Talk about this for a shocker: Democrats’ “Inflation Reduction Act” won’t reduce inflation.
That conclusion comes from the Congressional Budget Office (CBO) analysis of the spending spree legislation that passed last month. The budget office released its final report on the bill right after Labor Day, several weeks after President Biden signed the measure into law.
Lawmakers could have waited for CBO to publish its final report before voting on the measure, but House Speaker Nancy “We Have to Pass the Bill So You Can Find Out What’s in It” Pelosi wouldn’t dream of such transparency. Overall, the facts and figures in the CBO report illustrate the false claims and fiscal gimmicks to sell a law that will harm both the economy and the federal fisc.
More Inflation Ahead
CBO found that, in its first five years, the law will actually increase the federal deficit, and thus inflation. After $5.8 billion of deficit reduction in the fiscal year that begins this Oct. 1, the deficit will increase in each of the following three fiscal years, by $13.7 billion, $23.3 billion, and $29.2 billion, respectively.
Specific provisions of the legislation will also encourage inflation. A three-year extension of the enhanced Obamacare subsidies included in last March’s “Covid relief” measure will, by insulating more people from the effects of higher premiums on exchange coverage, encourage insurers to jack up rates.
If the law increases the deficit in the short term, then why and how could CBO conclude that it will lower the deficit over the longer term? That conclusion rests upon three assumptions:
- That the enhanced Obamacare subsidies don’t get extended (again) when they expire in 2025. CBO previously estimated that a permanent extension of the subsidies would cost $180 billion, significantly higher than the $58.1 billion in supposed deficit reduction in the measure Congress passed last month.
- The validity of the extension of a moratorium on a Medicare rebate rule issued by the Trump administration in late 2020. This rule was postponed by a court early last year, never went into effect — and never will go into effect. The Biden administration is only keeping it on the books so Congress can generate phony “savings” by postponing the rule. The Senate first used this gimmick last year as part of the infrastructure measure, and Democrats postponed the rule again in August. The postponement saves $122.2 billion on paper, but if one considers this action a budget gimmick (as I do), eliminating it from consideration means the law would increase the deficit on net.
- That the Internal Revenue Service’s new army of auditors will “succeed” in yielding new revenue. CBO estimated that the additional IRS enforcement funding will yield $180 billion in new revenue. However, budget scorekeeping conventions meant that CBO did not include these estimated new revenues when calculating the law’s fiscal effects.
To put it more bluntly: The law can only reduce the deficit if the IRS can investigate, audit, and harass enough Americans to generate additional buckets of cash for Washington to spend. Given how the IRS has ignored issues with Biden’s taxes, do you really believe that such efforts, if they happen, will come from “the rich,” as opposed to working-class families?
Quantifying the Raid on Medicare
The CBO report also puts final numbers behind one of Democrats’ favorite fiscal maneuvers: raiding Medicare to pay for other government programs. On net, the law reduces Medicare spending by $254.8 billion, which includes total Medicare savings of $299.3 billion, less $44.5 billion of new Medicare spending contained in the legislation.
Even if one subtracts the $122.1 billion in “savings” from the Medicare rebate rule from the equation, that still leaves a net of $132.7 billion taken from the Medicare program. And that money won’t go toward reducing the deficit. Rather, it will fund new spending on things like the 86,000 IRS agents and green-energy subsidies for affluent individuals’ Teslas.
For someone who on the day of his inauguration became the nation’s oldest-ever president, Joe Biden sure hasn’t shown much consideration toward his fellow seniors by raiding Medicare. It’s but one example of this administration’s flawed policy priorities.