Why the Inflation Reduction Act Is a Big Deal
If it passes, the US Inflation Reduction Act would be a landmark legislative achievement. With provisions to accelerate America's clean-energy transition, control health-care costs, and restore some sanity to the tax code, it will not only curtail inflation but also bolster America's long-term competitiveness.
NEW YORK – US Senate Democrats’ compromise bill, the Inflation Reduction Act (IRA) of 2022, addresses not just inflation but also several key longstanding problems facing our economy and society.
There is a simmering debate about the causes of today’s inflation; but regardless of what side one takes, this bill represents a step forward. For those worried about excessive demand, there is more than $300 billion in deficit reduction. And on the supply side, the bill would mobilize $369 billion of investments in energy security and decarbonization. That will help bring down the cost of energy – one of the main drivers of current price growth – and put America back on track to reduce its carbon dioxide emissions by some 40% (from 2005 levels) by 2030.
These investments will yield far-reaching returns. The costs of climate-driven events (wildfires, hurricanes, tornados, and floods) will reduce our standard of living even more than today’s inflation will, and they are disproportionately borne by lower-income households, people of color, and future generations. These costs are far larger and more difficult to rectify than the costs of deficits.