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 Sen. 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 of dollars 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 10 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% 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% 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.
Rich Lowry is the editor of the National Review. Follow him on Twitter @RichLowry.