By J.D. Foster, the Daily Caller Foundation | August 18, 2023
One year ago this week, President Joe Biden signed the most laughingly labeled legislation in modern history, the Inflation Reduction Act (IRA). The IRA is a big piece of Bidenomics, the new marketing ploy of Biden’s administration. The IRA, like Bidenomics is all hat and no cattle as they say in Texas.
The IRA was a Christmas bill in August, doling out goodies to every feel-good scheme with a leftist lobbyist. Inflation was soaring after years of relative calm while Congress fashioned the IRA, so naturally it became the Inflation Reduction Act, never mind it had nothing to do with reducing inflation, not in 2022, not in 2023, or ever. Had COVID roared back in 2022, the bill would have been the COVID Reduction Act. You get the joke.
For example, the IRA includes a provision to force lower prices for certain high-priced single source drugs. Debate the merits if you like, but this has nothing to do with reducing inflation, especially as it doesn’t take effect until 2027.
Then there’s the clean electricity investment credit, which likewise doesn’t really take effect until 2027. And even if it took effect immediately, the policy still has nothing to do with reducing inflation.
Think I’m cherry picking? Well, how do you tie inflation reduction to additional funding for Fish and Wildlife, or drought relief, or “Tribal Climate Resilience?” If you think excess business investment is a cause for inflation, then maybe you can explain a $313 billion tax hike through expanding the Corporate Alternative Minimum Tax.
Relative to the amount of money the federal government spends already, the IRA’s roughly $27 billion top up is a drop in the bucket — an unhelpful drop, but still a drop. View it as just one component of the Biden Spending Blowout trifecta which also includes the CHIPS and the mega infrastructure bills. Together they help explain why the Congressional Budget Office projects the 2023 budget deficit to soar above $1.5 trillion, an increase of nearly 11% compared to 2022.
Fortunately, inflation, though still much too high, has come down because certain temporary factors came and went and because the Federal Reserve woke up and did its job. Raising the federal funds rate rapidly and shrinking the Fed’s balance sheet get the credit for lower inflation, not Biden and certainly not the IRA.
As important as are the soaring deficits, even more so is Bidenomics’ core tenet that government always knows best, and especially the federal government. The three big spending bills are laced with credits, grants and special funding large and small to nudge and induce favored behaviors.
Now add in Biden’s torrent of new regulations and you have a multitude of thou shalts and thou shalt nots. These are more like shoves than nudges. Then there are the Biden militants like Federal Trade Commission Chair Lina Kahn who seems to think no business should be larger than your local hardware store.
Nearly every one of these actions interferes with the economy and somebody’s personal freedom. And nearly every one triggers an expansion of the Washington swamp as those for and against engage in multi-year battles through comments, lobbying, and eventually through the courts.
If you believe government really does know best and does best most of the time, then Joe Biden is your man. If you find the idea preposterous and its application frightening, then you might consider rising up in opposition however you think best.
There is an election coming up. It’s a start.
J.D. Foster is the Norman B. Ture Senior Fellow in the Economics of Fiscal Policy at The Heritage Foundation. He came to Heritage after a five-year stint as Chief Economist at the Office of Management and Budget during the George W. Bush Administration.
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