One year ago today, President Biden signed the so-called “Inflation Reduction Act” into law. Today, the president will take the stage and attempt to take a victory lap over this legislative “victory.” But an honest accounting reveals that the misleadingly-named Inflation Reduction Act has woefully failed at its namesake goal: reducing inflation.
The legislation mostly consisted of green energy subsidies, healthcare subsidies, tax increases, and more funding for the Internal Revenue Service. Yet the President sold it to the public as a way to bring down the crushing inflation that continues to bankrupt the American people. (The typical U.S. family spent $709 more on monthly expenses last month, July 2023, than it did in July two years ago.)
The president promised during the debate over the legislation that the Inflation Reduction Act was “the strongest bill you can pass to lower inflation, reduce costs, and tackle our climate crisis.” But, while the inflation rate has dropped significantly, many economists from across the political spectrum agree that the IRA has had essentially no impact on that decline, which is almost entirely due to other factors, including the expiration of COVID stimulus spending and the Federal Reserve’s changes in monetary policy.
“I can’t think of any mechanism by which it would have brought down inflation to date,” former Obama administration economist Jason Furman told the Associated Press.
“We can say with pretty strong confidence that it was mostly other factors that have brought inflation down,” Wharton School of Business analyst Alex Arnon similarly concluded. “The IRA has just not been a significant factor.”
Even Biden himself recently admitted as much at a fundraiser, candidly admitting, “The Inflation Reduction Act—I wish I hadn’t called it that, because it has less to do with reducing inflation than it does to do with dealing with providing for alternatives that generate economic growth.”
Of course, we already knew that the IRA wouldn’t have any impact on inflation. The nonpartisan Congressional Budget Office (CBO) scored the legislation and warned that its impact on inflation would be “neglible.”
That was always intuitive, because the IRA was simply a grabbag of Democratic policy priorities that Biden couldn’t otherwise get passed. The president decided to seize the current moment and slap an “inflation reduction” promise on his partisan policies to in order to get them passed. He clearly and cynically exploited the very real problem of inflation that was and is burdening American families in order to ram through some largely unrelated agenda.
A year later, none of the inflation-reducing impact has materialized, and, it turns out, taxpayers may be on the hook for even more money than we originally thought. The IRA’s climate subsidies were estimated to cost taxpayers less than $400 billion. But analysts now believe that they will be much more expensive than was first anticipated.
Goldman Sachs, for example, says they will likely cost taxpayers more than $1.2 trillion, a.k.a., three times more than originally thought. (This difference more than eliminates the bill’s estimated $238 billion deficit-reduction effect, which was the mechanism by which it was, supposedly, going to reduce inflation.) Other nonpartisan analysts agree that the climate subsidies will be much more expensive than originally projected.
So, by passing the Inflation Reduction Act, working class taxpayers did not see any reduction in inflation—they simply got buried in more government debt. (Which means reduced incomes and higher taxes in the future.) And they may face lower wages from the impact of the corporate tax increases, while more middle and lower income families may face invasive IRS audits.
What a smashing success!
On the one-year anniversary of this legislation’s passage, the President can try as hard as he wants to spin it as some victory. But the public should see through Biden’s cheap rhetoric and realize that the Inflation Reduction Act has proven to be an utter failure and partisan disgrace.