The Inflation Reduction Act Will Lower Costs, Create Jobs, And Help Fight Inflation—AND Even Top Republicans Admit It Won’t Raise Tax Rates On American Families

August 6, 2022

TOP REPUBLICANS ADMIT THE INFLATION REDUCTION ACT WON’T RAISE MIDDLE CLASS FAMILIES’ TAX RATES

Senate Republican Leader Mitch McConnell (R-KY):

BENSON: He’s trying to say that this has nothing to do with taxes, not one penny of new taxes; do you have any clue what he means by that or what he’s trying to convey with that?

MCCONNELL: Yeah, look, Guy – he’s saying no new tax rate increases: that’s true. [Fox News Radio, 8/3/22]

Senate Republican Whip John Thune (R-SD): “It may have been the case that what Senator McConnell was referring to is individual tax rate increases. There aren’t individual rate increases.” [Fox News The Story With Martha MacCallum, 8/4/22]

Senate Finance Committee Ranking Member Mike Crapo (R-ID): "I will respond to the question about those two issues. One, that it's not raising taxes on certain Americans. Technically it's not raising their tax rates.” [Press Conference, 8/2/22]

EXPERTS SAY THE INFLATION REDUCTION ACT WILL LOWER INFLATION

Former Treasury Secretaries Under Democratic and Republican Presidents Tim Geithner, Jack Lew, Hank Paulson, Robert Rubin and Larry Summers: “As former Treasury Secretaries of both Democratic and Republican Administrations we support the Inflation Reduction Act which is financed by prudent tax policy that will collect more from top-earners and large corporations. Taxes due or paid will not increase for any family making less than $400,000/year. And the extra taxes levied on corporations do not reflect increases in the corporate tax rate, but rather the reclaiming of revenue lost to tax avoidance and provisions benefitting the most affluent. The selective presentation by some of the distributional effects of this bill neglects benefits to middle-class families from reducing deficits, from bringing down prescription drug prices, and from more affordable energy. This legislation will help increase American competitiveness, address our climate crisis, lower costs for families, and fight inflation — and should be passed immediately by Congress.” [Axios8/3/22]

Letter From 126 Leading Economists: “We write to strongly urge you and your colleagues in Congress to swiftly pass the Inflation Reduction Act of 2022. This historic legislation makes crucial investments in energy, health care, and in shoring up the nation’s tax system. These investments will fight inflation and lower costs for American families while setting the stage for strong, stable, and broadly-shared long-term economic growth.” [Letter to Congressional Leadership, 8/2/22]

Maya MacGuineas, President of the Committee for a Responsible Federal Budget: “To fight inflation, we want policies that will increase supply or reduce demand. And this does both. Almost every one of these policies, in and of itself, will fight inflation. And on net, the entire package most certainly will.” [New York Times, 7/28/22]

Maya MacGuineas, President of the Committee for a Responsible Federal Budget: “The best thing Congress and the President can do to help avoid a recession is to help the Fed fight inflation. Lawmakers should be focused on legislation like the Inflation Reduction Act that could make the Fed’s job easier. Improved tax collection, drug savings, and deficit reduction would put downward pressure on inflation and help ensure fiscal policy and monetary policy are rowing in the same direction.” … “With inflation and the national debt both far too high, it’s long past time that policymakers stop adding to the debt and shift focus to deficit reduction. The Inflation Reduction Act is exactly the kind of package lawmakers should put in place to help the economy in a number of ways.” [Committee for a Responsible Federal Budget, 7/29/22]

Committee for a Responsible Federal Budget: “Ultimately, we expect the IRA to very modestly reduce inflationary pressures in the near term while lowering the risk of persistent inflation over time and thus make it easier for the Federal Reserve to reduce inflation without causing a recession. Policymakers should follow the IRA with further inflation-reducing actions and should especially avoid policies that would worsen inflation and make the Federal Reserve’s job harder.” [Committee for a Responsible Federal Budget, 8/1/22]

Mark Zandi, Chief Economist of Moody’s Analytics: As named, the Inflation Reduction Act will lean against inflation over the next decade. It also adds a bit to growth. And it is more than paid for with tax hikes on large corporations and the well-to-do. While modest legislation, there is plenty to like in the legislation.” [Twitter, 7/31/22]

Mark Zandi, Chief Economist of Moody’s Analytics: “As named, the Inflation Reduction Act will modestly reduce inflation over the 10-year budget horizon.” [Moody’s Analytics, 8/1/22]

Jason FurmanFormer Chairman of the Council of Economic Advisers: “The Inflation Reduction Act is what the country needs right now--helping to address one of our biggest long-run challenges (climate change) while making progress on our biggest short-run challenge (inflation) while protecting the most vulnerable.” [Twitter, 7/27/22]

Jason Furman, Former Chairman of the Council of Economic Advisers: The Schumer-Manchin Bill Will Ease Inflation and Climate Change. “The Inflation Reduction Act is fundamentally different. It’s smaller and contains no large upfront deficit increases. In fact, it would reduce the deficit by more than $300 billion over the next decade. It could end up saving more than that, since properly funding the Internal Revenue Service will likely generate substantially more revenue than congressional estimators believe. The bill also creates a new precedent for paying for routine extensions of tax breaks. This is something both parties have routinely ignored in the past. Deficit reduction is almost always inflation-reducing.” [Wall Street Journal, 7/28/22]

Larry Summers, Former Treasury Secretary: “This is an important step forward in fighting inflation.” … “First, this reduces budget deficits, and so by reducing budget deficits, it reduces the level of demand in the economy. Second, this reduces prices directly by going after prescription drugs and getting lower prices and a better deal for taxpayers when they purchase prescription drugs. Third, this increases supply by stimulating energy production and by subsidizing and supporting our energy transition to renewables. So, less demand, more supply, and direct, better bargaining for lower prices, those are the things that are involved in reducing inflation.” … “This bill is fighting inflation.” [CNN, 7/28/22]

Larry Summers, Former Treasury Secretary: “I have been making the argument for quite some time that the right public investment program is not inflationary and could contribute to a reduction in inflation. And I think the deal that Senator Manchin and Majority Leader Schumer reached, with the strong support of the White House, meets that test in three ways. It reduces demand, because it will bring down the budget deficit over time, because, unlike what we did a year-and-a-half ago, we're raising more revenue than we're increasing spending. So we're taking funds out of the economy. We're putting direct pressure on prices that are too high. That's what the measures about pharmaceuticals, to use the government's purchasing power, are all about. And we're taking a set of steps that will expand the availability of energy and reduce the price of energy. And that means people will hoard less. That means they will hold smaller inventories because they won't be looking for big price increases. And that too will contribute to lower prices. So, I believe that this is disinflationary policy that's also going to make the economy more efficient. It's also going to preserve the environment and also is going to make us have a fairer society.” [CNN, 7/28/22]

Larry SummersFormer Treasury Secretary: “Less demand, more supply & direct better bargaining for lower prices--those are the things involved in reducing inflation. The bill reduces the deficit & the level of demand in the economy, reduces prescription drugs prices & increases supply by stimulating energy production.” [Twitter, 7/28/22]

Joseph Stiglitz, Nobel Prize Winning Economist: “The compromise agreed to under the rubric of the Inflation Reduction Act of 2022 is far more than just an act addressing inflation—although it does that in several ways. It simultaneously addresses several key and long-standing problems facing our economy and society. First, on inflation: There is a simmering debate on the causes of inflation, but whatever side one takes in that debate, this bill is a step forward. For those worried about excessive demand, there is more than $300 billion in deficit reduction.” [Roosevelt Institute, 7/28/22]

Chad Stone, Chief Economist at Center on Budget and Policy Priorities: “The Schumer-Manchin bill reflects sound policies and good economics. It raises needed revenues & makes the tax system fairer; makes health coverage and prescription drugs more affordable; & includes important climate investments. It reduces deficits and is not inflationary.” … “Bottom line: This is a sound package and critics’ arguments about hurting growth or stoking inflation are not based in facts.” [Twitter, 8/1/22]

Shai Akabas, Director Of Economic Policy At The Bipartisan Policy Center: “I think it’s likely to have a modest downward effect on inflation, so directionally, I think it is likely to push downward on prices.” [Vox, 8/4/22]

Chuck Marr, Vice President of Federal Tax Policy at the Center on Budget and Policy Priorities: “The tax elements of the Manchin-Schumer agmt announced yesterday – reducing the tax gap, requiring large, profitable corps to pay some tax & narrowing the carried interest loophole – are sound policy & will reduce the deficit. Well-timed for this inflationary economic moment.” [Twitter, 7/28/22]

Paul Krugman, Nobel Prize Winning Economist: Can Inflation Reduction Save the Planet? “First, would the law, in fact, reduce inflation? Yes, probably — or at least it would reduce inflationary pressures. That’s because the legislation’s increased spending, mainly on clean energy but also on health care, would be more than offset through its tax provisions; so it would be a deficit reduction act, which other things being equal would make it disinflationary. But you want to think of the Inflation Reduction Act as being like the National Interstate and Defense Highways Act of 1956, which probably did strengthen national defense a bit but mainly benefited America by investing in the nation’s future. This bill would do the same, and maybe even more so.” [New York Times, 8/1/22]

Mike Konczal, Director of Macroeconomic Analysis at the Roosevelt Institute: Four Reasons the Inflation Reduction Act Might Be Better at Fighting Inflation than Projected. “Our recent analysis shows the need for a comprehensive administrative and legislative response to tackling the inflationary pressures of demand, supply, and market power. The proposed Inflation Reduction Act (IRA), reconciliation legislation being considered by Senate Democrats, is an important step in this direction. All of the major components of this bill would reduce inflation, contrary to conservative claims. From expanding the supply of energy and addressing the skyrocketing costs of prescription drugs to reducing demand through taxing the rich.” [Roosevelt Institute, 8/2/22]

Treasury Secretary Janet Yellen: “The reconciliation package announced yesterday will help ease inflationary pressures by lowering some of the biggest costs families face, including energy, health care, and prescription drugs, while making historic investments in fighting climate change and reducing the deficit.” [Twitter, 7/27/22]

Treasury Secretary Janet Yellen: “This legislation is fiscally responsible. It will actually reduce the deficit by hundreds of billions of dollars over time. And by reducing deficits, it will be complimenting the work the Federal Reserve and the administration is doing to combat inflation.” [Remarks at a Business Roundtable, 8/4/22]

Gene Sperling, White House American Rescue Plan Coordinator and Former Director of the National Economic Council: “Joe Manchin and Larry Summers all agree this is not only paid for, but reduces the deficit by at least $300 billion. They agree that it's anti-inflationary. And they agree it's going to lower prescription drug prices, lower energy prices, and lower health premiums for 13 million and that, when you look at it as a whole, it is an anti-inflationary bill. And I think that there is wide support for that assessment even among people who we have had disagreements about inflation with in the past.” [Fox News, 7/28/22]

White House Council of Economic Advisers Chair Cecilia Rouse: “Cecilia Rouse, who chairs Mr. Biden’s Council of Economic Advisers, said in an interview on Thursday that the plan would make ‘a meaningful contribution’ to a wide range of ongoing government efforts to reduce inflation. That includes the administration’s work to clear pandemic-clogged supply chains and the Federal Reserve’s rapid moves to raise interest rates, which are intended to cool the economy by making money more expensive to borrow and spend. Ms. Rouse said the bill’s effects could begin to show up in economic data, which could in turn lead the Fed to alter its path of rate increases. ‘It could very well make a difference to their own policymaking,’ she said, ‘because to the extent that they see that inflation is coming down, while employment is remaining robust — so we have we still have maximum employment or a strong labor market that makes their life easier — they will be able to start to moderate their own policies.’” [New York Times, 7/28/22]

White House Council of Economic Advisers Member Jared Bernstein: “But on the inflation side, we all agree we've got to do more. And here, we really need to talk about some legislation. The Inflation Reduction Act was a critical breakthrough yesterday in negotiations. This will lower the cost of the prescription drugs. It will lower the cost of health insurance. It will lower the cost of investing in an electric vehicle. It will -- in tandem with the CHIPS Bill, it will stand up a domestic American semiconductor production industry, all of which over the longer term will put long-term downward pressure on prices. Near-term relief when it comes to drugs and health insurance, long-term relief when it comes to these investments. So, that's another really important aspect of our plan to help ease inflationary pressures.” [Fox, 7/28/22]

White House Council of Economic Advisers Member Jared Bernstein: “One of the things that the Inflation Reduction Act will do is right out of the gate lower the budget deficit by about $90 billion just from the minimum corporate tax alone in F.Y. '23 and '24 together. So, that starts working right away. And that is clearly disinflationary. So, we believe that will help with inflation. When it comes to lower prescription drug prices, some of the measures, including rebates to seniors and a cap on expenditures, they also get out of the gate very quickly. When it comes to lowering the coverage -- lowering the cost of health care coverage, that's also something that comes directly upon signing of that measure. So, some of these measures get right out there very quickly.” [Fox News, 8/2/22]

White House Council of Economic Advisers Member Jared Bernstein: “From our perspective, when we lower the budget deficit $300 billion over 10 years, I think it's actually pretty hard to find an economist who says anything other than, of course, that's disinflationary. When we boost the economy's supply side by helping people afford prescription drugs and by lowering the cost of clean energy, yes, to me, that's unquestionably pushing in the right direction.” [Fox News, 8/5/22]

White House Council of Economic Advisers Member Heather Boushey: “The Inflation Reduction Act would help families save money on key expenses. Take prescription drugs: Americans spend *more than* people in any other OECD country on pharmaceuticals including prescription drugs. The Inflation Reduction Act would make prescription drugs cheaper by allowing Medicare to negotiate lower prices (saving the government *and* households money). Economic research suggests that renewable energy sources can push down wholesale electricity prices, reducing costs for households and industries.” … “Second, the bill also has provisions to lower costs for households to ease the transition to clean energy.  For example, it includes a $10,000 direct consumer rebate that returns money to families when they buy heat pumps or other high-efficiency heating & cooling appliances.” … “Together, all of these pieces add up to hundreds of dollars each year in savings for American households.” [Twitter, 7/31/22]

White House National Economic Council Director Brian Deese: “The single most important thing that we can be doing, that Congress can be doing is moving on legislation that provides some relief to consumers and also reduces price pressures in our economy and the Inflation Reduction Act that Senator Schumer and Senator Manchin outlined yesterday is probably the best way we can do that." [The Hill, 7/28/22]

White House National Economic Council Director Brian Deese: “The Inflation Reduction Act is exactly what our economy needs. The prescription are economy needs right now, to the point you are making. Inflation is high and we need to bring prices down, we need to give some relief to consumers while also helping to bring inflation down in the economy as a whole. So what this bill would do: it would reduce the cost of prescription drugs, allow Medicare for the first time to negotiate for prescription drugs, which lowers costs in Medicare, and it also lowers costs for seniors and people with chronic conditions, lower the cost of health care for 13 million Americans, and invest prudently in energy in a way that will lower costs and help us meet our climate goals. All of those things are ready made for the economic circumstances that we face today.” [MSNBC, 7/31/22]

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