WASHINGTON (AP) — Even President Joe Biden has some regrets about the name of the Inflation Reduction Act: As the giant law turns 1 on Wednesday, it’
Even President Joe Biden has some regrets about the name of the Inflation Reduction Act: As the giant law turns 1 on Wednesday, it’s increasingly clear that immediately curbing prices wasn’t the point.
While price increases have cooled over the past year — the inflation rate has dropped from 9% to 3.2% — most economists say little to none of the drop came from the law.
“I can’t think of any mechanism by which it would have brought down inflation to date,” said Harvard University economist Jason Furman, who added that the law could eventually help to lower electricity bills.
Alex Arnon, an economic and budget analyst for the University of Pennsylvania’s Penn Wharton Budget Model, offers a similar assessment.
“We can say with pretty strong confidence that it was mostly other factors that have brought inflation down,’’ he said. “The IRA has just not been a significant factor.’’
That shouldn’t come as a surprise.
When the Inflation Reduction Act was proposed, the Congressional Budget Office said its impact on inflation would be “negligible.”
So why the name? It may ultimately help to hold down prices in the future — and it fit the politics of the moment.
.The law was proposed shortly after the American public learned that consumer prices were climbing upward at the fastest pace in four decades. Democratic Sen. Joe Manchin of West Virginia and Senate Majority Leader Chuck Schumer of New York had been holding private talks about Biden’s agenda and put forth the name Inflation Reduction Act once they had a deal. Biden pledged at the time that it would “reduce inflationary pressures.”
The law is now at the core of Biden’s pitch to voters going into the 2024 presidential campaign. But with inflation less of a pressing concern, the president is putting more emphasis on its provisions aimed at combating climate change, creating jobs and lowering people’s health care bills.
“I wish I hadn’t called it that because it has less to do with reducing inflation than it has to do with providing alternatives that generate economic growth,” Biden said Thursday at a fundraiser in Utah, adding that he still believes that with the law “we’re literally reducing the cost of people being able to meet their basic needs.”
While the law may not have crimped inflation over the past year, it could well do more in that regard going forward, since it just now is starting to be implemented. Along with the CHIPS Act, there are also signs that the Inflation Reduction Act helped to stimulate roughly $500 billion in corporate announcements to invest in new factories.
