Aaliyah Fooks
On August 16th 2022, US President Joe Biden signed the Inflation Reduction Act (IRA) into law. The $700bn (£579bn) bill targets climate change and rising healthcare costs.
This follows the August 12th decision in the House, approved on a party-line 220-207 vote. The bill passed through the Senate days earlier, with Vice President Kamala Harris breaking a 50-50 tie along party lines. Unsurprisingly, as the bill was a Democrat initiative, all Democrats voted in favour, whilst all Republicans voted against it.
The 51-50 vote was along party lines, with Vice President Kamala Harris breaking a tie. https://t.co/ERVZNniSqF
— CNN (@CNN) May 11, 2022
- Measures to make good on decades of congressional promises to curb the price of prescription drugs.
- A $375bn investment to fight climate change—the most significant federal investment in the issue in history.
- A projected reduction in US emissions by up to 44 percent by 2030.
- Tax incentives for firms and businesses to invest in renewable energy, as well as domestic rebates for investment in EVs.
- Negotiation for lower prices for some prescription medicines provided under the Medicare health insurance programme for those aged over 65.
The measures are funded through new taxes on large companies and stepped-up IRS enforcement of wealthy individuals and entities. These taxes will surpass the monies needed for the bill, and the surplus will reduce the federal deficit.
Criticisms and opposition
Key economic claims about the legislation have been under scrutiny. Republican Senate leader Mitch McConnell said the legislation “means higher taxes, higher energy bills, and aggressive IRS [tax] audits”.
The bill sets a minimum 15 percent tax for corporations, and Democrats have pledged it will entail no tax hikes for those with incomes below $400,000 a year. But an analysis of the legislation by the Congressional Budget Office said Americans earning less than $400,000 a year would end up paying an additional $20bn in taxes.
Republicans say the legislation’s new business taxes will increase prices, worsening its surging inflation rate, currently at its highest since 1981. Though Democrats have labelled the measure the Inflation Reduction Act, nonpartisan analysts say it will have a barely perceptible impact on prices.
“Biden pointed to the bill as proof that democracy—and the Democrats—can still deliver for voters in America”
While the climate spending is unprecedented, many of its changes will not go into effect for at least two more years, leaving questions about how the new programmes will work.
Several proposals were scrapped from the bill in the final weeks, including capping the price of the diabetes medicine insulin. Insulin in the US costs an average of $98.70 per unit, compared with $7.52 in the UK.
Walking back the former President’s actions
After former president Donald Trump took steps away from climate action, “it returns the US to a position of leadership”, says Michael Mann, a climate scientist at the University of Pennsylvania in Philadelphia. “It helps create a global climate for action”.
That is because the 2015 Paris climate agreement—which aims to limit the global average temperature rise to 1.5°C above pre-industrial levels—works on the basis of ‘reciprocal action’. That means that governments take the actions of other nations into account when setting their climate agendas.
“Despite their excitement over the legislation, scientists say the United States must do more”
If Joe Biden hadn’t raised the bar with this legislation, many countries could have eased off their own commitments by pointing to the inaction of the US despite its big responsibility.
Political favour and mid-term elections
A flagship of Mr Biden’s agenda, the bill could provide a boost ahead of the mid-term elections. Voters casting their ballots in November will decide whether Biden’s Democrats retain control of Congress for two more years. The president hailed the bill as he signed it on Tuesday as the “final piece” of his domestic agenda.
Biden pointed to the bill as proof that democracy—and the Democrats—can still deliver for voters in America. “In this historic moment, Democrats sided with the American people, and every single Republican in the Congress sided with the special interests in this vote”, Biden said.
The signing caps a spurt of legislative productivity for Biden and Congress, who have approved legislation on veterans’ benefits, the semiconductor industry and gun checks for young buyers in just three months. The President and lawmakers have also responded to Russia’s invasion of Ukraine and overwhelmingly supported NATO membership for Sweden and Finland.
With Joe Biden’s approval rating lagging, Democrats are hoping that this string of successes will jump-start their chances of maintaining control in Washington in the November midterms.
Investment into climate finance
The Inflation Reduction Act of 2022 invests billions to address the climate crisis.
I'm talking about rebates for sustainable choices, tax credits for electric vehicles, investments in environmental justice. All while lowering costs and creating thousands of clean energy jobs.
— President Biden (@POTUS) July 29, 2022
Despite their excitement over the legislation, scientists say the United States must do more. Even if all nations hit their climate targets, the global temperature will rise above the 1.5°C mark and low and lower-middle-income nations would be the most affected.
The United States needs to help deliver the climate finance promised to less wealthy nations in the Paris accord. High-income nations pledged to give $100 billion a year until 2025 to low-income ones, but the money has not yet materialised.
Is it enough?
The legislation would cut US greenhouse-gas emissions by about 30–40 percent below 2005 levels by 2030, scientists estimate, bringing the country closer to delivering on its pledge of a 50 percent reduction, which Biden made last year. This signals to other nations that the United States, a major emitter of greenhouse gases, is on board to address climate change.
However, despite being dubbed the ‘biggest step forward on climate ever’, scientists worry about the timeline of the bill. Analysis by scientists with the Climate Action Tracker says the bill will reduce future global warming by “not a lot, but not insignificantly either”.
Scientists around the world welcome the legislation, while acknowledging that more work is needed to counter global warming.
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Featured image courtesy of Prachatai on Flickr. No changes were made to this image. Image license can be found here.
