Thoughts on the “Inflation Reduction Act of 2022”?

[Poptart]

The proposed bill aims to raise $739 billion in revenue, spend $433 billion on climate change initiatives and health care subsidies, and reduce the budget deficit by about $300 billion.

Increased government revenue from:
- setting a minimum corporate tax at 15%
- closing existing corporate tax loopholes
- eliminating carried interest loophole
- increased tax enforcement
- allowing Medicare to negotiate with drug companies over prescription drug costs

Government spending on:
- clean energy tax credits, including a $7.5k tax credit for purchasing a new electric car and $4k for purchasing a used EV
- initiatives to reduce environmental pollution
- expansion of health care subsidies

[Adam Strange]

It's good legislation, as is typical of Democrat administrations. It reduces the budget deficit and makes investments in areas which will benefit the greatest number of people, rather than being a budget from extremist Republicans which tends to blow up the budget (read, steal money now for the rich and make the average person pay for it in the future), which basically destroys civilization for the benefit of a few rich people.

[DogOfDanger]

It's good legislation, as is typical of Democrat administrations. It reduces the budget deficit and makes investments in areas which will benefit the greatest number of people, rather than being a budget from extremist Republicans which tends to blow up the budget (read, steal money now for the rich and make the average person pay for it in the future), which basically destroys civilization for the benefit of a few rich people.

Eh, in real world terms inflation effects the poor more than it does the rich... the poor are the ones that can't afford gas and food, where those things make up a third of their budget. To a rich person... they don't even notice the difference. Climate change is an important issue to address, but not really for the cause of reducing our current inflation... Investing in it might reduce inflation in the very long term, like after most cars and trucks are electric (it's gona take many decades) ... assuming the stimulus actually makes the critical difference in the adoption of that technology, which is questionable. But if you really wanted to address inflation in the short term you'd reincentivize domestic oil drilling. Inflation is a short term problem in that people could already barely scrape by prior. Also... you say another bill would steal money for the rich - the bill is for 700B$... clean energy companies make money the same as dirty energy companies. The issue is what's practical and needed.
If you want to deal with climate change that's fine, I think we do need to address it, but it's not addressing the current problem with inflation.

[Poptart]

Eh, in real world terms inflation effects the poor more than it does the rich... the poor are the ones that can't afford gas and food, where those things make up a third of their budget. To a rich person... they don't even notice the difference. Climate change is an important issue to address, but not really for the cause of reducing our current inflation... Investing in it might reduce inflation in the very long term, like after most cars and trucks are electric (it's gona take many decades) ... assuming the stimulus actually makes the critical difference in the adoption of that technology, which is questionable. But if you really wanted to address inflation in the short term you'd reincentivize domestic oil drilling. Inflation is a short term problem in that people could already barely scrape by prior. Also... you say another bill would steal money for the rich - the bill is for 700B$... clean energy companies make money the same as dirty energy companies. The issue is what's practical and needed.
If you want to deal with climate change that's fine, I think we do need to address it, but it's not addressing the current problem with inflation.

Yeah I doubt this bill is our silver bullet to inflation. I think the idea is that these policies, when taken as a whole, have a net deflationary effect on the economy. A reduction in the deficit is a reduction in public spending and the overall level of demand, which in theory should lead to lower prices over time. Allowing Medicare to negotiate prices with prescription drug companies is a policy that directly targets healthcare spending and should reduce costs for consumers and the federal government. Increased enforcement of existing tax laws reduces demand by lessening the deficit and taking money out of the economy that would otherwise probably be spent on consumer goods. I guess that investing in clean energy should increase supply over the long term, but yeah I agree that won’t change the $10 price tag on bacon at my grocery store. I also wonder how car buyers will take advantage of the EV tax credits when there’s already a shortage of electric vehicles that will probably get worse when car buyers see a $7.5k slash in price

These policies have an overall deflationary effect on the economy. I suspect the magnitude of this effect won’t be enough to solve inflation by itself. Monetary policy is set by the federal reserve, not congress. I think the name of the bill is mostly just political marketing.

[DogOfDanger]

A reduction in the deficit is a reduction in public spending and the overall level of demand, which in theory should lead to lower prices over time.

Increased enforcement of existing tax laws reduces demand by lessening the deficit and taking money out of the economy that would otherwise probably be spent on consumer goods.

I've heard this said a couple times, but it doesn't make sense to me. If the reduction in the deficit was achieved through a reduction in government spending then yes, people would have less money and they could spend less on consumer goods... such a bill would be appropriate if there were some kind of money bubble, like if the public had large amounts of excess money and this was driving inflation. The policy would need to be targeted toward the segment of the public that had the excess cash, which... those that live off entitlements aren't exactly rolling in cash. But there isn't a large spending bubble out there today anyway, far from it...
But if you reduce the deficit by increasing corporate tax rates, as this bill did, that's not going to reduce the publics available cash. It'll reduce companies available cash... I don't see how that would translate into less consumer spending and inflation reduction. Not unless you mean to drive wages down, dry up jobs, or reduce the number of goods on the market... it's not a targeted policy aimed at a specific spending bubble, it's just slowing down the whole economy.... It will take a long time for these effects to accrue... and there isn't a spending bubble anyway, what's driving inflation is the price of gas, and that's a supply problem. The solution would be to drill domestic oil. Democrats ideas prohibit them from doing that... so, instead of addressing the issue directly we have this weird logic about how increasing corporate tax rates will dry up consumer spending somehow, which isn't even the problem...
You can slow down the economy all you like, the price of gas won't drop until you fix the supply problem, in the meantime you're just creating stagflation.

Allowing Medicare to negotiate prices with prescription drug companies is a policy that directly targets healthcare spending and should reduce costs for consumers and the federal government.

What amazes me in hearing this is that Medicare wasn't already able to negotiate prices with drug companies. So to me this sounds like more of a marketing slogan than a serious policy change, because it seems like something that should have been done a very long time ago for reasons totally unrelated to inflation. If they couldn't get it done then.... why are they doing it now? I haven't actually read the bill, admittedly.

I guess that investing in clean energy should increase supply over the long term, but yeah I agree that won’t change the $10 price tag on bacon at my grocery store. I also wonder how car buyers will take advantage of the EV tax credits when there’s already a shortage of electric vehicles that will probably get worse when car buyers see a $7.5k slash in price

Agreed

These policies have an overall deflationary effect on the economy. I suspect the magnitude of this effect won’t be enough to solve inflation by itself. Monetary policy is set by the federal reserve, not congress.

Certainly moving to electric vehicles will have a very stabilizing effect on the economy long term, and I'm fine with that policy. It's not going to reduce our inflation now, as you've pointed out... but it's generally a good idea, and I could live with this part of the bill. Im probably gona buy myself an EV in the coming years

I think the name of the bill is mostly just political marketing.

Yes, that's what it all comes down to - the midterms are in less than 3 and a half months. The democrats are getting killed in the polls and that's mainly due to inflation, they have to address this.. so here comes along a bill, it's named the "inflation reduction act". The vast majority of the public are not going to read the bill, or understand it, thus whether it actually addresses inflation is actually irrelevant - inflation reduction can be accomplished by releasing oil from the strategic oil reserves for the next 4 months - which is what they're also doing. What matters is that the bill contains material for important talking points, and satisfies the constituents, which means raising the corporate tax rate and incentivizing electric vehicles - regardless of how this effects inflation.

[Poptart]

It will take a long time for these effects to accrue... and there isn't a spending bubble anyway, what's driving inflation is the price of gas, and that's a supply problem. The solution would be to drill domestic oil.

Higher oil prices drive up costs in other areas, but inflation was rising before the price of oil went up, and the steady decline in gas prices we’ve seen for over a month isn’t mirrored by a decline in overall prices in the economy. I agree that the US could drill more oil, I’m just not that gas prices are the primary cause of this inflation.

I've heard this said a couple times, but it doesn't make sense to me. If the reduction in the deficit was achieved through a reduction in government spending then yes, people would have less money - they'd be bogged down in paying for more of their own expenses - and they could spend less on consumer goods... such a bill would be appropriate if there were some kind of money bubble, like if the public had large amounts of excess money and this was driving inflation. The policy would need to be targeted toward the segment of the public that had the excess cash, which... those that live off entitlements aren't exactly rolling in cash.

Can you explain what you mean by money bubble? I’m not familiar with that term. Increased tax enforcement will target higher earners because it’s more profitable to recover unpaid taxes from high earners who owe more taxes. Tbh all of this is nothing compared to the amount of money in the economy. I agree with you that the bill is unlikely to reduce inflation in any meaningful way, I was just trying to explain why it’s technically deflationary. It reminds me of weighing yourself after you pee and hoping the scale will go down lol.

[Poptart]

Certainly moving to electric vehicles will have a very stabilizing effect on the economy long term, and I'm fine with that policy. It's not going to reduce our inflation now, as you've pointed out... but it's generally a good idea, and I could live with this part of the bill. Im probably gona buy myself an EV in the coming years

I’m excited about the move towards electric vehicles, too. I expect my next car will be an EV, but that’s a few years down the road for me since I don’t really need a new car. Plus I’m waiting for better EV charging infrastructure to pop up, and I’d want to live somewhere with room to store a power generator in case of an outage. But yeah, I’m excited for electric cars. It’ll be interesting to watch the shift.

[Ave]

It's good legislation, as is typical of Democrat administrations.

I mean yeah, and anyone who disagrees belongs in a gas chamber.

[ouronis]

It won't get passed unless we put Manchin and Sinema in a gas chamber

[Poptart]

It won't get passed unless we put Manchin and Sinema in a gas chamber

Lol. Apparently a meeting with Larry Summers can achieve results similar to a gas chamber

[ouronis]

Lol. Apparently a meeting with Larry Summers can achieve results similar to a gas chamber

I guess Larry has the stale smell of someone that hasn't showered since the 90s.

[Adam Strange]

It won't get passed unless we put Manchin and Sinema in a gas chamber

Maybe the exhaust on Manchin's Maserati could be rerouted to the passenger compartment.

[ouronis]

Maybe the exhaust on Manchin's Maserati could be rerouted to the passenger compartment.

Via a tube taped to his mouth

[Ave]

Via a tube taped to his mouth

The benevolent Democrats of today.

[Ave]

American liberals: Expressing their benevolence to humanity and to their country, one nazi death camp reference at a time.

[Poptart]

Personally I think we should replace our senators with 100 of the 121 forum members who logged into 16types today

[ouronis]

Personally I think we should replace our senators with 100 of the 121 forum members who logged into 16types today

There you might actually see a congress that's dysfunctional just because people disagree lol

[RaptorWesNet]

Personally I think we should replace our senators with 100 of the 121 forum members who logged into 16types today

Ya, this sounds reasonable. Most of our officials are just greedy and power hungry people that suck the life out of genuine blueprints of the hero’s soul.

The city of tomorrow at least though can emerge through our freedom of religion and speech.

[Poptart]

Can we talk about the bill, pls? Partisanship is a big topic in American politics and probably deserves its own thread

[Poptart]

Another thought about the EV tax credits- California has mandated that all new cars sold within the state must have zero emissions by 2035. Hopefully congress has a plan for someday letting the government off the hook for these tax credits? Eventually the government will have to subsidize every car buyer’s purchase.

[Poptart]

The 2022 Nissan Leaf MSRP is $27,400, which means the EV tax credit lowers the cost to $19,900. For comparison, a new 2022 Toyota Corolla costs $20,425.

[Capitalist Pig]

If it doesn't involve abolishing the Fed and getting the government out of money, it won't solve a goddamn thing, and can only make the situation worse.

[ouronis]

Right now the gov is hiking interest rates, which hurts consumers. Most inflation-reducing measures I'm aware of that don't just hurt normal people involve attempts to trap money in place so that it isn't in circulation, e.g. bond yields via the gov taking on more debt rather than less. Honestly, I don't see how any of the bullet points above trap money, in fact it looks like they encourage spending. It does try to fight healthcare inflation (the kind we are seeing right now with oil, where it's the equivalent of a professor issuing homework like they're the only class you're taking) it looks like, but I'm not sure if I believe in the government's ability to negotiate. That just looks like a reason for companies to beef up their legal talent.

[Hot Scalding Gayser]

It seems fair, compassionate and reasonable - so naturally I'm cynical it will get passed and instead the Republicunts will have their way and create more problems and then blame everything on blacks, women and gays like they always do.

Despite my Te Polr I got an A+ in law and I shoulda utilized that and made more of a real difference for others instead of being a useless weeb that plays too many video games but I guess I was too afraid I'd fuck things up that I didn't try to fight people that I should have been fighting.

[timber]

It seems fair, compassionate and reasonable - so naturally I'm cynical it will get passed and instead the Republicunts will have their way and create more problems and then blame everything on blacks, women and gays like they always do.

Despite my Te Polr I got an A+ in law and I shoulda utilized that and made more of a real difference for others instead of being a useless weeb that plays too many video games but I guess I was too afraid I'd fuck things up that I didn't try to fight people that I should have been fighting.

its never to late to try.

[FreelancePoliceman]

The Inflation Reduction Act is not Designed to Reduce Inflation

The bigger issue is that the United States suffers from a chronic lack of state capacity. It struggles to pass all but the most paltry legislation. It cannot get out in front of its problems and it cannot even solve crises as they arise. So, it papers over its dysfunction by measuring spending in decades rather than in years, by sticking that extra zero on the end of every number. Seven hundred billion sounds much better than seventy billion. It almost sounds like somebody’s doing something. But it’s the sound of silence.

[Metamorph]

The Inflation Reduction Act is not Designed to Reduce Inflation

Of course, it's designed to give money to the IRS and the IRA (OK, an IRA is certainly something very different from the IRA.)

[Poptart]

The Inflation Reduction Act is not Designed to Reduce Inflation

https://twitter.com/cityafreaks/stat...-RL1DUDahgp2Ww

[Poptart]

The Inflation Reduction Act is not Designed to Reduce Inflation

To fight inflation, the government would need to be doing some combination of three things:

It could actively work with other countries to unblock supply chains or establish replacement trade links.
This might involve, say, talking to the Venezuelans or the Iranians and normalizing relations with them in a bid to drive down oil prices. Or it might involve asking our trade partners in East Asia to relax their zero-COVID policies to reduce interruptions in production. The federal government won’t do these things, because it is loathe to admit to Venezuela, Iran, China, and other countries that it needs their help. It has no desire to make any concessions to any of these states. It would rather allow American workers to suffer than look so sheepish. It certainly would rather let inflation run loose than negotiate with the Russians on an end to the war in Ukraine.

I’m not an expert in international relations—could it really be that simple? China would end it’s zero-covid policies if only the US asked them nicely?

It could embark on a longer, slower project of creating new industries in the United States to alleviate the cost of living crisis.

For instance, the government could start a publicly run energy company and use that energy company to offer energy to ordinary Americans at a subsidized cost. Mexico has a state-owned oil company, called Pemex. Because Pemex belongs to the Mexican state, Mexico can subsidize the oil Pemex drills, offering immediate relief to Mexican consumers. We could do something similar here. Private oil companies would not like having an American state-owned competitor, and the political obstacles would be sizable. But a president serious about alleviating pain at the pump could use this crisis to mobilize the public. Once prices are alleviated, a public energy company could be a source of future revenue, and it could lead to the creation of a sovereign wealth fund. Norway does something similar. No one in American politics seriously discusses any of these possibilities, because no one is serious about actually helping Americans deal with the cost-of-living crisis. The Democrats are happy to use higher gas prices to push Americans to buy electric cars, while the Republican strategy is to open nature preserves to private drilling. Neither will make any near-term difference to inflation.

Setting aside that the bill incentivizes clean energy development in the long-run, and never mind that his suggestion is a change of ownership and not a creation of a new industry. Is a public take-over of the fossil fuel industry really the most cost-effective policy? “No one in American politics seriously discusses any of these possibilities, because no one is serious about actually helping Americans deal with the cost-of-living crisis.” I don’t like this blogger’s assumption here. People can disagree with him on policy and want to help the country at the same time lol.

It could dramatically raise taxes on wealthy oligarchs, and use the revenue to fund the above.

Conservatives like to propose tax cuts during periods of high inflation, because they think taxes discourage the private sector from expanding production and resolving supply chain issues. But sometimes the private sector isn’t capable of resolving supply chain issues in a timely manner, and state investment is necessary to bring immediate relief. It must also be remembered that wealthy people have contributed to inflation by bidding up the value of all sorts of assets. They’ve dumped money into the stock market and the housing market, and their speculation has fueled a series of bubbles in things like cryptocurrencies and NFTs. Too much investment chasing too few profitable sectors leads to bubbles and herd behavior. It would be much better if the state took some of that money and used it to solve the actual, existing supply chain problems. In the long run, private investors would have better opportunities if the state acted in a more proactive manner.

The bigger issue is that the United States suffers from a chronic lack of state capacity. It struggles to pass all but the most paltry legislation. It cannot get out in front of its problems and it cannot even solve crises as they arise. So, it papers over its dysfunction by measuring spending in decades rather than in years, by sticking that extra zero on the end of every number. Seven hundred billion sounds much better than seventy billion. It almost sounds like somebody’s doing something. But it’s the sound of silence.

The CBO makes long term projections. This is nothing new and literally happens all of the time.

[FreelancePoliceman]

I’m not an expert in international relations—could it really be that simple? China would end it’s zero-covid policies if only the US asked them nicely?

"Asking them nicely" is not what was suggested, and hostilities with Iran and Venezuela are something that the US could easily work to change, if it had any interest in that.

Setting aside that the bill incentivizes clean energy development in the long-run, and never mind that his suggestion is a change of ownership and not a creation of a new industry. Is a public take-over of the fossil fuel industry really the most cost-effective policy?

Who exactly do you think should create these new industries? Why aren't they doing that now?

The article gave examples of states using their oil wealth for the public good. These models are successful; the suggestion was to consider emulating them.

“No one in American politics seriously discusses any of these possibilities, because no one is serious about actually helping Americans deal with the cost-of-living crisis.” I don’t like this blogger’s assumption here. People can disagree with him on policy and want to help the country at the same time lol.

Who is "people?"

The CBO makes long term projections. This is nothing new and literally happens all of the time.

I don't know what your point is, and secondly the country in a spiral of terminal decline; what Congress does "all the time" is part of that process.

[Poptart]

"Asking them nicely" is not what was suggested, and hostilities with Iran and Venezuela are something that the US could easily work to change, if it had any interest in that.

Was referring to China's zero-covid policies wrt supply shocks, and "asking them nicely" is what he suggests here: "Or it might involve asking our trade partners in East Asia to relax their zero-COVID policies to reduce interruptions in production. The federal government won’t do these things, because it is loathe to admit to Venezuela, Iran, China, and other countries that it needs their help."

The article gave examples of states using their oil wealth for the public good. These models are successful; the suggestion was to consider emulating them.

Right, and I asked if nationalizing the fossil fuel industry would be the best policy for making gas cheaper for Americans.

Who exactly do you think should create these new industries? Why aren't they doing that now?

I don't understand this question.

I don't know what your point is, and secondly the country in a spiral of terminal decline; what Congress does "all the time" is part of that process.

The CBO is not congress. My point is that the blogger is grasping at straws here: "So, it papers over its dysfunction by measuring spending in decades rather than in years, by sticking that extra zero on the end of every number. Seven hundred billion sounds much better than seventy billion. It almost sounds like somebody’s doing something".

[FreelancePoliceman]

Was referring to China's zero-covid policies wrt supply shocks, and "asking them nicely" is what he suggests here: "Or it might involve asking our trade partners in East Asia to relax their zero-COVID policies to reduce interruptions in production. The federal government won’t do these things, because it is loathe to admit to Venezuela, Iran, China, and other countries that it needs their help."

My point was that you're trying to make suggestions for literally anything other than the status quo sound ridiculous. "Asking them nicely" is interpreting the word "asking" literally, when obviously it's meant to mean a negotiation.

Right, and I asked if nationalizing the fossil fuel industry would be the best policy for making gas cheaper for Americans.

You do it again here. Rather than concede that any alternatives are worth considering, you say "I don't know that nationalization would make gas cheaper therefore it's wrong to consider doing anything else than what we're currently doing."

I don't understand this question.

You wanted to talk about developing new industries. What industries? Who should develop them?

The CBO is not congress. My point is that the blogger is grasping at straws here: "So, it papers over its dysfunction by measuring spending in decades rather than in years, by sticking that extra zero on the end of every number. Seven hundred billion sounds much better than seventy billion. It almost sounds like somebody’s doing something".

How is that "grasping at straws?" In ten years housing is still going to be unaffordable for most people, either because the current trend has gotten worse or because a price crash has plunged the country into another depression. Going to the hospital is still going to cause bankruptcies. You'll just blame it all on the other neoliberal party though, so I don't know why you care about this bill since it won't matter anyway.

[Disturbed]

I don't think it's very impressive, and it doesn't propose ending the patent system. It also would've been nice if Joe Biden didn't start intervening in Ukraine and if he didn't try to create a central digital currency, because doing that creates inflation and makes it more difficult for people to find a way out of problems caused by inflation.

It's really a shame, because it seems like there is no way any politician could be elected to do sensible policy that allows for decentralization of political power and more individual liberty and satisfaction.