The two-year anniversary of the Inflation Reduction Act is this week on August 16th. Its name suggests that it would lower painful inflation for Americans that is ravaging families’ ability to feed and house their kids.
Two years later, we have data to tell us whether the Inflation Reduction Act (IRA) achieved its goal.
Everyone loves the party game/icebreaker “two truths and a lie.”
Can you identify which of the following is NOT true about inflation in America since the passage of the Inflation Reduction Act?
A. Government spending in the Inflation Reduction Act helped reduce inflation.
B. Inflation has increased in America in years following the Inflation Reduction Act
C. Energy provisions in the Inflation Reduction Act lowered U.S. energy prices.
Let’s take these statements one at a time:
A. FALSE! Numerous economists, including Barack Obama’s former economist Larry Summers, say that increased government spending has contributed to rising inflation.
Jobs figures in the time since the IRA launched, show that government hiring has grown faster than productive industries like manufacturing, mining, construction, and wholesaling.
This artificial demand for government employment is not sustainable because it is paid for by productive activity from taxpayers and/or layered onto the backs of future taxpayers in the form of new government debt. Without true, sustainable job growth from real jobs–not jobs artificially propped up by IRA government spending–America will remain on a stagnating economic path.
B. TRUTH! Inflation is still high, even two years after the Inflation Reduction Act’s passage. Two years later, households are suffering under an effective pay cut due to inflation. Yet given the more recent downturn in inflation, the Biden-Harris White House has far less reason to boast than it claims.
The consumer price index (CPI) grew by 2.97% at June 1, which is a drop from previous months, but still well above the Federal Reserve’s 2% target. More importantly, a sharper measure of inflation is the median consumer price index, or median CPI. That was 4.15% at June 1–significantly higher than the standard CPI.
The Federal Reserve Bank of Cleveland explains why this median CPI metric is more useful, and why it explains why so many families are still suffering: “According to research from the Cleveland Fed, the median CPI provides a better signal of the underlying inflation trend than either the all-items CPI or the CPI excluding food and energy. The median CPI is even better at forecasting PCE inflation in the near and longer term than the core PCE price index.”
C. FALSE! Energy prices have increased since the passage of The Inflation Reduction Act. The IRA is supposedly the Biden-Harris administration’s signature legislative achievement, and it was paid for exorbitant new “green energy” and electric vehicles subsidies by raiding Medicare Part D Prescription drug savings fund and doubling the size of the IRS. Americans were promised that the “Green New Deal” elements amounted to the most significant climate change-related legislation in U.S. history.
Nationwide, electricity prices surged 7% between when the Inflation Reduction Act passed in August 2022 and June 2024 (most recent data), according to the U.S. electricity pricing in the Federal Reserve’s tracker of Consumer Price Index for All Urban Consumers.
The Biden administration has squandered our Strategic Petroleum Reserves to pay for the inflation-inducing energy policies of the IRA.
Bottom line: Contrary to media and progressive claims, the Inflation Reduction Act is poorly named as it contributed to rising inflation hurting families. It’s no wonder then that only 23% of Americans say we are headed on “the right track” while 73% say we’re on the wrong track, according to new survey data from Hart Research.
This is 1 point higher than the 72% who said the country was on the wrong track in 2022, the year the IRA passed. We were promised things would get better under the IRA, but today’s number is the lowest confidence recording since the 2008 financial crisis, a sad commentary on the negative impact of the IRA.