The Inflation Reduction Act has been passed by the Senate. This is what you can expect

The Senate passed the Inflation Reduction Act on Sunday — a bill intended to provide key funding for clean energy investments and measures to lower the cost of prescription drugs, after an hours-long vote.

The marathon session that began Saturday continued through Sunday afternoon, with senators voting on a number of amendments to the 755 pages of legislation, including a failed provision offered by Senator Raphael Warnock (D-GA) that would have capped the cost of insulin products to $35 a month for those with private insurance. Despite the bill’s arduous journey and many compromises, there are still some victories that should have a tangible effect on the average American.

On Saturday, Vice President Kamala Harris cast the casting vote to launch a full day of debate on the bill — as well as several last-minute amendments floated by Republican senators. Senator Joe Manchin (D-WV) warned his colleagues in the Democratic Caucus not to kick in for the Republican senators’ “fake amendments” since no Republican intended to vote for the IRA under any circumstances.

For most of Sunday, the Democratic Caucus appeared to be following his admonition to vote against the Republican amendments — and, for that matter, any amendment that could upset the balance of the carefully calibrated bill. This included that of Senator Bernie Sanders (I-VT). Sanders was left alone with proposed changes to reinstate the child tax credit and a guarantee that Medicare drugs would not exceed what the Department of Veterans Affairs pays for the same drugs. CQ Roll Call reported.

The legislation is a stripped-down version of the Build Back Better Act, the Democrats’ ambitious agenda to fund health care, education and clean energy that effectively killed Manchin in December. Manchin announced on Fox News that he would not vote for the legislation as it was then due to concerns about entrenched inflation. At the time, Manchin released a statement saying the actual cost of BBB would be much higher than its initial price tag of $1.5 trillion and expressed concerns about the national debt.

“My Democratic colleagues in Washington are determined to drastically reshape our society in a way that makes our country even more vulnerable to the threats we face,” he wrote at the time. “I can’t take that risk with a staggering debt of more than $29 trillion and inflation taxes that are real and damaging to every hardworking American at the gas pumps, supermarkets and utility bills with no end in sight.”

Manchin’s statement in December meant those priorities were almost dead in the water until late July this year, when Manchin announced that he and Senate Majority Leader Chuck Schumer had reached a deal to approve a watered-down version of the Reconciliation Act. to approve – the IRA. Manchin reportedly agreed in exchange for Schumer’s promise Congress will try to speed up the permitting process for projects under the Clean Water Act, making it easier for developers to build pipelines, Bloomberg’s Law reported.

Now the bill goes to the House of Representatives for a final vote.

What does this do For real mean for inflation?

There are many different measures included in this bill as a way to get some of the Biden government’s priority legislation passed. It is however is called the Inflation Reduction Act, so how will this affect the decades-high inflation rates consumers feel at the grocery store and gas pump?

As economists told Vox’s Li Zhou last week, the average American probably won’t feel the impact immediately or particularly significant — the effect will be longer-term and macroeconomic.

“For the most part, this isn’t a 2022 bill,” said Marc Goldwein, the… senior policy director at the Committee on a Responsible Federal Budget, Vox said. “This is about 2023, 2024, 2025. It’s about helping the Federal Reserve fight continued inflation. It won’t bring inflation down in September.”

Shai Akabas, the economic policy director at the Bipartisan Policy Center, explained that “policymakers can do very little, certainly on a legal basis, to influence inflation overnight. That is primarily the job of the Federal Reserve.” The Fed has raised interest rates, essentially raising the cost of borrowing money to slow spending, but any decision the central bank makes about fiscal policy will also take time to affect the system in general. And as Vox’s Emily Stewart explained, that’s likely to be painful for consumers in the near term — the cost of mortgages and credit card debt will rise, hiring will likely slow, and there’s also the looming possibility of a recession. All this in the hope of building a more stable economy in the future.

The bill includes some measures to ease inflation when it comes to fuel and energy costs. Fuel prices were already high on global inflation when Russia invaded Ukraine in February, and subsequent sanctions on Russian fuel exacerbated those price hikes, though the price of a gallon of gas has fallen. partly due to federal actions such as releasing oil from the Strategic Petroleum Reservethe bill includes measures to open roads for drilling and accelerate pipeline construction to increase available supply – reducing costs for the average consumer.

In addition, the bill allows Medicare to negotiate cheaper prescription drug prices for certain highly expensive drugs and reduce over-the-counter prescription costs for Medicare beneficiaries to $2,000 per year. This unprecedented measure will reduce costs for consumers. Another measure requires drug companies to pay a discount to Medicare if they increase drug prices faster than inflation. NPR reported Friday — presumably to discourage those companies from repeated price increases.

Despite the breakthrough in healthcare, Senate still voted down a measure to require private insurers to limit out-of-pocket insulin costs to $35 per month.

The bill’s non-inflationary measures are also significant

The IRA may not immediately push prices to pre-Covid levels, and it’s a long way from Democrats’ initial Build Back Better plans, but it represents some significant steps forward for coping with crushing health care and health care costs. the existential threat of climate change.

In addition to strengthening Medicare’s new bargaining power, the bill also includes insurance subsidies for the Affordable Care Act through 2025, making health insurance more affordable for the millions of people insured through the health care market. The initial subsidies were set to expire this year, which would have resulted in higher premiums for the millions of people eligible for free health insurance when Congress removed the income cap to qualify for federal aid that pays premiums.

The IRA also includes the largest-ever investments in climate change mitigation efforts, clean energy production and climate justice programs, all designed to reduce the damaging effects of climate change in deprived areas.

although climate activists expressed frustration with the compromises of the oil and gas bill to drill, an analysis of Schumer’s office determined that climate provisions would reduce greenhouse gas emissions by 40 percent from 2005 levels by 2030. , which studies the impact of government policies on climate change, told NPR last month.

While many of the financial incentives for pursuing clean energy and mitigating climate change are directed at businesses, there are rebates and tax credits available to people who buy clean energy sources, such as heat pumps and solar panels on the roof. These measures are aimed at making clean energy available to more people, although solar panels, for example cost about $11,000 in 2021 for a household setup. The legislation also provides a $4,000 tax credit for low- and middle-income drivers to purchase a second-hand electric vehicle, and up to $7,500 for a new electric vehicle. In addition, a study of the Rhodium Group estimates that the bill’s amenities will save households an average of $1,025 per year by 2030.

Part of the funding is specifically aimed at low-income and vulnerable communities. For example, the legislation provides for $1 billion in subsidies to improve the energy efficiency of affordable housing. It also offers at least $60 billion in grants for projects such as improving air quality monitoring, improving transportation and deploying clean energy to poor and vulnerable communities, as well as improving climate resilience in public housing and for tribal and native Hawaiian communities.

While all these measures have been taken, there is no doubt that environmental actions and funding are not sufficient. The bill offers far less than what is actually needed – a total overhaul of the system. It will be years before these programs are implemented and will bear fruit in lower greenhouse gas emissions, better health outcomes for low-income communities and improved clean energy infrastructure. It’s hard to deny, though, that the IRA offers a glimmer of hope that it’s possible to tackle some of the most pressing problems, including overwhelming health care costs and climate change.

“It took 19 hours. Or maybe 2 years. Or maybe 3 decades, depending on how you measure it,” Leah Stokes, professor of climate and energy policy at the University of California, Santa Barbara tweeted Sunday. “But the US Senate has now passed a major climate bill. It was a compromise. We must join forces with communities on the front lines to fight the fossil fuel industry. But right now I’m celebrating.”