Nature

The Inflation Reduction Act will not reduce inflation


The Senate Democrats’ party line’s latest attempt to push their social agenda through Congress elevates Orwellian naming conventions to new heights. The Inflation Reduction Act of 2022? They might as well add “Global Peace” and “Global Democracy,” since the bill has about the same chance of achieving those goals.

There is a net $300 billion in the bill dedicated to reducing the deficit through higher taxes. In normal times, when inflation is around 2%, a tax increase of about 1.2% of gross domestic product would put downward pressure on inflation. But because deficit reduction is concentrated at the end of a 10-year period, only about a tenth of that reduction, or 0.12% of GDP, would materialize the following year.


Wj

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