Current Events > So how does this 'inflation fighting' bill actually fight inflation?

(+) Yeah! (+)

How does a bill that has $400B in credits and subsidies, paid for with a tax that will raise $300B over a decade, reduce inflation with the $300B they're saying is set aside to reduce the deficit? Am I taking crazy pills here? The bill costs $100B more than it raises just for the tax incentives, BEFORE setting aside another $300B for deficit reduction.

I'm not saying there aren't any good things in the bill (especially the medicare part). I just don't see the inflation fighting.

https://www.bbc.com/news/world-us-canada-62339593

The so-called Inflation Reduction Act also comes as the White House seeks to calm mounting fears of a recession. Data released on Thursday showed the US economy has shrunk over two consecutive quarters.

The bill invests $369bn (305bn) into tax incentives for renewable energy production. That includes $60bn in tax credits for clean energy manufacturing, $30bn in tax credits for wind and solar production, and tax breaks for consumers who go green - such as a $7,500 write-off on new electric vehicle purchases for anyone making $75,000 or less annually.

Also included in the package is a three-year $64bn (53bn) extension of health insurance subsidies purchased through the government marketplace. Consumers were soon to be informed their rates will go up later this year, but the move ensures that will not happen.

Much of the revenue for the bill is raised by a new 15% minimum tax on corporations that earn more than $1bn in annual profits.

The Biden administration has been negotiating with several countries around the world since last year on a 15% global minimum corporate tax, in an effort to limit international tax havens. If executed in the US, the tax will target some 200 US corporations and raise some $313bn (258bn) over the next decade, Democrats say.

The legislation also raises money by beefing up tax enforcement, closing what's viewed as a tax loophole for investment managers, and lowering prescription drug costs for seniors by allowing Medicare - the government health insurance programme for the elderly - to negotiate drug prices.

Democrats say the proposal would put $300bn towards reducing a federal deficit that rose sharply during the Covid-19 pandemic.

Questions like this are how people end up at fiscal conservatism.

https://gamefaqs.gamespot.com/a/user_image/4/0/6/AADgb_AADgdu.jpg
It raises 700 billion, not 300

"Re-incorporated in Barbados" in 3...2...

This is why we need a balanced budget amendment.

I'm assuming it just means a pay day for big companies.

They just name bills whatever the fuck they want

I still feel like Sinema will kill this bill and the CHIP bill

So how does this 'inflation fighting' bill actually fight inflation?

the same way the war on drugs fights drugs

The answers to your question were literally in the article text you posted.

Negotiating drug prices through Medicare is huge. And this bill is basically going to pause any future rise in medical costs for the next three years

tremain07 posted...

I still feel like Sinema will kill this bill and the CHIP bill

Chip already passed

Much of the revenue for the bill is raised by a new 15% minimum tax on corporations that earn more than $1bn in annual profits.

So... all that changes is a shift from companies being subsidiaries of bigger companies, to companies all being "independent" but with nigh identical boards of directors.

This guarantees that no company will bring in a billion ever again, at least on paper.

Questionmarktarius posted...

So... all that changes is a shift from companies being subsidiaries of bigger companies, to companies all being "independent" but with nigh identical boards of directors.

This guarantees that no company will bring in a billion ever again, at least on paper.

While that can certainly happen, I don't know if every company wants to go through the huge headache of restructuring/dividing that would also affect stock prices etc

You seem to be drawing one possibility as set in stone

Questionmarktarius posted...

So... all that changes is a shift from companies being subsidiaries of bigger companies, to companies all being "independent" but with nigh identical boards of directors.

This guarantees that no company will bring in a billion ever again, at least on paper.

Man, I get what you're saying. But this is such a nihilistic line of thinking.

Ruvan22 posted...

While that can certainly happen, I don't know if every company wants to go through the huge headache of restructuring/dividing that would also affect stock prices etc

You seem to be drawing one possibility as set in stone

He shills for corps every chance he can get.

EmbraceOfDeath posted...

He shills for corps every chance he can get.

When a law has an exception, that exception is the law.
Same idea happened when Obamacare set "full time" to 30 hours: the "29-hour work-week" became a thing.

EmbraceOfDeath posted...

He shills for corps every chance he can get.

pretty sure that poster is just a parody account of the enlightened centrist/libertarian

If everyone is broke and homeless, prices should come down.

TheGoldenEel posted...

pretty sure that poster is just a parody account of the enlightened centrist/libertarian

"cynical ass", thanks.

EmbraceOfDeath posted...

He shills for corps every chance he can get.

I think people confuse shilling with providing a realistic interpretation of how the world will respond to something.

Like, at no point did he say companies restructuring so their profit is valued at less than a billion was a good thing, but to push out a new tax and pretend to like the rest of the world will go "okay" without reacting is naive.

Somewhere along the way we got this crazy idea that highlighting the consequences of somebody's actions means defending those consequences as good and just, rather than literally just following through a proposal to it's natural conclusion.

If the people writing the bills did this sort of exercise they would have provisions for these consequences written into the bill, but that's hard work.

My understanding is that the bill does nothing to fight inflation, it's just buried with a ton of additional corporation-favoring tax breaks and garbage like that under the guise of it making things better for us, the common folk!

s0nicfan posted...

I think people confuse shilling with providing a realistic interpretation of how the world will respond to something.

Like, at no point did he say companies restructuring so their profit is valued at less than a billion was a good thing, but to push out a new tax and pretend to like the rest of the world will go "okay" without reacting is naive.

Somewhere along the way we got this crazy idea that highlighting the consequences of somebody's actions means defending those consequences as good and just, rather than literally just following through a proposal to it's natural conclusion.

If the people writing the bills did this sort of exercise they would have provisions for these consequences written into the bill, but that's hard work.

Being a Doomer and saying No company will ever make a billion again on paper! Is not being realisticlike what?

ToadallyAwesome posted...

like what?

It's a tax on profits, which can easily be restructured and finessed.
Hollywood has made an artform out of this. So can Exxon.

ToadallyAwesome posted...

Being a Doomer and saying No company will ever make a billion again on paper! Is not being realisticlike what?

How is it shilling, though? Even if you want to say it's hyperbolic, at what point does highlighting how businesses may work in response to a new tax represent defending them or their interests? What is the actual harm in calling out how companies might get around it and why is that harm so bad that some users want to try and shut down posters who are pointing it out?

s0nicfan posted...

How does a bill that has $400B in credits and subsidies, paid for with a tax that will raise $300B over a decade, reduce inflation with the $300B they're saying is set aside to reduce the deficit? Am I taking crazy pills here? The bill costs $100B more than it raises just for the tax incentives, BEFORE setting aside another $300B for deficit reduction.

as shown, the bill raises 700b and sets 300b of that aside as deficit reduction

i see users ignoring what emblem-man posted and repeating incorrect information so i think we need to repeat this statement a few dozen times while hitting them with a hammer

also the answer is "because companies currently pay taxes on their profits, since sometimes evading taxes costs more than the taxes do"

Sackgurl posted...

as shown, the bill raises 700b and sets 300b of that aside as deficit reduction

A balanced budget amendment would end the deficit immediately.
Unless, of course, there's exceptions for "emergencies" - then there will be nothing but emergencies.

Sackgurl posted...

as shown, the bill raises 700b and sets 300b of that aside as deficit reduction

i see users ignoring what emblem-man posted and repeating incorrect information so i think we need to repeat this statement a few dozen times while hitting them with a hammer

also the answer is "because companies currently pay taxes on their profits, since sometimes evading taxes costs more than the taxes do"

I definitely wasn't ignoring it, but allowing Medicare to negotiate drug prices doesn't actually bring down the deficit unless you also reduce the budget for Medicare by the amount it's going to save. Otherwise, while it is good for drug prices for individuals, I don't see how it combats inflation and I don't think the money that it's saving is actually going to go towards funding the things in this bill because that's not how budgets are itemized.

So at best if next year's Congressional budget includes 300 billion less in funding then the bill might even itself out in terms of cost, but that's a big if.

s0nicfan posted...

How is it shilling, though? Even if you want to say it's hyperbolic, at what point does highlighting how businesses may work in response to a new tax represent defending them or their interests? What is the actual harm in calling out how companies might get around it and why is that harm so bad that some users want to try and shut down posters who are pointing it out?

I'm not accusing him of shilling or defending - my post was calling into question his logic and what seemed to be a fallacy. Saying "here's a possible outcome that isn't good" is very different from his "this is guaranteed to happen". You'll notice he never responded to my post.

Ruvan22 posted...

I'm not accusing him of shilling or defending - my post was calling into question his logic and what seemed to be a fallacy. Saying "here's a possible outcome that isn't good" is very different from his "this is guaranteed to happen". You'll notice he never responded to my post.

Right, I was more responding to the earlier user accusing him of shilling within the context of your post. I tried to avoid use of the word "you" specifically to make sure you didn't think I was saying you were specifically calling him a shill. Sorry for any confusion.

You all voted for this

s0nicfan posted...

I definitely wasn't ignoring it, but allowing Medicare to negotiate drug prices doesn't actually bring down the deficit unless you also reduce the budget for Medicare by the amount it's going to save.

If it brings spending down to what there's actually money for, instead of some arbitrary amount that doesn't really care how much red ink is involved, then yes, this brings down the deficit.

The federal government spends about $1.25 for every dollar it actually takes in, or likely more over the past couple years or so. That has to stop.

Once in a lifetime crisis, I'm not really keen on tightening the purse strings rn thanks

Doom_Art posted...

I'm not really keen on tightening the purse strings rn thanks

Keynesian theory tells us that deficit spending is what you do in "ohshit" times. But, you need actual fiscal responsibility in the good times to get that to work.
Otherwise, you end up like Greece, which had to cut back during a super-oh-shit time.

Questionmarktarius posted...

you need actual fiscal responsibility in the good times

these aren't good times

Doom_Art posted...

these aren't good times

...and we definitely don't want Greece-times out of this.

I actually don't have an issue with people bringing up possible externalities to bills like this...
It's just that honestly, I just don't believe that it's a concern these people have. Fake criticism. As in, even if the bill was perfectly written to not allow loopholes, the argument would then just shift to "taxes on corporations are just taxes on people!"
Like, the point is, you just don't want the taxes.

I'm just being cynical though,I know.
I get that someone might not want the bill, but since it will be inevitable, they just want the best written bill possible.

Questionmarktarius posted...

...and we definitely don't want Greece-times out of this.

okay?

emblem-man posted...

Like, the point is, you just don't want the taxes.

I mean that's really what it all boils down to. Temporarily embarrassed millionaires terrified they'll be taxed into the poor house lol

Doom_Art posted...

okay?

The closest we've come to actual fiscal responsibility was the dotcom boom during the Clinton era.
But, instead of reducing the debt or actually balancing the budget, it ended up being a band-aid on decades of IOUs the treasury sucked out of FICA.

More recently, Our Orange Overlord could have plausibly balanced the budget in the pre-covid heyday, but instead went crazy-go-nuts on even more deficit spending.

That's how you end up with Greece.

doesn't pretty much every major nation regularly operate on deficit spending

Questionmarktarius posted...

If it brings spending down to what there's actually money for, instead of some arbitrary amount that doesn't really care how much red ink is involved, then yes, this brings down the deficit.

The federal government spends about $1.25 for every dollar it actually takes in, or likely more over the past couple years or so. That has to stop.

The problem is that budgets are "use it or lose it" by fiscal year, so unless you reduce the allocated funding for Medicare in a future budget, those departments will find new things to spend the "saved" money on because anything left unspent is "wasted" and people will actually get in trouble at their jobs for letting that money get sent back. You need to reduce the cap as well as reduce spending to match in parallel or you'll end up spending no less than you would have before.

EDIT: but again, allowing for price negotiation for medicare is great. I just don't think this bill actually has all the provisions necessary to convert that savings into an actual deficit reduction.

Doom_Art posted...

these aren't good times

tbh these are good times

s0nicfan posted...

unless you reduce the allocated funding for Medicare in a future budget

medicare's funding comes both from general revenue (43%) and the payroll tax

the former is fed in to it as operational expenses require it; the latter is explicitly allocated. this isn't done on federal budgets that congress approves each year.

its funding is automatically reduced when operational expenses are cut because the funding mechanism is based on operational needs

what you're describing--use it or lose it funding allocation--is not possible because that's specifically a mechanism used in discretional spending, which medicare is not. it's mostly seen in DoD and DoE spending.