Wharton School Finds Manchin–Schumer Spending Bill Will Have Minimal Impact on Inflation
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An analysis performed by the Wharton School at the University of Pennsylvania found that the spending deal reached by centrist Senator Joe Manchin (D., W.Va.) and Senate Majority Leader Chuck Schumer (D., N.Y.) will have a minimal long-term impact on inflation.
The analysis, produced by the Penn Wharton Budget Model, finds that the Inflation Reduction Act “would very slightly increase inflation until 2024 and decrease inflation thereafter.” The increase could be as high as 0.05 percentage points in 2024, and could be followed by an estimated 0.25 percentage point fall in the Personal Consumption Expenditures price index by the late 2020s.
“These point estimates are statistically indistinguishable from zero, thereby indicating low confidence that the legislation will have any impact on inflation,” write the study’s authors.
According to the PWBM, the bill — which would allocate nearly half-a-trillion dollars to energy and climate initiatives, as well as extend expiring federal subsidies for people buying health insurance — would actually cut cumulative deficits by $248 billion over the budget window.
Included in the bill is a 15 percent corporate minimum tax, which Schumer and Manchin argued will collect $739 billion in government revenue over ten years. Overall, “a decrease in spending on prescription drugs combined with increases in revenues from personal income taxes and business taxes lead to a decrease in government debt will lead to a decline in government debt by 8.4 percent by 2050,” the model says.
On the chamber floor on Thursday, Republican Senate Minority Leader Mitch McConnell (R., Ky.) knocked Democrats for raising taxes during a recession.
“Apparently, our Democratic colleagues do not want to be responsible for just skyrocketing prices alone: They want Americans to be faced with skyrocketing prices and higher taxes and fewer jobs, all at the same time,” he said.
After a year of dead-end negotiations, Manchin, and Schumer announced they would salvage President Biden’s failed social spending agenda in a slimmed-down version excluding childcare and other domestic priorities of their party. Manchin originally rejected Biden’s Build Back Better plan, which started at the gargantuan size of $3.5 trillion, citing concerns with inflation. He signaled, however, that he would be amenable to renewed discussion later down the line.
