Inflation Reduction Act aims to lower costs in multiple areas of the economy
A MARTINEZ, HOST:
Let's turn now to a top economic adviser to President Biden. Brian Deese is director of the National Economic Council.
Director, how exactly does the Inflation Reduction Act reduce inflation?
BRIAN DEESE: Well, it does it in two ways. The first is it lowers costs for families. And so millions of families out there who are thinking about how to make their monthly budget add up - it will lower prescription drug costs. It will lower health care premiums. And it will lower energy costs - what people pay on their utility bills or they pay for other things like how to get around. And the second thing it does is it lowers the deficit. By making the tax reforms that you were just discussing, it actually will bring down the federal deficit. And that will be complementary to what the Federal Reserve is trying to do on inflation. And that's why even Democrats and Republicans, former Treasury secretaries, economists across the board have said that this bill will make a positive impact on inflation while also tackling some of the biggest and longstanding issues facing our country, like prescription drugs and like tackling climate change.
MARTINEZ: When it comes to lowering those costs you mentioned and having an impact on inflation, as you mentioned, will that happen this year? When is that expected to be felt by Americans?
DEESE: Well, that's what's so important about the structure of this bill. Some of the elements will take place in impact right now. For example, there are 13 million Americans who this fall in just a couple of months are to see lower health care premiums as a result of this legislation. And in fact, this legislation will make it possible for millions more to actually gain health insurance as a result. People are going to feel that impact right now. And at the same time, it makes the kind of long-term investments in our energy security that we have been - we've failed to make as a country for a year.
And by doing that, it will help us build more reliable, more secure and cleaner energy here in the United States, increase the supply of energy. That will bring down costs for families not just in the short term, but over the course of multiple years as well. So this bill is designed to provide some relief on issues that matter to families right now, but also to tackle these longstanding problems. And I do want to underscore, it's been decades that people have tried to address the climate crisis in a way that increases our energy security. This bill will finally do that.
MARTINEZ: Director, then how are we supposed to square the Congressional Budget Office saying it's going to have little to no impact on inflation this year and Senator Chris Coons saying that Americans might not feel the bill's cost-saving effects this year or even next?
DEESE: Well, respectfully, I think you can look again at a wide range of assessments across the board. Former Treasury secretaries from Republican and Democratic administrations endorsed this bill because they believe it's the right economic prescription for our country. Hundreds of economists stood up and said, what we need right now in our economy is to provide working families a break. Bring the costs down that they face, and also bring costs down at the federal budget level as well.
And it is the case, as Senator Coons mentions - while some of the provisions will take effect immediately, like those health care premium reductions I was talking about, like the out-of-pocket cap that will go into place for people with chronic conditions - don't have to pay more than $2,000 a year on their prescription drugs, this bill also tackles the long-term issues that we face. And it doesn't shy away from the fact that to tackle climate change and increase energy security, we need to make a long-term commitment. And that's what this bill does.
MARTINEZ: So on climate change, the spending, about $370 billion - how will that be spent?
DEESE: Well, you can think about this in a couple of ways. The first is tax credits to families and businesses to go clean, to upgrade their own homes and businesses, to buy electric vehicles, to buy energy-efficient appliances, to help Americans actually save money while also reducing their emissions footprint. And second is tax credits to utilities and businesses for building the clean energy economy here in the United States. So that's for things like wind and solar, but also hydrogen, carbon capture and sequestration. And importantly, those tax credits are long term - that provides businesses the long term certainty they need to build those facilities here in the United States at prevailing wages, creating millions of jobs, and also positioning the United States to be a global leader in these innovations, these technologies that are going to need to be exported around the world if we can provide lower energy around the world and also fight climate change internationally.
MARTINEZ: Right. But as we heard from NPR's Deirdre Walsh, there's going to be also new leases for gas and oil production in that bill. So how does this bill get the U.S. closer to cutting global warming pollution in half by 2030 yet continue to allow for gas and oil production?
DEESE: Well, that structure of long-term tax incentives that I just mentioned - independent experts have confirmed that that will put us on a path to lower emissions by at least 40% by the end of this decade. And we believe with the additional actions that we can take, we are on track to hit the president's goal. This is the first time in decades that the United States has stepped up and passed legislation that would meet the moment on climate change, it would put us in a position where we can confidently say we will meet our climate goals. That's important for the country. It's important for families here in United States. But it's important for the world because, ultimately, we then need to bring that U.S. leadership globally and encourage other countries to take more action as well. But this bill will do that. It will meet the moment, and it will put us in a position to meet our goals.
MARTINEZ: And quickly, one other thing - Kyrsten Sinema agreed to support the measure in part because it left a tax break on certain investors that would have raised $14 billion. How can that money be recovered somewhere else?
DEESE: Well, the good news is the legislators yesterday figured it out. They put additional tax increases into the bill. Bottom line - this bill has a 15% minimum tax on corporations, a fair and balanced tax reform that will raise enough revenue to more than pay for all of the initiatives and reduce the deficit. So there's always a couple of moving pieces at the end. But they found a way to make it work with deficit reduction and the investments that we need.
MARTINEZ: Brian Deese is the director of the National Economic Council at the White House. Thank you very much.
DEESE: Thank you. Transcript provided by NPR, Copyright NPR.