President Biden said on Thursday that an energy, tax and health care agreement reached with Senator Joe Manchin III of West Virginia would relieve inflation and bring down the cost of living for American families. That key promise helped bring the centrist senator on board for a bill that carries the remnants of the president’s expansive domestic agenda.
Taming inflation has become a top priority for Democrats and Mr. Biden, who has seen his approval rating sink as Americans have faced soaring costs for food, gas, rent and other goods and services. With few policy levers under his immediate control to beat back rapid price gains, Mr. Biden sought to portray the new package as an economic salve that would put money back in consumers’ pocketbooks.
The extent to which the package, known as the Inflation Reduction Act, could alleviate the most rapid price gains in 40 years remains to be seen. But many economists agreed that the tax and other provisions would likely help reduce price pressures somewhat, although the overall effect is likely to be modest and potentially will not be felt for months or years.
The plan centers on nearly $370 billion in tax incentives and spending programs meant to encourage consumers, businesses and electric utilities to switch to lower-emission sources of energy on the road and in electricity generation. It also includes nearly $300 billion in federal spending savings, to be achieved by giving Medicare the power to negotiate for lower prescription drug prices, and money to lower health insurance premiums for 13 million people who get their insurance via the Affordable Care Act.
Mr. Biden said that health savings from those moves would amount to $800 per family per year, and that the energy provisions would bring down family energy bills “by hundreds of dollars.”
The new spending and tax credits would be more than offset by a $313 billion tax increase on large multinational corporations that currently reduce their tax bills below an effective rate of 15 percent, along with a new crackdown by the Internal Revenue Service on businesses and high-earning individuals that evade taxes. It would raise more than it spends, which would have the effect of reducing the federal budget deficit by $300 billion.
As a result, the bill could help mitigate inflation in two ways. Reducing the federal budget deficit should reduce consumer spending power in the economy, at least somewhat. In particular, it could take money from high earners, via increased tax enforcement, and large corporations. Its investments in emerging low-emission energy sectors could speed …….