August 06, 2022

The Truth about the Democrats’ Inflation Act

It has been a long week of cold hard facts raining down on the Democrats’ Inflation Act. First there were the folks at Penn Wharton and the Congressional Budget Office (CBO) who agree – this legislation does nothing to lower inflation:
  • Researchers with the Penn Wharton Model – a favorite of Sen. Joe Manchin (D-WV) – reported that the “Inflation Reduction Act” will do nothing to tamp down the inflation crisis and would actually increase inflation in the near term. To quote the experts, there’s “low confidence that the legislation will have any impact on inflation.”
  • On Thursday, the CBO reported that the legislation will have no impact on reducing inflation and the largest driver of inflationary pressure, extended Obamacare subsidies, will benefit the wealthy.
    • American households earning over $300,000 will qualify for taxpayer-funded Obamacare subsidies.
    • Those Obamacare subsidies will disincentivize work, reduce output, and increase inflation.
This legislation will raise taxes on low-and-middle income families:

The Joint Committee on Taxation (JCT) has found that domestic manufacturers will bear the largest portion of the tax burden from a 15 percent minimum tax on book income, driving up prices and worsening the supply chain crisis during a recession.

JCT confirmed that Americans making less than $400,000 per year – the threshold President Biden pretends to want to protect – will bear the brunt of more than half of the tax increases.

  • At least half of all new tax revenue raised next year would come from those earning under $400,000.
  • Billions worth of tax increases will hit taxpayers making less than $200,000 per year.
  • Over 50 percent of the IRS spending in the Democrats’ plan funds enforcement with middle-class Americans as the primary targets.
At $80 billion, that IRS spending will hit a lot of middle-class Americans:

The previous version of the Build Back Broke agenda passed by House Democrats last year gave the IRS the same $80 billion in taxpayer money this new version does to hire 87,000 agents. The purpose: taking a look into any Americans’ bank accounts with inflows or outflows of more than $10,000.

JCT confirmed such a proposal would impact up to 134 million Americans earning less than $400,000.

This legislation’s proposed prescription drug price controls will cause prices for new drugs to be more expensive:

On Thursday, CBO analysis confirmed that if Democrats enact their prescription drug price control scheme, we will see higher costs for future cures, less generic competition, and higher costs to taxpayers – a scenario where only the wealthiest Americans are able to afford new cures.

It’s hard to reduce inflation when you are raising the debt:

The Democrats’ Inflation Act relies on budget scoring gimmicks and false sunsets to hide the true cost of its inflationary spending – which will total over $700 billion and add over $100 billion in new debt. Between CBO’s analysis that the Democrats’ budget reconciliation bill will have no impact on inflation and 230 economists who say it will “perpetuate inflation”, it’s important to note that under the Democrat plan:

  • $22 billion is added to the debt in the first five years. How does that help today’s inflation crisis?
  • 122 percent of the bill’s supposed deficit reduction comes after 2026 – attempting to make up for the deficit increase in the first five years.
  • 78 percent of the deficit reduction does not show up until the last two years.