It is not very often that I agree with Sen. Bernie Sanders (I-VT) when it comes to public policy positions. However, I am very much in agreement with Bernie’s assessment of the Inflation Reduction Act, a 755-page bill that includes $439 billion in green energy and Obamacare subsidies and seeks to supersize the Internal Revenue Service (IRS) with the addition of 87,000 new IRS agents.
On August 6, while the bill was being debated on the Senate Floor, Sanders declared, “I want to take a moment to say a few words about the so-called Inflation Reduction Act that we are debating this evening. I say so-called because according to the CBO and other economic organizations that have studied this bill, it will in fact have a minimal impact on inflation.”
Yes, Bernie is absolutely correct. The absurdly named Inflation Reduction Act will not actually reduce inflation.
In fact, according to the Penn Wharton Budget Model, “The Act would very slightly increase inflation until 2024 and decrease inflation thereafter. These point estimates are statistically indistinguishable from zero, thereby indicating low confidence that the legislation will have any impact on inflation.”
Think about it for a minute. How in the world could this bill reduce inflation if it dramatically increases government spending, which means more short-term borrowing and money printing? As if that is not enough bad news, the bill also includes new taxes that would diminish American manufacturing, thereby reducing the supply of goods and services in an economy already in recession. And, because corporations don’t pay taxes (people do), you can bet that the corporate taxes in this bill will trickle-down to consumers, who are currently being hammered with the worst rate of inflation in more than 40 years.
What’s more, the bill seeks to expand the size of the IRS’ budget by $80 billion, a six-fold increase. The vast majority of that will go towards tax enforcement efforts, namely for middle-income Americans. Expect an avalanche of audits for hardworking Americans in the years to come.
Of course, Bernie ended up voting for the Inflation Reduction Act, despite the fact that he is well aware that it will have no beneficial effects for the millions of Americans who are struggling to make ends meet.
In reality, the Inflation Reduction Act is yet another incremental step towards big government socialism. It will not reduce inflation because it is not designed to do that. On the other hand, it will increase the size and scope of the federal government, make it easier for the IRS to audit individuals and collect more revenue, breed even more government dependence, foster more crony capitalism under the guise of climate change, discourage entrepreneurship and innovation, deter manufacturing jobs, and slow economic growth.