(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.
“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.