Milestone 1: Introduction to HR 5376, The Inflation Reduction Act of 2022
Macgregor Langston
Economics 290: Political Economy
Regent University
September 4, 2022
Introduction
In mid-August, HR 5376: The Inflation Reduction Act of 2022 was signed into law by President Biden (HR 5376, 2022). The primary purpose of this bill was said to be combating the growing inflation crisis (Durante et al., 2022). However, the contents of this bill diverge greatly from its title. The bill is a slimmed down version of the Build Back Better Bill, a centerpiece of President Biden’s agenda, which will not alleviate inflation (Smith, 2022). The contents of the bill reflect the president’s current economic agenda. First, the bill establishes a 15% minimum tax rate for corporations (Smith, 2022). Second, it reduces the cost of drugs for beneficiaries of Medicare (Smith, 2022). Third, it greatly increases funding for IRS tax enforcement, allocating $80 billion for the agency over the next 10 years (Smith, 2022). Fourth, government subsidies from the Affordable Care Act were extended to 2025 (Smith, 2022). Fifth and finally, the bill provides significant legislation for climate change, including “investments in clean energy production and tax credits aimed at reducing carbon emissions” (Smith, 2022). None of these changes address inflation, and may instead “worsen inflation by constraining the productive capacity of the economy (Durante et al., 2022).”
Concept Questions
1. What are the relevant rules guiding this policy?
a. As laid out above, this bill will raise the minimum tax rate for corporations, reduce drug costs for Medicare beneficiaries, majorly bolster the IRS, extend the subsidies of the ACA, and increase climate change incentives. This is a broad set of rules for defining the federal government’s economic policy moving forward.
2. Are those rules effectively enforced?
a. With the major support the bill provides for the Internal Revenue Service, and its direct support from the Biden administration, all of these rules will likely be effectively enforced.
3. Is there a romance – reality disconnect in the policy? In other words, do people seem to expect a much more “public spirited” outcome than is realistic?
a. For the average citizen, the misleading name of this bill will surely disappoint. Within the government, there is clearly a romance to this bill, as it represents a thrust for a specific agenda rather than a carefully designed economic policy for the purpose of improving the lives of American citizens.
4. What is the collective action the policy is supposed to accomplish? Or is there one? Is the policy designed to favor some over others? Be sure to distinguish between actual results and rhetoric.
a. While the rhetoric of this act purports it will combat inflation, the true action of the bill is to increase government revenue and power, and also fulfill a climate change agenda. This bill primarily benefits the federal government, providing it with a net revenue increase of $324 billion from 2022 to 2031 (Durante et al., 2022).
5. Is there a special interests involved? Who? Are they successful?
a. Special interests involved in this bill include those in the federal government who will benefit from the increase in revenue, especially the Internal Revenue Service. However, climate change activists and politicians who want to appear concerned about climate change also have a special interest in this bill. The Democratic Party as a whole represents a special interest as this legislation is crucial to its current agenda. All of these interest groups reap benefits from this legislation. However, the Americans suffering from inflation are being hurt instead of helped. Those under the Affordable Care Act or Medicare will see some benefits, but the costs will likely offset the benefits.
Why is it important to learn about this topic?
The Inflation Reduction Act of 2022 is a perfect example of economic decisions made in a non-market setting. The Bill claims to address a legitimate economic issue, yet fulfills a greatly diverging political agenda instead. While the bill does not solve inflation, likely worsening the crisis instead, it does provide significant revenue and power to the federal government, showing that government figures are still flawed people likely to be driven by selfish desires. Moreover, it shows the tendency of governments to put political agendas over what is best for the economy, as represented by the bill’s provisions for climate change. This bill will affect the direction of the United States moving forward and further damage a struggling economy, indicating it will play a key role in the forthcoming history of this nation and its place in the world politically and economically.
References
Durante, A., Kallen, C., Li, H., McBride, W., & Watson, G. (2022, September 1). Inflation
reduction act: Details & analysis. Tax Foundation. Retrieved September 3, 2022 from https://taxfoundation.org/inflation-reduction-act/
H.R.5376 - 117th Congress (2021-2022): Inflation Reduction Act of 2022. (2022, August 16).
Retrieved September 2, 2022 from https://www.congress.gov/bill/117th-congress/house-bill/5376
Smith, K. A. (2022, August 23). The inflation reduction act is now law-here's what it means for
you. Forbes. Retrieved September 2, 2022 from https://www.forbes.com/advisor/personal-finance/inflation-reduction-act/