By Dr. Mark W. Hendrickson
You know the old joke: How can you tell when a politician is lying? When his/her lips are moving. That extreme cynicism about politicians is reinforced by the recent passage of the so-called Inflation Reduction Act (IRA). In addition to being the most egregiously misnamed act in memory (more on that below), the dishonest statements made by its supporters have been breathtaking in their brazenness.
Senate Majority Leader Chuck Schumer (D-NY) proclaimed that the IRA “will help every citizen in this country and make America a much better place.” His assertion encapsulates progressives’ ideological belief that America currently is not a good place and can be redeemed only by economic central planning. Also erroneous is his assertion that IRA “will help every citizen.”
The truth is that the IRA will benefit some Americans at the expense of others. The IRA warps the rule of law by carving out privileges for special interests. It replaces the “general welfare” role of the federal government as specified in the Preamble to our Constitution with corrupt cronyism.
The IRA will raise taxes on corporations in several ways while funneling several hundred billion dollars of subsidies (pork) to energy companies. In the gleeful words of The New York Times, “The bill’s climate provisions are mostly a collection of subsidies [to] solar, wind and nuclear power.” As for funding those subsidies by raising taxes on corporations, it seems that in their zeal to undo President Trump’s corporate tax reductions, proponents of the IRA are overlooking the fact that the benefits of those reductions were skewed in favor of workers, resulting in record levels of employment and income for blacks and Hispanics. Raising corporate taxes are likely to undo those gains.
Another example of the IRA’s preference for privileges over the rule of law is the act’s grant of billions for a partial bailout of the (likewise) inaptly named “Affordable” Care Act. To help fund that bailout, the IRA authorizes “prescription drug pricing reform”—a euphemism for hoped-for price controls on certain pharmaceutical products. Such price controls utterly fail to address the root cause of today’s high drug prices, namely, government involvement in the healthcare marketplace.
More double talk about IRA came from Senator Joe Manchin (D-WV), whose crucial support for the bill provided the necessary vote for its passage. Several months ago, I lauded Sen. Manchin for refusing to support President Biden’s enormously costly Build Back Better proposal. I thanked him for placing the welfare of the country ahead of a partisan agenda. I cannot say the same about him today. Manchin tweeted, “The Inflation Reduction Act is the product of years of bipartisan conversations about the most impactful ways to produce more energy domestically, bring down energy and healthcare costs and pay down our debt. The IRA achieves this without raising taxes.”
Wow, where to begin at peeling off the Orwellian inversions of that statement? For starters:
—Manchin is trying to cloak the IRA in a veneer of bipartisanship, but not a single Republican voted for it. Blame who you want, but it was not bipartisan.
—”Without raising taxes?” IRA imposes a mandatory minimum 15% tax on corporations making more than $1 billion in a year; ensnares any small business that makes use of “private equity;” adds a new tax on corporate stock buybacks; and finally, adds tens of thousands of IRS agents whose purpose can be nothing other than redirecting more wealth from the private to the public sector.
—”Pay down our debt?” Where have we heard that before? Such rhetorical sugar helps the bitter medicine of government expansion go down more smoothly when a bill is first enacted, but somehow the rosy expectations never come to pass and government debt continues to swell.
—”Bring down energy and healthcare costs?” Here we see the common conflation of costs with prices. Under the authority of IRA, Medicare and Medicaid may indeed succeed in suppressing the prices of certain pharmaceutical drugs, but that won’t do anything to reduce the costs of producing such drugs. It is premature to say with any degree of certainty what the impact of lower prices for drugs will be on the development of future drugs, but the potential for harm is there.
As for reducing energy costs, that’s nonsense. For several decades now, progressives in the federal government have chosen to persecute the companies producing the cheapest and most reliable forms of energy (i.e., fossil fuels) while subsidizing more expensive, less reliable forms of energy, primarily wind and solar. This has raised the cost of energy above what it otherwise would have been, and IRA continues on the same economically perverse path.
That brings us back to Sen. Schumer’s assessment. How does making the cost of energy more expensive and supporting energy sources that place the electric grid at risk and result in brownouts and blackouts help every citizen and make America a better place? My gosh, 70 years ago, we never worried about brownouts and blackouts. Now, in states like liberal California and conservative Texas, residents have to worry about the lights going out.
Those are just some of the distortions being woven around the IRA. Let’s now address the biggest whopper of them all, namely, the absurd claim that the act will reduce inflation.
The purpose of the IRA is to expand government control over important parts of the economy and to siphon more wealth from the private sector to the public sector. It has nothing to do with reducing inflation according to the nonpartisan Congressional Budget Office – an assessment shared by Sen. Bernie Sanders (I-VT) who voted for the bill. The reason for calling this piece of legislation the “Inflation Reduction Act of 2022” is that the party currently calling the shots in Washington knows that the American people are ticked off and worried about inflation being over eight percent (inflation caused by previous reckless government over-spending). They hope that economically ignorant Americans will accept the name of the act at face value. It’s all marketing and p.r. The party in power is hoping to minimize electoral losses this November by getting some voters to believe that a new government tax-and-spend bill, which the IRA is, will help to bring down inflation, which the IRA will not.