Last Sunday, the Senate passed the Inflation Reduction Act despite unanimous Republican opposition. The new legislation is the most significant federal investment in history to counter the effects of Climate Change and marks a major victory for President Biden’s domestic policy agenda.
The Inflation Reduction Act aims to invest billions of dollars to fight climate change by incentivizing renewable energy and electric cars, along with a significant sum to fund climate resiliency programs for local governments and native populations. The bill will also allow 60 billion dollars to assist regions disproportionally affected by the climate crisis.
The Inflation Reduction Act will enable the United States to cut 40% of emissions by the end of the decade while also allocating a large sum to reduce the impact of climate change and other recent events, like the war in Ukraine and the COVID-19 pandemic, on underprivileged communities.
Democrats also secured a long-term goal of reducing prescription drug prices by allowing Medicare to negotiate price caps with manufacturers. The legislation will also add new substantial taxes to fund climate and health spending, mostly on large corporations, adding a minimum corporate tax of 15% and implementing a tax on company stock buy-backs.
As the name of the new legislation suggests, one of its main goals is to reduce consumer prices which have seen the most rapid increase in 40 years. The rise in taxes on the wealthy, and new investments in clean energy are projected to boost the economy and reduce the federal deficit by approximately $300 billion. This might allow the Biden administration to increase supply through government investments and tax incentives and reduce demand through taxation, both of which are required to reduce inflation effectively.
Will the Inflation Reduction Act be enough to reduce inflation and fight climate change?
The Inflation Reduction Act is a watered-down version of the Build Back Better plan, which was supposed to be Mr. Biden’s equivalent to former president FDR’s New Deal. This plan pulled the United States out of the Great Depression by revitalizing the economy through significant government investments.
As the country is facing numerous challenges like climate change and inflation, the Biden administration needs legislation to help Americans facing increased prices and devastating climate change-related disasters. However, with Senate republicans and a couple of democratic senators fiercely opposing the bill, Mr. Biden negotiated, and no doubt compromised, for passing a new smaller version of the Build Back Better legislation.
Despite being a reduced version of its predecessor, the Inflation Reduction Act is still the most significant spending effort ever to fight climate change by any one government. In recent decades, the United States has faced hundreds of climate-related disasters that have cost the country billions of dollars.
Aside from the glaring headlines, however, the bill offers minimal concrete investments in renewables and invests heavily in polluting industries like gas and fossil fuel-sourced hydrogen. The bill even requires the Interior Department to lease millions of acres of land and off-shore waters for oil and gas extraction.
In a recent statement, the Green Party of the US warns that “the 2022 Inflation Reduction Act allows corporations to capitalize on a world in crisis by expanding massive new oil and gas leasing in disproportionately impacted Indigenous, Black and People of Color communities.”
The Greens also added that the almost 400 billion dollar investment for Energy Security and Climate Change programs “is far lower than the $4.2 trillion per year needed to cut carbon emissions by 2030.” and that the bill “doesn’t actually address phasing out fossil fuels”.
Additionally, consumer prices were 8.5% higher in July compared with a year earlier, making it more difficult for Americans to access their basic needs like food and healthcare. While democrats are praising the bill for how much it will help American families save on healthcare and energy and even lower overall prices, the bill’s effects might not be enough to fight rising inflation and most likely won’t have any effect until next year at the earliest.