The Truth is Powerful
Would the Inflation Reduction Act actually reduce inflation?
Sen. Joe Manchin (D-WV) speaks to reporters outside his Washington, DC, office on August 2, as negotiations in the Senate continue over the Inflation Reduction Act of 2022. As its name suggests, Democrats’ new budget reconciliation bill — the Inflation Reduction Act — claims it will help bring down inflation .
The legislation is a landmark bill that makes massive investments in climate, tax, and health care policy, and contains multiple provisions that could help achieve that goal. For one, the Congressional Budget Office has found that it’s likely to reduce the deficit by up to $102 billion over 10 years (and perhaps more than $300 billion, depending on the proposal’s final taxation rules). Deficit reduction, as well as other policies in the bill, could curb demand in the economy. Additionally, the bill would increase the supply of resources like energy. As the thinking goes, when supply is up and demand is down, prices decline.
The bill’s net impact on inflation, though, is likely modest, and may not be felt for a while given how long many of these policies will take to go into effect, multiple economists who spoke with Vox said.
“We’re talking about small impacts one way or the […]