill. “The NAM remains staunchly opposed to the IRA,” the group’s President and CEO Jay Timmons said in a statement.
“It increases taxes on manufacturers in America, undermining our competitiveness while we are facing harsh economic headwinds such as supply chain disruptions and the highest rate of inflation in decades.” Timmons also described the bill’s intent to limit Medicare prescription drug costs as “a form of price setting and antithetical to the open marketplace of the Medicare Part D program. “Pursuing price control policies could threaten future innovation and cures,” he added. “Any desirable elements of this bill can and should be pursued as standalone legislation. As a whole, the bill simply does not position our industry or our country for future growth or global economic leadership and competitiveness.”
While the true effects of the IRA may not be seen for some time, debate around its efficacy is sure to continue, especially leading up to the 2022 midterm elections.
For more background, see the May 2022 issue of Congressional Digest on “Green New Deal.”
