Press Release

The Reviews Are In for the Inflation Reduction Act

Washington, D.C.—Tax, budget, and climate experts have read and analyzed the Inflation Reduction Act of 2022 (IRA) and the reviews are in:

“There is plenty to like.” “Almost every one of these policies, in and of itself, will fight inflation.” A “big win” for the taxpayer and a “big effing deal.” “A good bill.” “So much to like.”

The “best development on health care for the American people in years.” “A sound compromise and a step forward.” A “desperately needed investment in America’s future.” A “game-changer” for the climate.

“A sad reflection of our times if it does not get bipartisan support.”

“Congress should pass it.”

The recent introduction of the IRA has invigorated people all over the country who want to see policymakers act on inflation, the cost of living, the climate crisis, health care access and affordability, and tax fairness. Here is some of what experts across the country say about it, in their own words.

Letter from 126 top economists

Top economists say the IRA will put “downward pressure on inflation”: “The letter was signed by key economists including former Clinton Treasury Secretary Robert Rubin and Obama Treasury Secretary Jack Lew, Obama Labor Department chief economist Betsey Stevenson, Moody’s Analytics chief economist Mark Zandi, former Congressional Budget Office Director Doug Elmendorf, and Nobel prize-winning economist Joseph Stiglitz, among others.” ­– CNN, August 2, 2022

Larry Summers

Discussing the IRA, former Treasury Secretary Larry Summers states, “Everything in this bill should be welcomed by progressives and conservatives. It will be a sad reflection of our times if it does not get bipartisan support.” He continues, stating “The prescription drug provisions, energy incentives and the increased Medicare benefits will all contribute over time to much needed inflation reduction.” On the IRS provisions, he commented, “My conservative estimate would be that if they were properly evaluated the bill would increase revenues by over a trillion dollars.” He followed up by saying, “The health and environmental policies in this bill, together with the technology supported in the CHIPS legislation, mean the Biden Administration is now driving historic progress on strengthening the American economy for the medium and long term.” – Twitter, July 27, 2022

Summers claims that the IRA is a “good bill” for three main reasons. First, the bill “reduces demand because it will bring down the budget deficit.” Second, it “[puts] direct pressure on prices that are too high.” Finally, it “will expand the availability of energy & reduce the price.” – Twitter, July 28, 2022

Summers said the bill was “anti-inflationary” and further spelled out its positive qualities. “Mr. Summers added that he believed that the bill is ‘anti-inflationary’ on supply, demand and pricing grounds. ‘I think on economic growth and efficiency grounds, it promotes investment by reducing budget deficits,’ Mr. Summers said. ‘It promotes efficient resources allocation by leveling the corporate tax playing field, and it promotes investment with clean energy incentives. I think on fundamental progressive objectives, it makes health care more affordable.’” – The New York Times, July 28, 2022

Jason Furman

Jason Furman, former chair of the White House Council of Economic Advisers, says the IRA will ease inflation and climate change and spotlights the impact of reducing prescription drug prices. With the headline “The Schumer-Manchin Bill Will Ease Inflation and Climate Change,” Furman wrote, “The Inflation Reduction Act, to which Sen. Joe Manchin and Majority Leader Chuck Schumer agreed Wednesday, is what the country needs now. It will help address one of the world’s biggest long-run challenges, climate change, while making progress on inflation. At the same time it will help protect the most vulnerable by extending tax credits for healthcare. … More important, the Inflation Reduction Act as a whole will lead to reductions in consumption and also reduce inflation by slowing the growth of prescription-drug prices. This could ultimately lead to more investment, not less.” – The Wall Street Journal, July 28, 2022

Mark Zandi

Mark Zandi, chief economist for Moody’s Analytics: The IRA will have “material beneficial economic impact,” “will lean against inflation,” and “there is plenty to like.” Mark Zandi wrote on Twitter that the IRA “will have a material beneficial economic impact. Most immediately it helps millions of lower-income and elderly Americans with their health insurance premiums and prescription drug costs. It is also the first meaningful effort by the federal government to address climate change and its long-run corrosive economic effects. … As named, the Inflation Reduction Act will lean against inflation over the next decade. It also adds a bit to growth. And it is more than paid for with tax hikes on large corporations and the well-to-do. While modest legislation, there is plenty to like in the legislation.” – Twitter, July 31, 2022

In an interview with Erin Burnett, Zandi stated that the IRA will “push inflation lower” by lowering costs on prescription drugs, health care, and energy. “[This deal] will nudge [inflation] lower,” Zandi said. “You know, it lowers prescription drug costs, which is a key cost for a lot of seniors. It lowers the cost of health insurance for lower-income Americans. And longer run, because of the climate provisions, it will reduce the cost of energy for households to improve efficiency. So net, it will push inflation lower.” – CNN, Out Front with Erin Burnett, August 1, 2022

Moody’s: The IRA would provide “reduction in CPI inflation of 3.3 basis points per annum on average.” “As named, the Inflation Reduction Act will modestly reduce inflation over the 10-year budget horizon. By the fourth quarter of 2031, the consumer price inflation [CPI] index will be 0.33% lower because of the legislation. ​​This translates into a reduction in CPI inflation of 3.3 basis points per annum on average over the period. Through the middle of this decade the impact of the legislation on inflation is marginal, but it becomes more meaningful later in the decade.” –Moody’s Analytics, August 1, 2022

NYU Tax Law Center

Michael Kaercher and Chye-Ching Huang from the Tax Law Center at New York University (NYU) explain why the IRA has a “desperately-needed investment in the IRS” that will “improve the integrity of the tax system by ensuring more wealthy filers pay the taxes they already owe.” “The proposed reconciliation bill released Wednesday night includes a desperately-needed investment in the IRS, and the tax system more broadly. This investment promises to improve the integrity of the tax system by ensuring more wealthy filers pay the taxes they already owe under the law, while helping honest taxpayers and the budget.” – The Tax Law Center at New York Law, July 29, 2022

NYU Tax Law Center’s Chye-Ching Huang, Peter Richman, and Sophia Yan: The IRA’s corporate minimum tax is a “sound compromise and a step forward” that would “raise revenues in a progressive manner.” “Part of the reconciliation deal struck by Senators Manchin and Schumer in the proposed Inflation Reduction Act of 2022 is the so-called book corporate minimum tax imposed on the largest corporations operating in the US (the CMT). … On November 19, 2021, the House passed a reconciliation package that included a minimum tax based on a corporation’s book income, and the CMT released earlier this week largely follows that text. The proposal would raise revenues in a progressive manner to support worthwhile investments, as part of a package that would lower the costs of health insurance and prescription drugs for millions of people, fund investments in clean energy, adequately resource the IRS, and reduce the deficit. While there may be better ways to raise corporate tax revenue, those alternatives did not survive (or even enter into) protracted reconciliation negotiations. Given the political constraints, the CMT is a sound compromise and a step forward, despite its imperfections.” – The Tax Law Center at New York Law, August 29, 2022

NYU Tax Law Center’s Chye-Ching Huang refutes the Joint Committee on Taxation’s tax analysis. Huang argues that the analysis “1. relies on the assumption that tax increases on ~150 corporations w/ >$1 billion/year in income end up hurting workers 2. Leaves out all direct benefits for households of tax credits for health coverage & green energy; and 3. Leaves out indirect benefits e.g. drug price savings, mitigating climate crisis, deficit reduction.” – Twitter, July 31, 2022

Wendy Edelberg

Brookings Institution economist Wendy Edelberg: The IRA could “lower near-term inflation expectations.” “One of the most critical things that fiscal policy is doing right now to control inflation is letting COVID-19 fiscal support wind down responsibly. The Inflation Reduction Act takes this further with responsibly implemented cuts to healthcare and drug costs … longer-term investments in sustainable energy production, and tax reform–leading to deficit reduction. Implementing the IRA has the potential to lower near-term inflation expectations by showing that fiscal policy makers are committed to responsible tax & spending policy.” – Twitter, July 28, 2022

Bloomberg

Bloomberg editorial board: The IRA’s spending is “well focused” and passing it would be a “big win” for the taxpayer—“it’s a big effing deal.” Bloomberg News said, “Promisingly, the proposed spending is well focused. A summary of the deal Democrats put out on Wednesday says it would offer fully $369 billion for climate and energy proposals, the most urgent parts of Biden’s original $3.5 trillion proposal. That should turbocharge the administration’s plans to reduce carbon emissions and lay the groundwork for a clean-energy economy, while avoiding some of its less defensible outlays. The new bargain would also put $64 billion toward extending Covid-era subsidies for Obamacare health insurance, thus helping millions of Americans avoid significant premium increases. More or less true to its grandiose name—the Inflation Reduction Act of 2022—the proposal also takes budgetary restraint more seriously than its predecessors in this Congress. … But all told, this compromise would be a big win for Democrats, for the White House and—not least—for the US taxpayer. As America’s loquacious president once said in another context, it’s a big effing deal.” – Bloomberg, July 28, 2022

Bloomberg editorial board: Advancing prescription drug negotiation “alone would’ve been a momentous achievement.” “Perhaps more consequentially, the plan would remove a legal prohibition that has long prevented Medicare from bargaining with pharmaceutical companies on behalf of the 49 million Americans in its drug-insurance program. This barrier has kept US drug prices the highest in the world — $1,300 per person per year, on average. A previous proposal along these lines was expected to save taxpayers almost $290 billion through 2031, with greater savings in subsequent years as more drugs become eligible for negotiation. Advancing this reform alone would’ve been a momentous achievement.” – Bloomberg, July 28, 2022

Joseph Stiglitz

Joseph Stiglitz, the Roosevelt Institute’s chief economist, argued that the IRA “simultaneously addresses several key and long-standing problems facing our economy and society.” Stiglitz highlights the more than $300 billion in deficit reduction as the “first step” for those worried about excessive demand. Stiglitz also argued that the $369 billion investment in energy security and climate change aimed at reducing energy costs is essential to “[protect] us from the ravages of climate change by lowering carbon emissions by some 40 percent by 2030.” Regarding health care costs, Stiglitz argued, “This bill will help lower the costs American families pay for health care, both by lowering ACA health-care premiums for millions of Americans and by capping out-of-pocket costs for drugs for those on Medicare.” He also commented on the importance of the 15 percent corporate minimum tax, “Passing the 15 percent minimum tax not only raises badly needed revenue; it saves American jobs from being unfairly competed away, and, like the climate measures, is an important step in showing that we can be good global citizens.” – Roosevelt Institute, July 28, 2022, and Stiglitz’s statement, July 28, 2022

Committee for a Responsible Federal Budget

The Committee for a Responsible Federal Budget (CRFB) said that the IRA’s deficit reduction is likely to reduce inflationary pressures and called its deficit-reducing qualities a “welcomed improvement from the status quo.” “Unlike prior versions of this reconciliation bill, such as the House-passed Build Back Better Act, this legislation would reduce deficits by more than $300 billion over a decade. This deficit reduction, along with other elements of the bill, is likely to reduce inflationary pressures and thus reduce the risk of a possible recession. … Although reconciliation was designed for deficit reduction, this would be the first time in many years it was actually used for this purpose. It would also be the largest deficit reduction bill since the Budget Control Act of 2011. With inflation at a 40-year high and debt approaching record levels, this would be a welcomed improvement from the status quo.” – CRFB, July 28, 2022

CRFB President Maya MacGuineas said, “Almost every one of these policies, in and of itself, will fight inflation.” “‘To fight inflation, we want policies that will increase supply or reduce demand. And this does both,’ said Maya MacGuineas, president of the Center for a Responsible Federal Budget in Washington, which has pressed lawmakers to support policies that reduce the deficit. ‘Almost every one of these policies, in and of itself, will fight inflation. And on net, the entire package most certainly will.’” – The New York Times, July 28, 2022

MacGuineas said that it “manages to push against inflation, reduce the deficit … and cut net spending without raising net taxes.” “[The IRA] “manages to push against inflation, reduce the deficit, and, once fully phased in, it would actually cut net spending, without raising net taxes. That is a pretty monumental improvement.” – The New York Times, August 2, 2022

Kimberly Clausing

Economist Kimberly Clausing: The IRA would reduce inflation, lower health care costs, refurbish the tax system, and further climate mitigation … “so much to like.” Kimberly Clausing, an economist with the University of California at Los Angeles School of Law, wrote on Twitter: “In addition to reducing inflation, the Act would further climate change mitigation with clean energy tax incentives, refurbish America’s tax system through investments in the IRS, and directly lower healthcare costs. So much to like.” – Twitter, July 28, 2022

David Kamin

NYU Law Professor David Kamin wrote that the IRA’s corporate minimum tax is a “good thing” and would not boost inflation or hurt economy, arguing “Congress should pass it.” In a thread on Twitter about the corporate book minimum tax in the IRA, tax and budget policy expert David Kamin wrote, “It raises $300 bn+ from largest corps, and that’s a good thing. Congress should now enact, and hopefully lay groundwork for the global min tax that the U.S. can adopt looking ahead.” He also said, “Objections that raising taxes on big corporations to finance these investments and reduce deficit would be inflationary now and hurt economy are wrong/implausible.” He concludes: “Congress should pass it, and use it as a stepping stone for further reform.” – Twitter, July 28, 2022

Steve Wamhoff

Steve Wamhoff, tax expert with the Institute on Taxation and Economic Policy: The IRA is the “biggest corporate tax increase in decades” and the “first attempt” to “combat wealth and income inequality.” “‘This would certainly be the biggest corporate tax increase in decades,’ said Steve Wamhoff, a tax expert at Institute on Taxation and Economic Policy, a left-leaning think tank. ‘We’ve had decades of tax policy benefiting the rich, but this is really the first attempt to raise revenue in a progressive way that would begin to combat wealth and income inequality.’” – The Washington Post, July 28, 2022

Paul Krugman

Economist Paul Krugman writes that the IRA is a “desperately needed investment in America’s future” and will reduce inflation. “Senator Joe Manchin pronounced himself persuaded that a bill addressing climate change will actually reduce inflation. (It will.) While I’m not ready to count my chickens until they’ve been formally signed in the Oval Office, right now it looks as if we’re going to have gotten both a rapid recovery and desperately needed investment in America’s future.” – The New York Times, July 28, 2022

Climate experts

Climate and energy policy professor Leah Stokes called the IRA a “game changer” for the climate. She detailed how the bill will save Americans money from lower energy costs and clean up the transportation and electricity system, among many other benefits. “It would be the largest climate investment in America[n] history—4 times bigger than the recovery act. It would bring clean energy jobs to America and lower energy bills for American families. It would get us 80% of the way to President Biden’s climate goal. This is a game changer.” – Twitter, July 27, 2022

Leah Stokes: The IRA is a game-changer for lowering home energy costs and fighting climate change. – MSNBC, July 29, 2022

Families USA

Families USA: The IRA is the “best development on health care for the American people in years” and will lower drug costs. “This is the best development on health care for the American people in years. It promises lower drug costs and wider health care access. It’s crucial we get this deal locked down and passed as soon as possible.” – Families USA on Facebook, July 27, 2022

Matt Yglesias

Matt Yglesias, a senior fellow with the Niskanen Center: The IRA “reduces demand … increases supply … less inflation.” Responding to a tweet from Tom Cotton, Matt Yglesias said: “Well, the bill: (a) Reduces demand by increasing taxes to cut the deficit (b) Increases supply by investing in the production of more domestic energy. So, yeah, demand [decreases] + supply [increases] = less inflation. Republicans just hate it when rich people pay taxes.” – Twitter, August 1, 2022

For more information or to speak with an expert, please contact Colin Seeberger at cseeberger.af@americanprogressaction.org.