The bill, titled the “Inflation Reduction Act,” resurrected parts of Biden’s massive “Build Back Better” agenda after Sen. Joe Manchin (D-WV) agreed with Senate Majority Leader Chuck Schumer (D-NY) on the package last week. Sinema was the last Democrat to hold out on the bill due to its carried tax increase provision before an agreement was made Thursday to remove the provision.
“We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate’s budget reconciliation legislation,” Sinema said, according to Fox News. “Subject to the Parliamentarian’s review, I’ll move forward.”
Schumer said he plans on moving forward with the reconciliation bill on Saturday. Democrats will use the budget reconciliation process to bypass the Senate filibuster and advance the bill along party lines, potentially giving the party a much-needed legislative victory before a midterm election where Democrats are expected to face a “red wave.”
The spending package includes tax increases on billion-dollar corporations and the largest legislative climate spending in U.S. history at $369 billion. Manchin’s surprising agreement to the bill came after he shot down Democrat attempts at pushing through Biden’s agenda, and reportedly told Democratic leaders he would “unequivocally” refuse to support legislation related to climate change and tax increases.
Manchin claims that reconciling with Democrats on this package will help the country fight inflation, but findings from the Penn Wharton Budget Model now bring that claim into question. If signed into law, the “Inflation Reduction Act” could result in the exact opposite of what its name suggests, as it is estimated to slightly increase inflation over the next two years, according to the Penn Wharton study.
“The Act would very slightly increase inflation until 2024 and decrease inflation thereafter. These point estimates are statistically indistinguishable from zero, thereby indicating low confidence that the legislation will have any impact on inflation,” the Penn Wharton Budget Model found.
The study went on to explain that inflation could rise by 0.05% over the next two years before a marginal drop of 0.25% “by the late 2020s,” rendering the spending package basically ineffective at accomplishing its purpose.
Republicans on the Senate Finance Committee also released data last week from the nonpartisan Joint Committee on Taxation (JCT) that showed that taxes will increase in calendar year 2023 for everyone under the plan except those making between $10,000 and $30,000 per year.
Ryan Saavedra contributed to this report.