Economists: ‘Inflation Reduction Act’ Not Likely to do Much if Anything to Reduce Inflation

After the “Inflation Reduction Act” was passed, conservatives decried the bill as doing nothing to reduce inflation, with many suggesting it will add to it.

A new Yahoo! Finance article reports that some economists believe the $430 billion price tag on the bill over the next 10 years is a hefty amount for what they consider to be marginal economic returns.

Oxford Economics economists wrote in a new note, “Our preliminary analysis of the ‘Inflation Reduction Act’ (IRA), a climate, tax, and health-focused bill, shows it will boost the level of GDP by about 0.2%-0.3% by the end of 2031 and, despite its name, will have no measurable impact on inflation.”

Economists at Wells Fargo also suggested that the impact of the legislation would be minimal at best.

In a separate note, they wrote that “In our view, the IRA will not have a major impact on the outlook for the U.S. macroeconomy over the next year or two.”

“A tightening of fiscal policy can be disinflationary by slowing aggregate demand growth. The IRA does impose some fiscal tightening, such as the 15% minimum tax on corporations’ financial statement income and the 1% excise tax on stock buybacks. However, these new taxes are relatively small, amounting to just 0.1% of GDP per year,” they added.

Despite that, Biden has declared that “The Inflation Reduction Act is a win for working families over the wealthiest corporations and special interests that Congressional Republicans continue to prioritize.”

The Inflation Reduction Act is a win for working families over the wealthiest corporations and special interests that Congressional Republicans continue to prioritize. pic.twitter.com/tA65NKDOhz

— President Biden (@POTUS) August 23, 2022

Biden also noted that “We’ll no longer have a situation where 55 of the largest corporations in America pay zero in federal income taxes on $40 billion in profits thanks to the Inflation Reduction Act.”

“And no one making less than $400,000 per year will pay a penny more in federal taxes,” Biden claimed.

We'll no longer have a situation where 55 of the largest corporations in America pay zero in federal income taxes on $40 billion in profits thanks to the Inflation Reduction Act.

And no one making less than $400,000 per year will pay a penny more in federal taxes.

— Joe Biden (@JoeBiden) August 23, 2022