About a week ago, President Biden signed the Inflation Reduction Act into law. It’s probably the most transformative piece of legislation passed this year, and something that will surely play a large part in the upcoming midterms. I’ll admit that when I first saw the title of the bill, it seemed somewhat clear to me that it was meant to soothe fears of inflation, especially now in an environment that seems prone to recession with every passing day. And it also looked like the main purpose of the bill was to reduce the impact of climate change. So, could one combat inflationary pressures and fight global warming at the same time?
I think that part of the reason why the bill was passed was so that lawmakers could show that they were listening to concerns about inflation and not just going, “This is fine.” Part of the way the bill attempts to combat this is by raising a 15% minimum tax on corporations, which would amount to around $300 billion over the next ten years, according to the Congressional Budget Office. But in the long run, though, this doesn’t really amount to much, especially with an economy of this size.
The real, and slightly more controversial, way the bill handles inflation is by looking to the future and reducing long-term inflationary pressures, mainly in the climate sector. The Bipartisan Policy Center estimates that the act would hasten the decline of carbon dioxide emissions in the US by almost ten percent.
It does this mainly by implementing and extending a series of tax credits, and investing in home-grown renewable energy sources, including allowing lower-income residents to use more renewable power sources. This could be the primary reason the law would drive inflation down–oftentimes, price increases are driven by rapid fluctuations in oil prices. Being independent of this would be a huge boon to lower-income folks.
But would this law have any immediate effects? It’s not exactly clear whether it does, unlike some of the other bills passed this presidency, such as the stimulus package in March or so of last year. Either way, I think that the bill’s benefits have to be explained more clearly, especially in campaigning, if voters are to make an informed decision come November.