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There are many good things in the climate and health care bill passed by Senate Democrats over the weekend – funding for cleaner energy and mechanisms to reduce prescription drug spending, for example.
But, frankly, the Inflation Reduction Act, which was passed with Vice President Kamala Harris casting the decisive 51st vote, is being overhyped. What are being touted as an “unprecedented investment in clean energy” and “a transformational investment” are mostly tax credits to encourage the purchase of electric vehicles and to spur the development of cleaner energy.
These are important, of course, but these tax credits won’t do much to help low-income Americans and they are not as direct as setting targets to lower greenhouse gas emissions, for example. We realize that getting limits on emissions through this Senate would likely be impossible, but that doesn’t mean that we can’t be clear-eyed about the shortcomings of the Inflation Reduction Act, which Sen. Angus King voted for and Sen. Susan Collins voted against.
Electric vehicles are already big sellers, yet the bill contains $36 billion to incentivize the purchase of more electric vehicles. Consumers may be eligible for a $7,500 tax credit for a new EV or $4,000 for the purchase of a new one. There’s a big caveat: to qualify for the credits, the cars can’t be made, beginning in 2025, with batteries and some other materials from China and other countries lacking free-trade agreements with the U.S. This threshold, which West Virginia Sen. Manchin pushed as a way to boost domestic production, could be impossible to meet, automakers warn, as reported by the Washington Post.
There are also tax incentives and rebates for the residential installation of heat pumps and solar panels in the bill. On the production side, the bill contains $44 billion for tax credits to promote wind, solar, battery storage and hydrogen technologies. Such credits will now last a decade, rather than the current two years, to increase certainty for developers.
But, in part to win the support of Manchin, who long opposed a larger, more comprehensive White House-backed spending bill, Democratic leadership pledged to mandate more domestic oil and gas drilling and to streamline some fossil fuel pipelines. These measures fall outside of the scope of the recently passed bill and would require future legislation.
Likewise, the health care aspects of the bill are also muted. We have long pushed for Medicare to negotiate drug prices, so this is a good provision. But, it is unclear if lower drug prices – which won’t start for four years – will also flow to Americans who aren’t over 65.
Capping the price of insulin is also good news. But this provision also only applies to those 65 and older, because the Senate parliamentarian said that a broader price cap couldn’t be included in this reconciliation measure. Democrats left it in, but Republicans had enough votes to force its removal. Collins voted with six of her Republican colleagues to allow the broader insulin price cap to remain in the bill.
Extending subsidies in the Affordable Care Act for three more years is an unabashed win for the millions of Americans who buy their health insurance through the ACA.
The mechanisms to pay for the bill, including hiring more IRS agents to catch tax cheats and a corporate minimum tax, seem a bit speculative.
America needs to reduce its carbon emissions and to lower health care costs. The Inflation Reduction Act will help, but it is far from a full solution to these problems for most Americans.
