President Biden Doesn’t Get Enough Credit for Legislative Victories.

Joe Biden is no Donald Trump when it comes to self-promotion. With his low approval ratings and fellow Democrats keeping their distance, you can be forgiven for forgetting that Joe Biden is our President. Donald Trump continues to suck all of the oxygen out of the room, on and off the campaign trail. The recovery of classified documents from Mar-a-Lago has dominated the headlines for weeks, while another major piece of legislation signed into law by the President gets pushed to the back pages.
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As Trump promotes far-right candidates in the upcoming mid-term elections, and the Republican Party is apoplectic about the “raid” on Mar-a-Lago, President Biden quietly pulls off another major legislative victory. 

Legislative Victories:

• Inflation Reduction Act of 2022: On August 16, 2022, the President signed into law the “Inflation Reduction Act of 2022”, capping off a very productive August. We will explore this new law in further detail below.
• PACT Act:  Earlier in the month the President signed into law the “PACT Act”,  a significant expansion of benefits and services for veterans exposed to toxic materials while serving our country.
• CHIPS and Science Act of 2022:  Also signed into law  this month, the “CHIPS and Science Act of 2022”,  is a $280 billion investment to spur American-made semiconductors, tackle supply chain vulnerabilities, and jumpstart scientific research and technological leadership.
• Bipartisan Safer Communities Act: Signed into law in June, the “Bipartisan Safer Communities Act”, is the most significant piece of gun reform legislation passed in decades. I wrote about this new law in last month’s post: “One Small Step Forward and a Giant Step Backwards for Gun Reform”. 
• Infrastructure Investment and Jobs Act: Signed into law last November, the “Infrastructure Investment and Jobs Act” is perhaps President Biden’s most important piece of legislation. The $1.9 trillion bill was a long overdue investment in the nation’s crumbling infrastructure. The need for an infrastructure bill was something the Republicans in Congress promoted for years, but never managed to get off the ground. 

​Time for Action: Now it is time for the President and the Democrat Party to rally around their latest legislative victory and regain the narrative from the Republicans. The Republicans see the Inflation Reduction Act as a Democrat victory and are desperate to somehow turn it against the President. It is true that calling the bill the “Inflation Reduction Act” is a little disingenuous, but there is a lot of good in this bill. Let’s take a closer look at it now. 

​Inflation Reduction Act of 2022: This bill should have been titled the “Healthcare, Tax and Climate Bill of 2022”, because that is really what it is. The details of this bill fill over 700 pages and the costs are projected out over ten fiscal years. The $740 billion price tag attached to this bill is confusing and really doesn’t mean much to the average American. Democrat legislators claim that the approximately $440 billion in new spending will be more than offset by new tax hikes on wealthy corporations, reduced drug prices paid by Medicare, and increased taxes recovered by the IRS.

If this bill actually brings in more federal revenue than it costs, then yes, it will reduce federal spending and help to lower inflation. But I can’t find any analyst who really believes that this bill will lower inflation. The best that we can hope for is that it pays for itself, and doesn’t exacerbate inflation.

Here are some of the major provisions of the bill:

New Spending on Clean Energy and Combating Climate Change:  If fully enacted, these initiatives are projected to reduce carbon emissions in the U.S. by up to 40% by 2030. The programs that fall under this category will cost approximately $375 billion over ten years, and fall into four major parts.

• Clean Energy Credits: New tax credits to incentivize companies to produce renewable sources of energy, such as solar, wind, geothermal, and hydroelectric.
• Rebates for Electric Vehicles: These credits start in 2023 and are applied at the point of purchase for certain new and used electric vehicles. The tax credits are up to $7,500 for new electric vehicles, and up to $4,000 for previously owned electric vehicles. Plug-in hybrids will receive a partial credit.
• Residential Clean Energy Credits: Tax credits of up to 30% to offset the cost to homeowners for solar, energy efficient windows and doors, insulation, furnaces, air conditioners, water heaters, electric cook tops, and more.
• R+D and Other Special Programs: This category will provide tax credits for everything from reducing methane production to developing new nuclear and carbon capture technologies.

Reducing carbon emissions and combating climate change are very popular with the American people. Voting against this bill has made the Republicans in Congress more vulnerable in the mid-term elections.  

​Healthcare Spending:

• Allowing Medicare to Negotiate Drug Prices: For the first time, Medicare will be allowed to negotiate with pharmaceutical companies on some prescription drug prices. The program doesn’t take effect until 2026 and will involve only ten drugs. This will be increased to fifteen drugs in 2027, and twenty drugs in 2029. This is a meager start and doesn’t help the majority of Americans who don’t currently qualify for Medicare. But it sets a very important precedent. This provision of the new legislation is very popular with seniors, an important voting-block, which makes it likely that the program will be expanded in the future.
• Caps Out-of-Pocket Prescription Drug Costs: Starting in 2025, out-of-pocket costs of prescription drugs will be capped at $2,000 per year for seniors who purchase their drugs through Medicare. This has the potential to save seniors with cancer or other serious illnesses, tens of thousands of dollars a year.
• Drug Price Increase Limits: Pharmaceutical companies will be forced to pay a rebate to Medicare if drug prices increase faster than inflation.
• Free Vaccines: Starting in 2023, vaccines will be provided for free to seniors on Medicare.
• Insulin Price Limits: Starting in 2023, the share that Medicare patients pay per month for insulin will be limited to $35.
• Extended Health Insurance Subsidies: Subsidies for low and middle- income people who purchase health insurance on one of the Affordable Care Act’s exchanges, will be extended for three years. This will save approximately 13 million Americans hundreds of dollars a month.

The healthcare spending portion of the Inflation Reduction Act is a win for the American people, and is a win for the Biden agenda. It is something that the Democrats can campaign on and use against the Republicans, who mostly opposed it.

The Republicans have backed themselves into a corner by being on the side of the pharmaceutical industry and against lower prescription drug prices for seniors. It is hypocritical to say that you are the party of lower government spending, but refuse to allow the Medicare program to lower its costs through negotiations. 

Additional IRS Funding: The bill will invest $80 billion over ten years to begin to rebuild the Internal Revenue Service after years of underfunding. If you have ever filed a paper tax return or tried to get an IRS representative on the phone, you understand just how dysfunctional the IRS has become. I have written extensively on this topic in my blog “The IRS Needs Our Love, Not Our Hate”. 

A significant portion of the new funding will help upgrade phone and computer systems, and ease the administrative logjams now plaguing the IRS. The IRS will also be replacing existing agents who are retiring in droves, and adding new agents to its ranks. I see this is as a positive development. There are hundreds of billions of tax dollars that go uncollected each year due to severe staff shortages. It takes a lot of staff resources to audit and investigate large corporations, complex entities, and cash-based businesses.

Don’t fall for the Republican scare tactics flooding the air waves and social media about an army of IRS agents getting ready to breakdown your door. The new funding will focus on tax cheats that have the potential to return large sums of money to the Treasury. If you are an honest taxpayer and earn less than $400,000 a year, your chances of hearing from the IRS are remote.

The Republicans are running scared because of the popularity of many of the provisions in the Inflation Reduction Act. They are trying to paint IRS agents as jackbooted thugs, at the beck and call of an out-of- control Biden administration. 

​15% Minimum Corporate Income Tax: The new minimum tax will apply to a limited number of large publicly held corporations with over a $1 billion in annual profits. There are a lot of ways for companies to manipulate profits, and therefore, what they report to the IRS for tax purposes. To get around this problem, the 15% minimum tax will apply to the book income, or what the company reports to its shareholders. This provision of the bill is expected to bring in approximately $258 billion in new revenue over ten years. 

​1% Excise Tax on Stock Buybacks: This new corporate tax will apply to the value of a company’s own shares of stock that it repurchases (buybacks). Stock buybacks are often used by publicly held companies to increase the stock price of the remaining shares. This provision of the bill is expected to bring in approximately $74 billion over ten years.

The Inflation Reduction Act of 2022 has a lot of good provisions, and will be paying dividends for years to come. One of them will probably not be reducing inflation. But with luck, most of the new spending provisions will be offset by new corporate taxes, higher IRS collections, and lower Medicare spending. The new law will empower the Medicare agency like never before, and demonstrates that the government has the power to do something about exorbitant health care costs.
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While Donald Trump’s legal troubles mount, and he paints himself as the victim of a partisan witch hunt, Joe Biden has achieved real legislative victories which will benefit current and future Americans. It’s time for Joe Biden to become “cheerleader-in-chief” for his legislative victories. Along with his fellow Democrats, he needs to take to the airwaves and campaign trail to tout his accomplishments. 

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Thanks,
Armchair American