The Inflation Reduction Act passed the Senate. Here’s what to expect

The Senate on Sunday passed the Inflation Reduction Act – a bill aimed at providing essential funding for clean energy investments and measures to lower prescription drug costs – after hours of voting.

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

On Saturday, Vice President Kamala Harris cast the vote to begin 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 fall for the “phony amendments” of Republican senators, as no Republican planned to vote for the IRA under any circumstances.

For most of Sunday, the Democratic caucus appeared to follow his urging to vote down Republican amendments — and for that matter, any amendment that could throw off the balance of the carefully calibrated bill. This included those of Sen. Bernie Sanders (I-VT). Sanders stood alone on proposed amendments to restore the child tax credit and guarantee that Medicare drug costs will not exceed what the Department of Veterans Affairs pays for the same drugs. CQ Roll Call reported.

The legislation is a revamped version of the Build Back Better Act, the Democrats’ ambitious health care, education and clean energy funding agenda that Manchin effectively killed in December. Manchin announced on Fox News that he would not vote for the legislation as it stood at the time due to concerns about entrenched inflation. At that time, Manchin issued a statement saying BBB’s true cost would far exceed its original $1.5 trillion price tag and expressed concerns about the national debt.

“My Democratic colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face,” he wrote at the time. “I can’t take that risk with a terrifying debt of over $29 trillion and inflationary taxes that are real and harmful to every hard-working American at the gas pump, grocery store, and utility bill without end.”

Manchin’s declaration in December meant those priorities were dead until late July of this year, when Manchin announced that he and Senate Majority Leader Chuck Schumer had reached an agreement to pass a watered-down version of the bill. reconciliation – the IRA. Manchin reportedly agreed in exchange for Schumer’s promise that Congress would try to speed up the permitting process for projects under the Clean Water Act, which could allow developers to build pipelines more easily. Bloomberg’s Law mentionted.

Now it The bill goes to Parliament for a final vote.

What does this do? Really does it mean for inflation?

There are several different measures attached to this bill as a way to pass some of the Biden administration’s priority legislation. However, this is called the Inflation Reduction Act, so how will it affect the decades-long high levels of inflation that consumers are feeling at the grocery store and gas pump?

As economists told Vox’s Li Zhou last week, the average American likely won’t feel the impact immediately or particularly significantly—its impact will be in a long-term and macroeconomic sense.

“For the most part, this is not a 2022 bill,” said Marc Goldwein, the senior policy director at the Committee for a Responsible Federal Budget, told Vox. “It’s about 2023, 2024, 2025. It’s about helping the Fed fight stubborn inflation. It’s not going to reduce inflation in September.”

Shai Akabas, director of economic policy at the Bipartisan Policy Center, explained that “there is very little policymakers can do, certainly legislatively, to affect inflation overnight. That’s primarily the job of the Federal Reserve.” The Fed has raised interest rates, which effectively raises the cost of borrowing money as spending slows, but any central bank decision on fiscal policy will also take time to affect the system as a whole. And as Vox’s Emily Stewart explained, that’s likely to be painful for consumers in the short 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. This, however, is done in hopes of creating a more stable economy in the future.

There are a number of measures in the bill to reduce the burden of inflation on fuel and energy costs. Fuel prices were already high due to global inflation when Russia invaded Ukraine in February, and subsequent sanctions on Russian fuel have exacerbated those price increases, although the price of a gallon of natural gas has fallen due in part to federal actions as if releasing oil from the Strategic Petroleum Reservethe bill contains measures to pave the way for drilling and fast-track pipeline construction to increase available supply — thereby lowering costs for the average consumer.

In addition, the bill would allow Medicare to negotiate cheaper prescription drug prices for some very expensive drugs and cap prescription costs for Medicare beneficiaries at $2,000 per year. This unprecedented measure will reduce costs for consumers. An additional measure requires drug companies to pay a rebate to Medicare if they raise drug prices faster than inflation increases; NPR reported Friday — possibly disincentivizing these companies from repeated price increases.

Despite the discovery of health care, the The Senate is still voting against a measure to require private insurers to cap out-of-pocket insulin costs at $35 a month.

The bill’s non-inflationary measures are also important

The IRA may not immediately push prices back to pre-Covid levels and is a far cry from Democrats’ original Build Back Better plans, but it represents some important steps forward in addressing crushing health care costs and the existential threat of climate change. of 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 marketplace. The original subsidies were supposed to end this year, which would have meant higher premiums for the millions of people who qualified for free health insurance when Congress removed the income ceiling to qualify for federal help paying premiums.

The IRA also includes the largest investments ever in climate change mitigation efforts, clean energy production, and climate justice programs, all designed to mitigate the harmful effects of climate change in underserved areas.

Although climate activists have expressed frustration about oil and gas bill compromises drilling, an analysis from Schumer’s office determined that climate provisions would reduce greenhouse gas emissions by 40 percent from 2005 levels by 2030. “It doesn’t get us there by itself, but it keeps us in the climate fight,” Jesse Jenkins of the REPEAT Project of Princeton University, which studies the impact of government policy on climate change; he told NPR last month.

While many of the financial incentives to pursue clean energy and climate change mitigation are directed at corporations, there are rebates and tax credits available for individuals who purchase clean energy sources such as heat pumps and roof solar panels. These measures aim to make clean energy more available to more people, although solar panels, for example, it cost about $11,000 in 2021 for home installation. The legislation also offers a $4,000 tax credit for low- and moderate-income drivers to buy a used electric vehicle and up to $7,500 for a new electric vehicle. In addition, a study by the Rhodium Group estimates that the bill’s provisions would save households an average of $1,025 annually by 2030.

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

Although all these measures have been put in place, there is no doubt that environmental actions and funding are insufficient. The bill provides far less than what is really needed — a total overhaul of the system. It will be years before these programs are implemented and pay off in the form of lower greenhouse gas emissions, better health outcomes for low-income communities, and improved clean energy infrastructure. Still, it’s hard to deny that the IRA provides a glimmer of hope that it’s possible to begin tackling some of the most pressing problems—including crushing 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, a professor of climate and energy policy at the University of California, Santa Barbara. he tweeted on Sunday. “But the US Senate has now passed a major climate bill. It was a compromise. We must stand with frontline communities against the fossil fuel industry. But right now, I’m celebrating.”