The Inflation Reduction Act is close to passage.

 

This new bill, announced by Senator Joe Manchin (D-WV) and Senate majority leader Chuck Schumer (D-NY) on July 27, will invest $386 billion into addressing climate change and new energy development, and $100 billion in new health care spending, including extending subsidies for the Affordable Care Act. The measure will raise about $790 billion in savings and revenue over a decade. It will save money by enabling Medicare to negotiate the prices for certain prescription drugs and by beefing up funding for the IRS to enforce existing tax laws. It also will raise revenue by requiring corporations to pay a minimum tax of 15%. The measure is projected to raise about $50 billion a year for 9 years, which will be used to reduce the federal deficit by $300 billion.Last night, Arizona senator Kyrsten Sinema, the last Democratic holdout on the bill, said she would support it if leaders added drought money for Arizona and removed the carried interest loophole that lowers taxation for certain wealthy hedge fund managers. The carried interest loophole would have raised $14 billion, but Democrats instead added a 1% tax on stock buybacks, which is expected to make up that money.

The measure is expected to pass the House but can make it through the Senate only because Democrats will pass it under the system known as reconciliation, which cannot be filibustered. Republicans are dead set against the measure, although all of its pieces are widely popular. Indeed, the Inflation Reduction Act seems to reflect the sort of government the Republicans constructed during the Civil War: one that answered to the American people, and one in which the government is making an effort to distribute the costs of that government among people according to their ability to pay.

Republicans stand united against the Inflation Reduction Act.

Today’s Republicans, echoing Republican rhetoric since the 1980s, Senate minority leader Mitch McConnell (R-KY) has taken the position that taxes do not build the country, but destroy it. He says that Democrats “want to pile on giant tax hikes that will hammer workers and kill many thousands of American jobs.”

And yet, in the Wall Street Journal, Princeton economics professor Alan S. Blinder, who served as vice chair of the Federal Reserve from 1994 to 1996, points out that the proposed tax changes “are tiny compared with the Trump tax cuts,” which “slashed the top corporate tax rate from 35% to 21% and allowed more items to be expensed.”

What is at stake in this contest is the same issue Republicans grappled with in the 1860s, guaranteeing that “the burdens [of taxation] will be more equalized on all classes of the community, more especially on those who are able to bear them.” Now, though, it is the Democrats taking up that cause.

The Senate will work on the bill this weekend.

The introduction of the Inflation Reduction Act caps what has turned out to be a spectacular week for the Biden administration. Jobs numbers out today showed not the downturn that many expected, but instead the addition of 528,000 new jobs, restoring the U.S. job numbers to where they were before the pandemic and putting unemployment at 3.5%, the lowest rate in 50 years. The United States Chips and Science Act (CHIPS) and the Promise to Address Comprehensive Toxics Act (PACT) have both passed Congress. The president authorized and troops achieved the killing of al-Qaeda leader Ayman al-Zawahiri. And gas prices have hit a 50-day low.