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WITH A 220-207 YES VOTE, the House of Representatives passed on Friday the “Inflation” Reduction Act, which has been touted as a solution to contain rising prices in the nation, however, the GOP claims it is nothing more than a new Democratic spending plan.
Democrats have claimed that the legislation will raise $730 billion in revenue and spend $430 billion over ten years.
The approval by the House of Representatives of the Inflation Reduction Act comes less than a week after it passed the Senate, a vote in which the Democrats were in a tie with the Republicans so they had to rely on a procedure known as reconciliation, where the tie is settled by the vote of the Vice President, Kamala Harris.
Passage of the legislation in the Senate looked unlikely, however, Majority Leader Chuck Schumer (D-NY) managed to convince skeptical Senator Joe Manchin (D-WV) to vote for the bill. Manchin carried with him the vote of Kyrsten Sinema (D-AZ), with whom he shared skepticism about the Biden administration’s expansion of government spending.
The entire Republican Party united against the bill, so a single Democratic “no” vote would have sunk the House-sponsored spending bill during its vote in the Senate.
The passage of the Inflation Reduction Act comes as a lifeline for the Biden Administration, whose popularity is sinking because of inflation totaling 9.1% annually during the month of June, the Russo-Ukrainian War, the crisis in Taiwan and the entry into a technical recession of the American economy, a fact that the White House has attempted to deny.
As a strategy for the mid-term elections, the Democrats seek to take refuge in all the legislative victories they have had during the last Administration, despite their results as a government.
What does the Inflation Reduction Act contain?
The Inflation Reduction Act allows Medicare to negotiate the price of some prescription drugs, appropriates $80 billion to the Internal Revenue Service (IRS) and expands insurance subsidies under the Affordable Care Act, also known as Obamacare. Some prescription drugs such as insulin could be price-controlled under the bill.
Regarding the energy transition, the law offers tax incentives to companies that invest in solar or wind energy, or in the development of electric batteries.
Consumers will also receive a subsidy for the purchase of more energy-efficient appliances, as well as a $7,500 tax credit, in addition to the existing credit, for those who purchase an electric or fuel cell vehicle. This tax credit is extended to the purchase of used cars.
Along with a 1% tax on share buybacks by companies, the legislation establishes a minimum corporate tax of 15%. Treasury Secretary Janet Yellen has actively advocated the establishment of this minimum corporate tax to the international community, however, several countries in the European community have withdrawn from such an agreement.
Although the Biden administration has struggled to find economists to confirm that its new law will indeed control rising prices, the U-Penn economics faculty’s budget model estimates that the inflation reduction will be virtually zero because of the Democratic spending proposal.
Biden says he will sign the bill into law next week.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica