The Inflation Reduction Act: What it Actually will do and Why

Today, a proposed bill which came about through an agreement reached by Democratic senators Joe Manchin and Chuck Schumer was passed by the Senate, a bill which is deceptively titled the “Inflation Reduction Act.” What it actually is is a $280 billion chips and science bill, which has a significant focus on climate change initiatives that the Democrats have been fighting for. 

So what does that mean in regards to the effect this bill will actually have on inflation? An interesting study done by the Wharton School at the University of Pennsylvania answers this question. 

Jonathan Turley writes: “ Jon Huntley and John Ricco found that the bill ‘would reduce non-interest cumulative deficits by $248 billion over the budget window with no impact on GDP in 2031. The impact on inflation is statistically indistinguishable from zero.’

That is $52 billion less in deficit reduction than claimed by the Democrats and the review found the bill would actually ‘very slightly increase inflation until 2024 and decrease inflation thereafter.’ 
Inflation by Jernej Furman is licensed under CC BY 2.0

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