Now that Senator Joe Manchin has signaled his support, the Cut Inflation Act of 2022 is back on track in Congress. More than a short-term answer to inflation, this bill has the potential to become the boldest action the United States has ever taken against climate change and will bring real benefits to the people of Minnesota. Assuming, of course, that he survives votes and procedural challenges in both houses with little or no support from Republicans.
The title “Inflation Reduction Act” itself is really a bit of political theater; the bill is really a complex package of new spending and tax credits for energy and climate initiatives, combined with some investments in health care, funded by tax reforms and drug cost savings for a positive net return estimated at more than $300 billion over the next decade.
On the climate/energy side, there are expanded credits for clean energy generation, including biofuels, subsidies for electric vehicles, rebates for home energy upgrades, and support for state-made green energy technologies. States such as solar panels and batteries. A new “incentive program” would be created to levy charges on methane emissions linked to oil and gas production, a major contributor to pollution from climate change.
On the health care side, a major investment in the Affordable Care Act is aimed at reducing the cost of health insurance for those who buy in the marketplace. A provision allowing the federal government — and Medicare in particular — to negotiate drug prices with manufacturers alone is expected to save $266 billion. Another would limit drug costs for seniors to $2,000 a year.
All of this would be paid for by tax reforms targeting corporations, tax evaders and loopholes. An estimated $440 billion in taxes owed go unpaid each year, most of which belongs to wealthy Americans. The bill would increase appropriations to the IRS to strengthen enforcement; the nonpartisan Congressional Budget Office estimated a 250% return on every dollar invested in increased enforcement. A minimum tax of 15% for corporations making more than $1 billion in profits would raise more than $300 billion, ensuring the big energy, tech and retail giants pay their fair share . The carried interest loophole would also be closed, forcing investment managers to treat their earnings as income rather than capital gains which are taxed at lower rates. Proponents of the bill say those earning less than $400,000 a year would see no direct tax increase.
So what does this have to do with inflation?
As far as interest rates or short-term prices are concerned, not so much. This is long-term legislation: the investment and savings figures relate to a ten-year period. According to a recent Forbes article, if passed, the provisions of the climate and energy bill would “reduce emissions by 37-41% by 2030 from 2003 levels” and “spur a boom.” economy, increasing GDP by almost 1% in 2030”. The same analysis concluded that the bill would create about 1.5 million new jobs in the manufacturing, construction and service sectors. Fighting climate change may not pay off in the short term, but it will certainly help us avoid soaring costs in the future as we deal with the impacts of climate change on everything from weather to supply chains to agriculture.
But spending on energy and health care is also a significant part of the monthly household budget. Switching to climate-friendly home green energy and reducing insurance and prescription drug costs would undoubtedly have a direct impact on American families. Grants for home energy upgrades — insulation, better windows, more efficient HVAC — would be especially welcome here in Minnesota where heating costs are high. And electric vehicles? Ask any friend who no longer needs to buy gas to get to work how nice that can be.
The headlines proclaiming “the greatest climate movement ever” have been slow to arrive. It is possible that the Reducing Inflation Act is indeed that and more – a measure aimed at making the tax system fairer and more equitable, improving access to health care and also reducing the costs of prescription drugs.
Bill just needs a better name. Something like the “Protecting our grandchildren’s future and the health of seniors while making tax evaders pay their fair share” act would work.
— That’s the opinion of Derek Larson, a member of the Times Writers Group. He teaches history and environmental studies at the College of St. Benedict and St. John’s University and his column appears monthly. He welcomes your comments at [email protected]