If reducing inflation were as simple as passing a law, Congress would have done it already. Democrats are claiming that a new deal between Senate majority leader Chuck Schumer and West Virginia senator Joe Manchin is the ticket back to price stability. That’s nonsense, and it won’t save Democrats’ reputation among voters.
Democrats aren’t calling this bill Build Back Better, and they shouldn’t because it isn’t. Build Back Better was an absurdly large progressive wishlist that would have cost trillions of dollars and included countless new welfare programs and industry subsidies for Democratic interest groups. That bill died, as it deserved to, because even after a year of haggling and horse-trading, it never had a majority of senators in favor of its provisions.
What we have instead is what Democrats are calling the Inflation Reduction Act, which is composed of a few random parts of Build Back Better that Manchin agrees with. For revenue, it includes a 15 percent corporate minimum tax, prescription-drug pricing reforms, and more IRS tax-code enforcement. On the expense side, there are $369 billion in green-energy programs and subsidies, plus a $64 billion extension of the Affordable Care Act.
It’s a delicious bit of Washington-speak that the Inflation Reduction Act, which will not reduce inflation, contains an extension of the Affordable Care Act, which did not make care more affordable. The Manchin–Schumer deal also hides the true cost of the Obamacare expansion by letting the subsidies expire in 2025. Last year, Manchin said temporary expansions of budget items intended to be permanent in the Build Back Better bill were “budget gimmicks” and “shell games.”
This bill would add new spending on government boondoggles at a time when plenty of other government boondoggles are already on their way out the door. The bipartisan infrastructure law, we were told, also contained green-energy programs that would help fight climate change, and it will be rolled out over the next nine and a half years. That “once-in-a-generation investment,” it turns out, wasn’t enough (surprise!), which is why we need more “historic investment” now. Something tells us that this time won’t be enough, either, and in a few months, progressives will again be hectoring Congress to “save the planet” from the “climate emergency,” which conveniently involves shoveling more taxpayer money to Democratic special interests.
The revenue provisions aren’t any better. Increasing taxes on corporations as the economy contracts is not exactly a recipe for economic growth, or for correcting supply-chain issues. At a time when Americans are being squeezed by inflation, Democrats apparently want them to also be squeezed by the IRS. The tax-enforcement provisions would effectively double the size of the agency, giving it more manpower to audit taxpayers. That’s what “closing the tax gap” will mean in practice: more audits. Hooray.
Democrats claim this bill would reduce the deficit by $300 billion, a “historic deficit reduction to fight inflation.” At least they have included more realistic estimates of their revenue provisions this time around, rather than the sham overestimates they were using to justify Build Back Better. They say IRS enforcement, for example, will raise $124 billion, which is far more realistic than the $400 billion to $1 trillion some Democrats were claiming it would raise last year.
But it’s hard to believe the Democrats have found religion on deficit reduction, given their actions earlier this congress and the actions they want to pursue going forward. The American Rescue Plan, passed by these very same Democratic senators and representatives, is partially responsible for the inflationary pressures our economy is facing and added $1.9 trillion in new debt. That debt was entirely unnecessary, and the rising interest rates that have followed the rising inflation have made financing that debt less affordable. Democrats are also still toying with student-loan forgiveness, when even just extending the pause that’s already in place would be deficit-increasing and inflationary. And we all know many of them wanted to spend way more than this and Manchin and Schumer negotiated it down.
Negotiations are likely incomplete. Arizona senator Kyrsten Sinema has yet to indicate her position on it, and she opposed similar corporate-tax provisions in the past. Other potential holdouts include Democrats from states with high property and income taxes, most prominent among them New Jersey senator Bob Menendez. That’s because this agreement does not include restoration of the SALT deduction, which Menendez believes is the greatest thing since sliced gabagool. If restoration of the SALT deduction does get included, then Manchin will likely be out, and Democrats can’t have a single defector.
Regardless, even if it does pass, this cynical plan to throw together a few legislative proposals Democrats have wanted for years and call it “inflation reduction” will not work, even as a piece of deceptive labeling. Voters want to see inflation actually come down, not their member of Congress vote for the words “inflation reduction.