By Rich Lowry
Tuesday, August 02, 2022
Congress has never cared much about
truth in labeling, but even by its standards, the “Inflation Reduction Act of
2022” is laughably absurd.
The deal reached by West Virginia senator
Joe Manchin and Majority Leader Chuck Schumer is getting puffed up by the media
as a presidency-revitalizing achievement for President Joe Biden, when in
reality it is the detritus of his stymied legislative agenda hastily thrown
together in an incoherent muddle, under a deceptive name.
A signature of Biden’s legislative strategy
has been pursuing sweeping legislation that has nothing to do with the actual
concerns of voters. Worried about inflation? Don’t worry, we have a
partisan, enormously ambitious voting-rights bill, police-reform bill, or new
multitrillion-dollar spending bill just for you.
Thankfully, Manchin significantly bid down
what Biden and the rest of the party initially wanted to spend on so-called “Build
Back Better.” Otherwise, the new deal is as much of a non sequitur as ever. At
a time of inflation, it offers hundreds of billions in new spending. As the
economy dips into a recession or close to one, it offers hundreds of billions
in new taxes. And its main element is more green-energy spending, when the
climate is far down the priority list for voters.
None of this makes much sense. According
to the estimate of the Penn Wharton Budget Model, the act would very slightly
increase inflation in the near term, when inflation is a problem, and very
slightly decrease it after 2024, when — one hopes — it will already have
fallen.
That’s just some random model, you say?
Well, Manchin used to rely on it.
Manchin brags about the $300 billion in
deficit reduction over ten years, which is supposed to be one of the bill’s
counterinflationary bragging points. Just a week or so ago, though, the senator
voted for the Senate’s $280 billion “Chips and Science” bill. What the West
Virginia solon giveth with one hand, he taketh away with another.
Surely, Democrats will keep the new
spending coming to the extent they can.
Manchin deserves credit for sounding the
alarm about inflation when Democrats were still in denial. Nonetheless, his own
record isn’t exactly sterling. Last year, he voted for the $1.9 billion “rescue
plan” that had some role in worsening inflation. Now, he claims to be tackling
this inflation via fiscal rectitude while he freely spends more money.
In short, Manchin is an arsonist who shows
up to put out the fire with a leaky hose.
The tax piece isn’t any better. The 15
percent corporate income tax will hit manufacturers particularly hard,
including the semiconductor manufacturers that Manchin and the Senate just went
out of their way to subsidize. Again, which is it — do those companies deserve
to be subsidized more, or taxed more?
Manchin implausibly denies the tax
increase is a tax increase. He calls it closing a loophole, a classic Beltway
euphemism for a tax hike.
Also, he further denies that the bill
increases taxes on those making less than $200,000 a year, despite the Joint
Committee on Taxation finding exactly that. The committee estimates that people
making between $50,000 and $75,000 would see a 0.8 percent increase next year.
Then there’s the issue that the additional
corporate tax is a disincentive to business investment when more of it is
desperately needed. Inflation results from demand outstripping supply, so it is
imperative that government get out of the way of business creating more supply.
Finally, Manchin said in 2010, “I don’t
think, during the time of recession, you mess with any of the taxes or increase
any taxes.” He has apparently suspended that rule until further notice.
At the end of the day, all of this is a
counterproductive waste, but it could have been much worse. The bill isn’t
going to remake Biden’s foundering presidency, but it will make Democratic
activists feel a little better — Joe Manchin’s contribution to the republic.
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