Over 230 Economists Give Dire Warning About ‘Inflation Reduction Act,’ Say It Will Make Inflation Worse

Over 230 Economists Give Dire Warning About Inflation Reduction Act, Will Make Inflation Worse
Schumer: Attribution 2.0 Generic (CC BY 2.0) Senate Democrats 10/22/20 Manchin: YouTube Screen Shot-Senator Joe Manchin

As Democrats prepare to double down on the reckless economic policies of the Biden administration, a letter signed by over 230 economists was sent to both the House and Senate, warning that the impending Inflation Reduction Act does nothing of the sort.

That in fact, passage of the bill will only add fuel to the fire making already 40-year high inflation even worse, contradicting assertions made by President Joe Biden and Democrats about the bill.

The bill, which now has all 50 Democrats on board, is expected to be passed on Saturday without a single Republican vote.

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Will Make The Economy Worse

The economists stated that the economy is at a “dangerous crossroads” and the “inaptly named ‘Inflation Reduction Act of 2022’ would do nothing of the sort and instead would perpetuate the same fiscal policy errors that have helped precipitate the current troubling economic climate.” 

The letter continued, addressing the $433 billion in new spending contained in the bill. Such an increase in government spending “would create immediate inflationary pressures by boosting demand, while the supply-side tax hikes would constrain supply by discouraging investment and draining the private sector of much-needed resources.”

The economists also point out that the corporate minimum tax hike will further damage supply chain issues.

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No Economic Slouches

The signers of the letter sent to Congress are not economic novices. They include Nobel laureate Vernon Smith, former Chair of the Council of Economic Advisers Kevin Hassett, former director of the Office of Management and Budget Jim Miller, and former president of the Federal Reserve Board Robert Heller.

In addition, professors from the University of Chicago, Princeton University, Duke University, University of Virginia, Columbia, and the University of Notre Dame signed on to the letter.

Recipients of the letter were Senate Majority and Minority Leaders Sens. Chuck Schumer (D-NY) and Mitch McConnell (R-KY), Speaker of the House Rep. Nancy Pelosi (D-CA) and House Minority Leader Rep. Kevin McCarthy (R-CA).

But even as experts try to warn of the impending economic disaster the bill could create, Democrats are not deterred. From the Senate floor on Thursday, Schumer stated, “The Inflation Reduction Act will lower inflation, lower the costs of prescription drugs, close loopholes long exploited by big business who pay no or little taxes.”

Joe Biden also encouraged Congress to pass the bill by saying, “My message to Congress is this: Listen to the American people.” He added,

“This is the strongest bill you can pass to lower inflation, continue to cut the deficit, reduce health care costs, tackle a climate crisis and promote America’s energy security and reduce the burdens facing working-class and middle-class families.”

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Party-Line Bill

Republicans were hoping that Joe Manchin would again be the lone voice of reason in his party and not support the Inflation Reduction Act. Instead, weeks of negotiation paid off for Chuck Schumer, but not for the people of West Virginia.

Ultimately, Schumer and Manchin agreed to a deal that Manchin could support and he promptly caved. The same Senator who once said, “If I can’t go home and explain it I can’t vote for it,” will now have to go home to a state that is the second largest coal producer in the nation, and explain why he backs a bill that would slap a 7.2% tax on the coal industry.

Sen. Kyrsten Sinema (D-AZ) was the last hope for scuttling the bill. On Friday, Sinema stated that, after making some changes in the tax provision portion of the bill, she was prepared to support the bill.

She said, “We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate’s budget reconciliation legislation.”

Sinema’s support all but guarantees the bill’s passage in the Senate with the needed 50 votes and will move to the House for final approval next week.

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