Divisions on full show in spending vote
While $430b bill scrapes through Senate, critics talk of hit to jobs in US
A deadlock-breaking vote enabling the US Senate’s approval on Sunday of the Inflation Reduction Act, which commits funds to climate initiatives among other goals, once again highlights the political divisions in the United States.
After 16 hours of debate at the weekend, the $430 billion-spending bill passed only when Vice-President Kamala Harris cast her vote to break a 50-50 Senate tie. All 50 Republicans opposed the bill, which is also expected to raise about $740 billion in new revenue.
“The Senate is making history. I am confident the Inflation Reduction Act will endure as one of the defining legislative measures of the 21st century,” said Senate Majority Leader Chuck Schumer, a New York Democrat.
However, Senate Minority Leader Mitch McConnell, a Kentucky Republican, gave a starkly different view that highlights the nation’s partisan divide. “Democrats have already robbed American families once through inflation, and now their solution is to rob American families a second time,” McConnell said.
He said spending and tax increases in the legislation would eliminate jobs while having an insignificant impact on inflation and climate change.
McConnell’s concerns were largely shared by the Tax Foundation, a think tank, which estimates that the act will “reduce long-run economic output by about 0.1 percent and eliminate about 30,000 full-time equivalent jobs in the United States”.
The House of Representatives is expected to pass the bill on Friday and send it to US President Joe Biden for his signature.
“Today, Senate Democrats sided with American families over special interests, voting to lower the cost of prescription drugs, health insurance, and everyday energy costs and reduce the deficit, while making the wealthiest corporations finally pay their fair share,” Biden said in a statement on the legislation, which is a slimmed-down version of his Build Back Better plan. That social spending package failed to get through Congress several months ago.
The vote gave the White House much-needed good news as the president’s sinking approval ratings cast a shadow on the Democratic Party’s prospects in the congressional midterm elections in November.
But on the supposed inflationfighting goals of the legislation, Moody’s Analytics chief economist Mark Zandi has said the legislation would lower the benchmark Consumer Price Index by a mere 0.33 percent by 2031. US inflation hit a record high of 9.1 percent in June.
Democrats approved the bill using a legislative procedure called reconciliation, which allows budget-related legislation to avoid the 100-seat chamber’s 60-vote threshold for most bills and pass by a simple majority.
Energy in focus
The legislation will result in investments of $369 billion over 10 years in tax credits and incentives to support wind and solar power and electric vehicles, as well as emerging technologies such as carbon capture and storage, and low-emissions hydrogen, The New York Times reported.
The tax credits include $30 billion to increase the production of solar panels, wind turbines, batteries and critical minerals processing, $10 billion to build facilities for the manufacture of electric vehicles and solar panels, and $500 million under the Defense Production Act for heat pumps and critical minerals processing, the newspaper reported.
The Times reported that the step would help the US cut greenhouse gas emissions about 40 percent below 2005 levels by the end of this decade.
About $300 billion of the funds raised by the legislation would go toward deficit reduction. The legislation would be funded with a 15 percent minimum tax on a handful of corporations with yearly profits above $1 billion, and a 1 percent tax on companies that repurchase their own stock. It also would bolster Internal Revenue Service tax collections and increase government savings from lower drug costs.
Senator Ben Cardin, a Maryland Democrat, told the Fox News Sunday program: “The auditing is going to be focused on those with high incomes, the large corporations, et cetera. So there’s no reason to be fearful.”