Yahoo Finance Biden’s Inflation Reduction Act One Year Later — Has It Impacted Americans’ Wallets So Far?
One year ago on Aug. 16, President Joe Biden signed the Inflation Reduction Act (IRA) into law — sweeping legislation which addresses climate, energy and healthcare issues. But how has it helped Americans’ wallets so far?
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According to the administration, the IRA’s clean energy and climate provisions have “created more than 170,000 clean energy jobs already… companies have announced over $110 billion in clean energy manufacturing investments in the last year alone, the law is delivering billions of dollars to protect communities from the impacts of climate change, and millions of seniors are saving money because their insulin is capped at $35 per month.”
And according to a report cited by the White House, there are 272 new clean energy projects in small towns and big cities nationwide, totaling $278 billion in new investments.
The administration stated in a separate fact sheet that the act is projected to create more than 1.5 million additional jobs over the next decade (according to estimates by outside groups). An estimated 4 million seniors are benefiting from $35 insulin and 15 million Americans are saving $800 per year on health insurance premiums, the White House suggested.
Yet, some experts noted that while the IRA will likely improve the economy, it’s not a cure-all for everything inflation-related. Some provisions might take time to make a difference.
“The IRA isn’t open-heart surgery for inflation,” said Howard Dvorkin, CPA, founder and chairman of Debt.com. “It’s not that dramatic. Think of it like taking a daily baby aspirin to prevent a heart attack. Many IRA provisions won’t show up in your wallet after one year, but they probably stopped your finances from getting worse.”
According to Dvorkin, like most legislation, not everyone gets the same benefits at the same time. For instance, one of the most lauded provisions allowed Medicare to negotiate prescription drug prices with pharmaceutical companies.
“Biden says that will save the federal government around $288 billion over 10 years. Even if he’s exaggerating by half, it’s still a big savings that will get passed down to Medicare patients — eventually. When? Who knows. But it won’t be tomorrow,” added Dvorkin.
He also added that the most politically charged part of the IRA — fighting climate change — still comes with individual benefits. There’s a 10-year consumer tax credit for renewable energy investments in wind and solar, and immediate tax credits of $4,000 for buying a used electric car (and $7,500 for buying a new one).
“But if you’re not on Medicare or buying electric vehicles, you might not notice the IRA at all. The other effects are too subtle,” he said.
According to him, if there’s a downside to the IRA it’s how Biden paid for it. The IRA imposed a new 15% minimum tax on corporations that earn more than $1 billion in annual profits.
“That might sound good — hey, billion-dollar businesses can obviously afford it — but history tells us something different,” he said. “Those corporations will simply pass that tax onto their customers. You might not notice it, but you’ll be paying more for the same products and services. So for some folks, the IRA might end up costing them more.”
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Meanwhile, other experts — such as Peter C. Earle, economist with the American Institute for Economic Research — argue that while the IRA has been a great boon for companies ideologically aligned with the Biden administration (namely climate change and alternative energy enterprises) those uses of taxpayer funds have nothing whatsoever to do with fighting inflation, despite the name of the act.
“If the Biden administration wants to take credit for the decline in inflation over the last year, it would have to describe how, outside of the Federal Reserve’s contractionary policies (interest rate hikes) the IRA might have done so,” said Earle. “They won’t, because there is no mechanism by which spending hundreds of billions of dollars reduces the general price level.”
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This article originally appeared on GOBankingRates.com: Biden’s Inflation Reduction Act One Year Later — Has It Impacted Americans’ Wallets So Far?
