Economists say reconciliation bill will lower prices for all Americans

by Jared Gans - 08/02/22 9:12 AM ET

A man shops at a supermarket on Wednesday, July 27, 2022, in New York. The Federal Reserve on Wednesday raised its benchmark interest rate by a hefty three-quarters of a point for a second straight time in its most aggressive drive in three decades to tame high inflation. The Fed is tightening credit even while the economy has begun to slow, thereby heightening the risk that its rate hikes will cause a recession later this year or next. (AP Photo/Andres Kudacki)

A group of more than 120 economists is backing the climate, health care and tax package that Senate Majority Leader Charles Schumer (D-N.Y.) will bring to a vote this week.

The economists said in a letter addressed to Schumer, Speaker Nancy Pelosi (D-Calif.), Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader Kevin McCarthy (R-Calif.) that the Inflation Reduction Act will reduce prices for American families while making “crucial” investments in energy and health care.

They added that the legislation will quickly and noticeably lower health care costs by allowing Medicare to directly negotiate drug prices with pharmaceutical companies and capping out-of-pocket prescription drug costs at $2,000. And it will lower health insurance prices for 13 million Americans in expanding the provisions of the Affordable Care Act, they said.

The economists also said in the letter, first reported by CNN, that the investments the legislation would make would be “more than fully paid for” since the revenue to finance them would come from wealthy individuals and corporations.

The bill would raise $739 billion in revenue from a range of provisions, including a 15 percent corporate minimum tax, stronger IRS enforcement of tax law and closing loopholes.

“This proposal addresses some of the country’s biggest challenges at a significant scale,” the letter states. “And because it is deficit-reducing, it does so while putting downward pressure on inflation.”

The package would also make significant investments in climate programs, which Schumer and Sen. Joe Manchin (D-W.Va.) have said would reduce emissions by 40 percent by 2030, while devoting $300 billion to deficit reduction.

The economists said this would be the biggest step in fighting climate change yet and lower energy costs for families.

The signatories include Robert Rubin, a Treasury secretary under former President Clinton; Jack Lew, a Treasury secretary under former President Obama; and Mark Zandi, the chief economist for Moody’s Analytics, an economic research and consulting organization.

A Moody’s analysis found that the package will “nudge” inflation in the right direction and “meaningfully” address climate change.

Senate Republicans, meanwhile, have said the legislation would worsen inflation and raise taxes across the board.