President Biden Signs Inflation Reduction Act, which Aims to Reduce Costs while Fighting Climate Change

By Yehudit Garmaise

President Joe Biden signed The Inflation Reduction Act (IRA) Tuesday, which he claims will stop inflation in ways that Americans will be able to feel right away, but many economists say the effects will take a while, if they can reduce inflation at all. 

Biden connected his goal of reducing inflation with his intent to slow climate change by providing tax credits for energy-related home improvements and electric vehicles.

Many of the bill’s measures unrealistically require Americans, who are stressed by costs at grocery stores and other everyday items, to undertake large renovation projects.

Energy Secretary Jennifer Granholm said that Americans can lower the fuel costs in their homes “immediately,” by installing energy-efficient windows, heat pumps, and newer models of appliances, and then receiving 30% tax credits.

Another tax credit encourages Americans to install solar panels on their roofs.

The bill also seeks to reduce prescription drug costs, which will please seniors, who comprise two-thirds of voters, as the midterm elections loom.

For instance, starting next year, the bill will limit to $35 a month the payments of Medicare Part D beneficiaries who need insulin.

In 2024, the bill caps the costs of all out-of-pocket drug costs to $4,000 annually.

By 2025, the bill aims to further lower that maximum cap to $2,000 a year.  

The bill also provided $64 billion to extend, for three more years, healthcare payments that the 2010 Affordable Care Act had scheduled to end this fall. 

"There are 13 million Americans who, starting this fall, will benefit from lower health care premiums as a result of this bill," Brian Deese, Biden’s top economic adviser, said. "Insurers will be sending out letters in October of this year and because of this legislation people will see lower premiums in those letters."

Interestingly, the bill’s least climate-friendly measure is the one that is the most likely to reduce inflation, said Marc Goldwein, a top economist at the Committee for a Responsible Federal Budget.

The measure, which is backed by traditional energy producers and Republicans alike, opens up more areas in which oil companies can drill.

The president hopes to balance out the increased drilling by rewarding oil producers who adopt “carbon capture” technology, which captures carbon dioxide before it enters the atmosphere.