Inaptly named Inflation Reduction Act may come back to hurt Democrats in midterms

The Biden administration and Democrats on Capitol Hill have again defied basic logic in arguing that by passing the Inflation Reduction Act, inflation will decline from its current rate of 8.5 percent. 

For the low, low price of $740 billion, the U.S. is projected to see its inflation rate stay more or less the same over the next two years, according to the Congressional Budget Office. Meanwhile, White House senior adviser Jared Bernstein, citing a Moody’s estimate, says the massive new spending bill will take inflation down by just a third of a point.

And that’s the optimistic estimate from a White House that has gotten it wrong or outright misled the public about inflation time after time. Last summer, we were promised it was “transitory”, a blip that would come and go. Then we were told it was all Russian President Vladimir Putin’s fault for invading Ukraine in February, despite that inflation had been rising for a year prior to Russian boots entering the country.

The hashtag #PutinPriceHike was laughable. But sure, let’s trust the math around spending hundreds of billions of dollars while cheering inflation dropping by maybe one-third of a point and spending hundreds of billions of dollars to create such a measly result. 

Sounding the alarm, 230 respected economists penned a letter last week explaining why the Inflation Reduction Act will not reduce inflation but rather increase it. The experts include former President of the Federal Reserve Board Robert Heller, former Directors of the Office of Management and Budget Jim Miller and Robert Heller, Nobel laureate Vernon Smith, former Chair of the Council of Economic Advisers Kevin Hassett, along with professors from the University of Chicago, Princeton, Duke, Columbia and Notre Dame, among others. 

In the letter sent to leaders of both parties, the economists conclude that the “inaptly named bill” would “create immediate inflationary pressures by boosting demand, while the supply-side tax hikes would constrain supply by discouraging investment and draining the private sector of much-needed resources.” The letter adds that the bill puts the U.S. economy at a dangerous crossroads. 

When confronted by the economists’ letter, Senate Majority Leader Chuck Schumer (D-N.Y.) dismissed it without explaining exactly where they were wrong. 

“They’re wrong. …I don’t know who that list was…it’s as plain as the nose on your face,” Schumer told reporters when asked last week. 

On cue, many in the media hailed the bill as a huge win for the Democratic Party and President Biden. 

Bloomberg Editorial Board: “New Budget Deal Would Be a Big Win for Congress — and the Country.”

NPR: “Inflation and climate change tackled in new Senate deal that Biden calls ‘historic.’”

Associated Press: “Dems seem headed for climate, health win after ups and downs.”

The AP headline is especially interesting because of what it doesn’t mention: inflation reduction, which is literally what the act is named for.

In a related story, a recent Monmouth University poll shows that nearly two-thirds of voters – 63 percent – say “inflation, gas prices, the economy or everyday bills/groceries is their family’s top concern.”

So, when Election Day comes, will the Inflation Reduction Act turn the tide for the Blue Team? That all depends on whether inflation appears to be coming down and gas prices continue to fall. 

On the latter, energy experts warn that gas prices could sharply rise ahead of the midterms. 

“The price concerns are tied to the timeline for stricter sanctions on Russia that will further choke the global oil supply,” reads a July Washington Post report. “J.P. Morgan has warned that in a worst-case scenario — in which Russia retaliates by shutting down its supply altogether — the price of oil could jump to $380 per barrel, more than triple what it is today.”

Kiplinger, a non-partisan business forecaster, sees the inflation rate staying close to 9 percent for the remainder of the year, which will likely keep it as a top issue in the midterms. 

As for public perception of the Inflation Reduction Act at its core, it ain’t good. A YouGov poll asked: Do you think that this bill will increase or decrease inflation? Just 12 percent of adults said it will decrease inflation, while 23 percent said it won’t change anything. The same poll found that only 20 percent of those polled are Republicans. 

The Democrats tried naming a bill Build Back Better. And when that failed, they called it the Inflation Reduction Act. There seems to be a reflex in Washington to use names to market legislation that have little or nothing to do with the content of the legislation. And when Democrats do it, they know a mostly-friendly media won’t call them on it. But if the Inflation Reduction Act doesn’t actually reduce inflation, voters just might.

Joe Concha is a media and politics columnist.