The first thing to remember about the reconciliation bill Sens. Joe Manchin and Chuck Schumer agreed to Wednesday is that despite its utterly preposterous name, it has absolutely zero to do with inflation. The Inflation Reduction Act is crammed with the very same spending, corporate welfare, price-fixing and tax hikes that were part of Build Back Better — long-desired progressive wish-list agenda items. Pumping hundreds of billions into the economy will do nothing to alleviate inflation. The opposite.
Let’s also remember the Democrats’ deflection on inflation last year — claiming it was “transitory” and “no serious economist” is “suggesting there’s unchecked inflation on the way” and so on — was all part of a concerted political effort to ignore the problem long enough to cram through a $5.5 trillion iteration of their agenda. And when inflation suddenly became non-transitory and politically problematic, the Biden administration argued that more spending would relieve inflation. It doesn’t care about the economy, as long as dependency is being expanded.
The bill is far more likely to spike consumer prices than not. You can hate corporations with the heat of a thousand suns and grouse about the lack of fairness in the world, but it won’t change the fact that businesses don’t pay taxes, they collect them. The Dems claim their bill raises $313 billion with a minimum 15% corporate tax rate. They seem to be under the impression corporations that pay less than 15% are evading taxes rather than using completely legal tools like accelerated depreciation or taking advantage of tax credits. Whatever the case, raising corporate taxes means fewer jobs or higher prices. Maybe both. What it won’t do is lower inflation.
The same establishment media suddenly unsure how to define a recession are going to falsely claim the bill has a “deficit-reduction package,” even though anyone who’s spent five minutes in DC knows the bill features a bunch of accounting gimmicks that will allow Manchin to go back to West Virginia and claim his concerns about spending are allayed. The deficit-reduction number — which relies not only on raising taxes on consumers but creating a more powerful IRS (and IRS public-sector union) — is plucked from the ether. We have no clue how much new taxes and audits will raise. What we do know is that any spending program instituted today will exist in perpetuity.
The bill also dumps another $369 billion into green boondoggles, a slush fund for Democrats. Now, even if you’ve convinced yourself that slight variations in temperature are an existential threat to humanity, there’s never been an instance of energy becoming more affordable due to pumping money into green economies. A bill with “investments” that will “encourage” a “transition,” as political journalists would say, is really just force-feeding inefficient and expensive alternatives that elbow out reliable, affordable gas and oil and push prices higher. Manchin claims the bill specifically brings down energy prices. Yet unless West Virginians are clamoring to buy already heavily subsidized electric cars, the bill gives them nothing. It takes.
The only aspect of the bill that even feigns being about prices allows Medicare to “negotiate” (some) prescription-drug prices. This is called price-fixing, as the government is big enough and powerful enough to demand any arbitrary price it wants from rent-seeking companies. What it will do, as price-fixing always does, is undercut innovation and investments and create supply shortages and higher prices for ordinary consumers.
The Inflation Reduction Act features new taxes on natural-gas and coal production. How could a senator from West Virginia ever support a proposal that promises a 40% reduction in greenhouse-gas emissions by 2030? Achieving it would mean the economic destruction of his state. Though, to be fair, those policies would mean destruction of the entire economy.
Manchin — who once said, “I don’t think during a time of recession you mess with any of the taxes or increase any taxes” — always plays this game, making it difficult for Dems to create the impression of moderation at home and then basically giving in. And in the end, nearly every reporter is going to let Democrats pretend $430 billion is a pared-down bill, a mighty political sacrifice, because what they really wanted was a $3.5 trillion bill. The press will allow Democrats to pretend the bill lives up to its name when it does nothing of the sort. The Inflation Reduction Act is to inflation what the Affordable Care Act — which doubled premium costs — was to health-care insurance.