Discussing the "inflation reduction act"

 Mein Gott. The democrats look like they're ACTUALLY passing something. Holy crap. It's a miracle. Anyway, what just passed the senate and is likely to be signed by Joe Biden is known as the "inflation reduction act." But, what's actually in it? Well, according to the one page summary, it's trying to solve inflation by fixing the deficit. So this bill claims to raise $739 billion by:

1) Establishing a 15% corporate minimum tax

2) Prescription drug pricing reform

3) Beefed up IRS tax enforcement

4) Carried Interest Loophole

This looks like it will be over the course of a decade, not yearly. So read the above as $74 billion or so a year. Maybe a bit more since some things will be funded for less time. 

The money will be spent on:

1) Energy security and climate change

2) Expanding the affordable care act

3) Deficit reduction

So...basically, this is a stripped down version of build back better. We FINALLY got a climate bill passed. FINALLY. Given its size, it looks a bit anemic compared to even the original BBB framework, but it's something. I support climate change investment after all. We need clean energy, and we need to wean ourselves off of fossil fuels. This isn't just a climate change thing either. Being oil dependent is also a national security risk. What happened this year with gas prices hitting $5 a gallon happened back in the 1970s when opec choked off supply too. If we didnt have to worry about oil, it would be a massive game changer for our national security strategy. 

Prescription drug reform is something that also needs to happen. Mark Cuban recently showed with his new website just how hosed we are on medicines, and if we had universal healthcare, imagine how much we could save. I'm not sure how effective this more piecemeal framework would be, but it's something.

Now, as for deficit reduction, will this fix inflation? In theory but probably no. Let's put our MMT thinking caps on for a second. Under MMT, generally speaking, balanced budgets aren't a good thing. Because people won't spend. And this means the economy won't grow. And just as we can stimulate the economy by pumping money into it, we can also put the brakes on by taking it out of the economy. 

This bill puts about 40% of its revenue toward deficit reduction, which basically takes it out of the economy. But let's look at the sources. The big one comes from the corporate minimum tax. This would raise revenue, but if inflation comes from spending, will this solve the problem? Eh...maybe?

I mean, we looked at inflation previously on this blog and found a lot of it is not due to wage price spirals, but because of corporate price gauging. I guess if this tax hits corporations in their profits, it could reduce the desire of corporations to gauge people. I'm not sure if it will or not as I'm not an economist and this is a bit out of my depth, but it might, it might not. Intuitively I would say it won't,, but you never know. After all, key behind deficit reduction by taking money out of circulation implies that the problem is there is too much money out there. And reducing the amount of money out there normally makes people tighten their belts a bit. But, this isn't really targetting normal consumers at all. It's sticking it to the rich. And while the rich are the problem and making off with excessive profits, I'm not entirely sure that this tax will effectively solve the problem. 

So, what do I think of this bill? Meh. It's alright. I mean, I'm glad we're passing SOMETHING. But honestly, the standards are so low at this point it's pathetic. I guess this bill does some good things but given how we went into the 2020 elections with utopian ideas like UBI and universal healthcare, and even though I don't agree with it, the green new deal, it's kind of insulting this is all we get. 

So while I have to congratulate Biden on passing something, this really is peak Bidenism. The standards are so low we're cheering we're getting something rather than nothing at all. Meh. Whatever.