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Having in mind concerns about the rising cost of living for Americans, Democrats in the Senate have passed a new spending plan, called the “Inflation Reduction Act“, which consists of allocating more taxpayer money to programs traditionally favored by liberals.
The legislation passed on a 51-50 vote, defined by the deciding vote of Vice President Kamala Harris through a process known as reconciliation, which allows a bill to pass through a simple majority rather than the 60 votes required by the Senate, with the Vice President’s vote breaking a tie.
What is in the Democratic spending plan?
The bill allows Medicare to negotiate the price of some prescription drugs, allocating $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.
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Regarding the climate agenda, the bill offers tax incentives to companies that invest in solar or wind energy, or in the development of electric batteries. Consumers could also receive a subsidy for the purchase of more energy-efficient appliances, as well as a $7,500 tax credit for those who purchase an electric vehicle.
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of this minimum corporate tax to the international community, however, several countries in the European community have withdrawn from such an agreement.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 proposal will indeed control rising prices, the U-Penn economics faculty’s budget model estimates that the reduction in inflation will be virtually zero because of the Democratic spending proposal.
Last-minute changes to the legislation have prevented technicians from doing an analysis of the draft passed in the Senate. Democrats have claimed that the legislation will raise $730 billion in revenue and spend $430 billion over ten years.
Democratic spending plan seeks to be a lifeline for Biden’s sinking approval ratings
However, negotiations between Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV) bore fruit and the Democratic Party was able to reach a consensus. Manchin dragged Kyrsten Sinema (D-AZ), with whom he shared skepticism of the Biden administration’s spending agenda, for a favorable vote.
The entire Republican Party lined up against the bill, so a single Democratic no vote would have sunk the White House-sponsored spending proposal.
The legislation must still pass through the House of Representatives who will vote on the bill on Friday. Rep. Nancy Pelosi (D-CA) has announced her support for the legislation.
The approval of the bill in the Senate comes at a time when the popularity levels of the Biden administration are plunging due to inflation totaling 9.1 % annually during the month of June, the war in Ukraine, the crisis in Taiwan and the entry into technical recession of the American economy, a fact that the White House strives to deny.
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