Written By: Subiksha Surianarayanan
Edited By: Marvin Kimwon
On 13th September, 2022, supporters were gathered around the white house, giving it an air of celebration on the passage of the new Inflation reduction act. (Wagner) The effects of the pandemic are still as strong as ever, with supply chain issues and rising prices, but the war in Ukraine has further contributed to this with Western imposed economic sanctions in Russia. The high energy and consumer product prices are all but a small example of the effects of inflation because of the war. (Guilford) All this prompted the President to push for the inflation reduction act, by West Virginia Senator Manchin, in the hopes that the country can heal with reducing inflation. (Senate Committee on Energy and Natural Resources)
The main provision that catches the eye of many Americans is its impact on healthcare. The act has many cost-saving provisions, the most important of which is to reduce the costs of prescription drugs. Americans pay 5 times more than the citizens of other nations for prescription drugs. While reducing drug costs, there is also the chance of reducing the cost of receiving healthcare, a necessity for every American, something that should not cost what it does in the United States. (Medicare) Most pharmaceutical companies will view this as a threat, because they will not make the profits that they do make currently with these high prices and privatization of healthcare, but the Biden administration has always advocated for improving the healthcare system, and making it more affordable. It is considered as a huge step for the administration’s agenda.
Another provision of this act, another major step for the Biden Administration, is reduction of energy prices and the accommodation of clean energy. The climate crisis has been widely acknowledged by President Biden. He unveiled a $2.3 billion plan to fight climate change during the summer, but did not declare a climate emergency to give him more powers. This could be because of his faith in his administration’s plan to tackle this crisis diplomatically and bureaucratically (Debusmann). The act would create American jobs for clean energy, and the nationalist approach it takes grants American-made clean energy opportunities. By investing in solar, wind, and clean hydrogen, there is the chance that an actual difference will be made, one that will help improve the country’s response to climate change (White House).
While this act will hope to increase tax revenue, that in turn will decrease deficit, which will hopefully reduce inflation. The act will not increase the taxes of low-income and middle class families, or small businesses. This act has a lot of options for tax credits, through the Affordable care act, or through the purchase of electric cars. (Taylor) But there is the possibility that big companies can have huge tax breaks with the clean energy provisions of this act. All the provisions mentioned till now sound excellent, providing a solution for the problems Americans have been facing for the longest time. But the question rises – does it reduce inflation?
The sad truth is that there will be no effect on our huge daily prices immediately. While it does look to do some good for Americans in the long run with the creation of American jobs, low medicine costs, and reduce low-income tax, it does not solve the immediate problem everyone is facing. Economists analyze that the legislation itself predicts a 0.1% inflation reduction in the next 5 years, by which time the economy may already be in an even bigger turmoil (Muschick). The administration comes from a good place and hopes for the betterment of American lives. However, unless the Fed gets directly involved in the legislation, interest rates will increase as the only way to reduce inflation.
[The views expressed in this article are those of the author and the author alone; they do not necessarily represent the views of all members of the RULR Editorial Board and Rutgers University]
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