Despite its name, the Inflation Reduction Act won’t reduce inflation, but it could soon save Americans money on health care and energy bills.
- The proposed Inflation Reduction Act would be one of the largest deficit reduction bills in US history.
- The bill includes several provisions for Americans to reduce healthcare costs and invest in long-term clean energy initiatives.
- Reports from the Congressional Budget Office (CBO) and Penn Wharton Business Model (PWBM) suggest the bill will have little impact on inflation in 2022 and beyond.
Senate Majority Leader Chuck Schumer, DNY, announced Thursday that the Senate will begin debate on a landmark climate change and health care bill called the Inflation Reduction Act this Saturday. The bill includes a series of provisions that would reduce health care and prescription drug costs, invest in climate protection initiatives and reduce the federal deficit by $300 billion.
While the bill will be one of the largest deficit-reduction laws ever passed by Congress, there is little evidence to date that it will reverse the rising cost of inflation in the US, the Health for Americans Inflation Reduction Act. Can provide instant relief on care costs and more.
What is the Anti-Inflation Act?
The Inflation Reduction Act is an energy and health-focused bill proposed by Senate Democrats to reduce the federal deficit and give Americans relief in key areas. Their main goals are fighting inflation, investing in climate change and reducing healthcare costs.
The bill has the full support of President Joe Biden, who called it “the strongest bill you can pass to lower inflation, lower the deficit, lower health care costs and tackle the climate crisis.” and can promote energy security.”
The Inflation Reduction Act proposes a $300 billion reduction in the overall deficit. The $739 billion needed for these reductions and health and energy investments comes from:
- 15% corporate tax minimum requirement
- Price reform for prescription drugs
- IRS Tax Enforcement
Once the bill is introduced in the Senate, it must be passed by a majority. Senate Democrats recently received a helping hand when Arizona Sen. Kirsten Cinema announced that she would proceed with other Democratic senators to support the bill.
Will the Anti-Inflation Act bring down inflation?
It’s no secret that inflation has reached record highs. According to the June Consumer Price Index (CPI) inflation report, 12-month turnaround inflation hit 9.1%. This is the largest 12-month increase since November 1981.
Democrats hope the legislation will ease Americans’ pockets and ease inflationary pressures on the economy.
A recent study by the University of Pennsylvania’s Wharton School of Business suggests that the bill’s impact on inflation will be minimal. The study estimates that the bill “would reduce the accumulated deficit by $248 billion over the fiscal window.”
The Penn Wharton Business Model (PWBM) also suggests that the Inflation Reduction Act may actually lead to a small increase in inflation by 2024. After that, the PWBM is estimated to result in a barely perceptible reduction in inflation.
The Congressional Budget Office (CBO) comes to a similar conclusion. The CBO is a bipartisan federal agency charged with analyzing budget and economic issues for the US Congress. In a recent letter to Sen. Lindsey Graham, CBO Director Philip Swagel said, “In calendar year 2022, the CBO estimates that the implementation of the bill will have a negligible impact on inflation.” CBO expects similar results in 2023.
Three ways the Inflation Reduction Act could save Americans money
It is not clear whether the provisions currently included in the Anti-Inflation Act will bring inflation down. However, the law could result in significant savings for Americans in a few key areas.
Prescription drug costs
The Inflation Mitigation Act would allow Medicare to negotiate prescription drug prices. The policy change could potentially significantly reduce drug costs. The bill also offers Medicare an inflation exemption for drug companies if prescription drug prices rise above normal inflation.
Another billing rule is prescription expenses of $2,000 per year for people receiving Medicare. Regardless of your prescription, you’ll never pay more than $2,000 for medication.
The CBO estimates the bill would save Medicare $288 billion over 10 years.
If passed, the bill would extend health insurance premium subsidies under the Affordable Care Act (ACA) until 2025. These subsidies granted by the federal government to reduce premium costs expire at the end of 2022.
According to the US Department of Health and Human Services (HHS), without expansion, about 3 million Americans could lose health insurance coverage. Without current subsidies, more than 10 million Americans would lose the important premium tax credit or see significant deductions, according to HHS.
Another important part of the Anti-Inflation Act is combating climate change. Democrats claim the bill will “reduce energy costs, increase clean manufacturing and reduce carbon emissions by about 40% by 2030.”
The bill earmarks $369 billion for clean energy initiatives over the next decade. In terms of savings for Americans, the bill provides a number of tax exemptions and credits for those investing in clean energy upgrades, including:
- energy efficient devices
- electric vehicles
- Solar panels on the roof
There is an upfront cost to buying a new vehicle or making your home more energy efficient, but the cost is significantly reduced with tax incentives. Such upgrades also reduce utility bills.
Inflation doesn’t look like it’s going to return to normal levels any time soon, but hopefully some of these changes will help Americans keep some more money in their checking accounts.
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