Budget model shows $740B Inflation Reduction Act will not reduce inflation

By Kim Jarrett | The Center Square

The Penn Wharton Budget Model estimates the Inflation Reduction Act of 2022 will have very little impact on inflation.

North Dakota Republican Sen. Kevin Cramer, who voted against the $740 billion bill that passed Sunday, said the analysis shows that inflation may rise.

Wikimedia Commons/JP Valery

“New energy taxes and Green New Deal-style subsidies will worsen our current energy crisis and weaken our nation’s economic and national security,” Hoeven said. “We need to unleash our domestic energy production and get our debt and deficit under control, while positioning our farmers and ranchers to continue to produce the highest quality lowest cost food supply in the world.”

“We estimate that the Inflation Reduction Act will produce a very small increase in inflation for the first few years, up to 0.05 percent points in 2024,” the Penn Wharton report said. “We estimate a 0.25 percentage point fall in the PCE price index by the late 2020s. These point estimates, however, are not statistically different than zero, thereby indicating a very low level of confidence that the legislation will have any impact on inflation.”

Penn Wharton is a widely used economic forecasting model used by politically unaligned groups like the Tax Policy Center.

The bill includes $64 billion to extend the premium tax credits for the Affordable Care Act. These are “transfers or payments to households, which reduces the incentive to work,” according to the Penn Wharton analysis.

“Extending the ACA subsidies expansion permanently leads to higher government spending,” analysts said.

Cramer called the bill dubbed by Democrats as the “Inflation Reduction Act” as the “Inflation Enhancement Act.”

“This bill is fiscally irresponsible, needlessly bureaucratic, and damaging to every sector of the American economy from energy to agriculture to pharmaceuticals and manufacturing,” Cramer said in a statement. “It’s going to put a dent in every American’s bottom line while hiring 80,000 IRS agents to make it as painful as possible. Democrats must be held accountable for single-handedly passing the Inflation Enhancement Act.”

U.S. Sen. John Hoeven, R-North Dakota, introduced an amendment that would have sent the bill to committee until inflation levels fell below January 2021 levels.

Hoeven called the bill “wrong for American” on the Senate floor.

“New energy taxes and Green New Deal-style subsidies will worsen our current energy crisis and weaken our nation’s economic and national security,” Hoeven said. “We need to unleash our domestic energy production and get our debt and deficit under control, while positioning our farmers and ranchers to continue to produce the highest quality lowest cost food supply in the world. We need to provide real, meaningful price relief to the American people but this bill that the Democrats pushed through using the budget reconciliation process doesn’t do that; instead it increases taxes and spending.”

President Joe Biden praised the bill, singling out provisions that would cap spending on prescription drugs for seniors at $2,000 a year and establish a minimum corporate tax.

“This bill tackles inflation by lowering the deficit and lowering costs for regular families,” Biden said in a statement.

The House is expected to take up the bill Friday. Biden said in his statement he will sign it if it passes.

Image courtesy of Wikimedia Commons/JP Valery
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6 thoughts on “Budget model shows $740B Inflation Reduction Act will not reduce inflation

  1. Another heist.
    Anyone remember Obama’s “Shovel Ready” jobs? I don’t think I saw one.
    Or how about “If you like your doctor you can keep your doctor”.. how did that work out for you.

    Nancy stood right at her podium and said “The Ends Justify The Means” and that right there is how these people conduct themselves.
    People on the Left should be promptly removed FROM ALL POWER AND CONTROL.
    They flat out lie to us with no qualms what so ever about it.

  2. but to do it as a “budget reconciliation” knowing it would be a tie……..and need the cackling tie breaker
    is just plain seek attack on “we the people”
    did most Americans (legal and otherwise) want this…….hell no
    so find a way to avoid the process………they did
    vote them out tomorrow…………

  3. You’ll also be happy (NOT) to hear a bill attached to the IRS hiring 178,000 auditors
    to only audit over $400,000. incomes was defeated by ALL Dems and our Commie.
    You can always count on the Drats to call things the opposite of what they will do same as them doing what they accuse their enemies of doing. it’s the commie way
    same as lying thru their teeth.

    • correction it’s 87,000 new irs employees, I don’t want to be accused of lying
      like a lefty…also in the bill passed was another 9 billion for the rich to buy
      overpriced golf cart cars

  4. Now, I cannot believe these geniuses did not know going into this that inflation will not change any if at all. It is a Democrat sneaky ploy to use the money for something else, HA! HA!. Vermonters need to bombard Welch’s office and insist he vote NO when it gets to the house. Using appropriated money for things other than what the intent was is not a new trick. In Vermont Howard Dean was big on this, and because of that we are now just getting caught up in road and bridge maintenance because of that misuse of VT DOT money.

    • The delays in the work were caused because of the delays in refunding the money.
      Can’t have it both ways guys.

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