The Inflation Reduction Act is what the country needs right now--helping to address one of our biggest long-run challenges (climate change) while making progress on our biggest short-run challenge (inflation) while protecting the most vulnerable.
A π§΅on inflation/fiscal aspects.
A π§΅on inflation/fiscal aspects.
It would be over $300 billion of deficit reduction. Unless I'm missing something this is the 1st meaningful deficit reduction in about a decade. The last was the ACA in 2010, the Budget Control Act in 2011 and (if you use a current policy baseline) the tax deal in 2013.
For the people who love arguing about budget numbers on balance the deficit reduction is arguably larger than the headline number (although could make a case the other way).
1. IRS savings very likely to exceed the $125b they seem to be assuming. washingtonpost.com
1. IRS savings very likely to exceed the $125b they seem to be assuming. washingtonpost.com
2. The bill includes the cost of extending the Production Tax Credit and Investment Tax Credit for renewable energy. Like most business tax extenders I'm pretty sure they've always been extended in the past without payfors. So more deficit reduction relative to the default path.
3. The bill only includes 3 years continued subsidies for the ACA. I wish this was permanent mostly to give families (and the fisc) more predictability. But it does establish the precedent that they are paid for. And even if not this is smaller than #1 and #2 above.
The deficit reduction in the bill would help reduce inflation. It may not do it in a way that everyone likes--there are many forms of deficit reduction I would not like because I balance other priorities--but it's silly to argue that the sign of this on inflation is not negative.
I addressed some of the economic arguments on the ways in which deficit reduction can reduce inflation and/or take pressure of the Fed to raise rates quite as much in this earlier thread.
The Inflation Reduction Act has changed *a lot* from Build Back Better. It is smaller. It is net deficit reduction in the 10-year window. And it does not have any large upfront deficit increases. On balance those changes shift it in the right direction for the moment we are in.
I wish it had much more investments, child credit, coverage gap, more offsets, and more net deficit reduction. It is not the bill I would write or you would write or anyone would write. It is a compromise. And much, much better than the alternative--which is nothing.
P.S. I agree with @ParrottCBPP that if Congress could still make one relatively small and inexpensive change it should be to address the Medicaid coverage gap that the Supreme Court created with their ACA decision a decade ago.
P.P.S. And I agree with @LHSummers that the most important missing offset is the global tax agreement. That, unfortunately, would not be a small change at this stage in the process.
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