Congress has passed the Inflation Reduction Act. President Biden says this is a success story, in part because it will reduce the deficit by $305 billion over the next decade. IRA mainly reduces the deficit by raising taxes and regulating drug prices; the act increases federal spending and subsidies by nearly half a trillion dollars over this period.
The budget reconciliation process has been used again to increase government spending and taxes, increase federal subsidies, and expand regulatory powers. Before we break out the champagne, it is time for some straight talk about the nation’s debt crisis. Legislation such as the Inflation Reduction Act will do little to change the nation’s long-term debt trajectory.