What exactly goes into the kind of bill that makes a sitting US senator tweet “holy sh*t”? A rare compromise from Joe Manchin and a breakthrough in months of political gridlock – which is to say, not necessarily the contents of the bill itself. After the Inflation Reduction Act, a “pared-down version” of the 2021 Build Back Better Act, passed the Senate on August 7, fanfare erupted. (The r/politics subreddit, not notoriously a place of positivity, was partying in the comments.) It was a much-needed sign of movement from a stalemate Congress; after passing the House and Senate earlier this month, President Joe Biden is expected to sign the bill into law this afternoon.
The bill’s contents, for simplicity’s sake, can be roughly divided into chunks by climate, healthcare, and economy. In an explainer listed on their website, Senate Democrats say the bill will “invest in domestic energy production and manufacturing” and “reduce carbon emissions by roughly 40 percent by 2030;” allow Medicare to negotiate on drug pricing and extend the Affordable Care Act to 2025; and will “make a historic down payment” to fight inflation.
We’re going to walk you through the specifics of what this all means, and try and make sense of the 730-page, $700 billion bill. I’ll leave climate for last, since it’s the most complicated; for more context, we spoke to Environmental Protection Agency Administrator Michael Regan. Let’s get into it.
By many accounts, it’s unlikely that the IRA will have any major impact on inflation in the short term; instead, its policies would aim to impact it over a longer period. NPR writes that its plan to do so is two-part, “by lowering energy and health care costs for families and by helping to bring down the deficit;” NPR also notes that “some of the biggest drivers of inflation” like food costs “are not immediately addressed.”
Another economic issue in the bill is what Kyrsten Sinema’s “yes” vote on the bill was won by, the carried interest loophole; Sinema voted in support of the bill in exchange for any provisions on the loophole being removed. Basically, Sinema did what she usually does, which is act in service of the donors lining her pockets; this time it was hedge fund managers who make millions but pay pennies in income tax, what Brianna Wu calls “a tax bonanza for the rich.” The provisions in the bill would only have served to limit it, not even close the loophole, but that’s over with now. On the other hand, Biden’s effort to staff up the Internal Revenue Service to pursue unpaid taxes (included in the bill) will focus on those with a yearly income of $400,000 and above.
There are other policies in the bill that were meant to tax corporations that Sinema bravely stood in the way of, like a 15 percent tax on companies raking in over $1 billion in profits. In appeasing Sinema, the bill now includes some carveouts for manufacturers and private equity firms, which will likely lessen the revenue projected from the tax plan, according to Vox. The bill also includes a 1 percent tax on corporate stock buybacks, intended to come down on corporations. But it’s not clear that taxing stock buybacks are a net win; per The American Prospect’s David Dayen, researchers report stock buybacks “manipulate markets, stifle innovation, dampen corporate investment and worker wages, and serve mainly to enrich shareholders, particularly insider executives,” effects the federal government now tacitly endorses.