WASHINGTON, DC – JANUARY 13: U.S. President Joe Biden talks to reporters after meeting with Senate Democrats in the Russell Senate Office Building on Capitol Hill on January 13, 2022 in Washington, DC. Biden has called on his fellow Democrats to go around Republican opposition, do away with the 60-vote threshold for advancing legislation in the Senate and pass the John Lewis Voting Rights Advancement Act and the Freedom To Vote Act. The strategy is in doubt because Sen. Joe Manchin (D-WV) and Sen. Kyrsten Sinema (D-AZ) oppose doing away with the filibuster. (Photo by Chip Somodevilla/Getty Images)
As West Virginia’s Democrat Senator Joe Manchin makes the weekend rounds touting the Inflation Reduction Act, analysis suggests that this proposed legislation could cause problems for President Joe Biden. While the commander-in-chief is currently convalescing from his second bout of COVID in as many weeks, he has so far avoided questions related to his major campaign promise to insulate lower earners from tax hikes. But he can’t escape scrutiny indefinitely.
Here Come the Taxes
The nonpartisan Joint Committee on Taxation (JCT) provided its take on how the Inflation Reduction Act might impact taxpayers, and it’s not good news for Biden if he expected to keep his campaign promise. Senate Finance Committee Ranking Member Mike Crapo (R-ID), who requested the analysis, said the JCT found that there would be increased taxes on Americans across every income bracket, “with more than half of the tax increases on Americans making less than $400,000 per year.”
According to the JCT analysis, taxes will increase by roughly $16.7 billion for Americans earning less than $200,000 annually and by $14.1 billion for those making $200,000 to $500,000 yearly. Crapo noted that more than half of the new tax revenue raised next year would come from those earning less than $400,000.
Experts Say No Inflation Reduction
(Photo by Chip Somodevilla/Getty Images)
With the words “inflation reduction” in the title, one would assume the bill might at least help cut back on this most destructive of unofficial taxes, but according to an analysis by the Penn Wharton Budget Model, it just ain’t so.
The researchers ultimately surmised that they have “low confidence that the legislation will have any impact on inflation.” Further, they suggested that the personal consumption expenditures index — the major inflation gauge used by the Federal Reserve – would, in fact, rise by 0.05% by 2024 and then likely drop by 0.25% later in the decade. “These point estimates, however, are not statistically different than zero,” the researchers concluded.
But what of the deficit reduction that so obsessed Senator Manchin? Penn Wharton calculates that the bill could reduce deficits by $248 billion over the next ten years, more than $50 billion short of the figures provided by the Democrat team. However, the researchers suggest that if the Obamacare subsidies are extended to ten years rather than the three years being touted (which seems more than possible), the deficit reduction will come in at just $89 billion.
Paging PT Barnum
Legendary showman P.T. Barnum once wrote, “Advertising is to a genuine article what manure is to land, – it largely increases the product.” Team Biden and the Senate Democrats are now faced with the unenviable task of trying to sell a product to the American people that, according to the experts, doesn’t do what it claims to do. Indeed, the administration will be aided by a large chunk of the Fourth Estate, but will salesmanship be enough to trump analysis?
Without actually admitting a volte-face, Biden and his not-so-merry band will likely sell this as tough medicine; a bitter pill to swallow, but one that will right economic wrongs. And if the White House can pooh-pooh the very experts it claims to laud for long enough, the voting public might keep buying the hype until the November congressional elections. And that may just be the entire point.
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