A group of 230 respected economists has sent a letter to congressional leaders of both parties warning that the Democrats’ “Inflation Reduction Act” will actually increase inflation.
The letter was sent to Senate Majority Leader Chuck Schumer (D-NY), Senate Minority Leader Mitch McConnell (R-KY), House Speaker Nancy Pelosi (D-CA), and House Minority Leader Kevin McCarthy (R-CA).
In the letter, the economists wrote that the “inaptly named bill” would “would perpetuate the same fiscal policy errors that have helped precipitate the current troubling economic climate.”
“At a time when the economy already faces supply/demand imbalances, the residual effects of stimulus, labor shortages, and supply chain disruptions, this bill would compound rather than alleviate many of these problems,” the economists continued. “In particular, its $433 billion in proposed government spending would create immediate inflation pressures by boosting demand, which the supply-side tax hikes would constrain supply by discouraging investment draining the private sector of much-need resources.”
“Of particular concern, the corporate minimum tax would fall heavily on capital-intensive manufacturing, thereby undercutting efforts to shore up the resilience of America’s supply chains,” they added. “In addition, the prescription drug provisions would impose price controls that threaten healthcare innovation, creating a human health toll that would add to the financial woes that Americans are already experiencing. Even the one superficially appealing aspect of the bill–deficit reduction–is likely to prove illusory due to implausible spending phaseouts.”
“In summary we agree with the urgent need to reduce inflation, but the ‘Inflation Reduction Act of 2022’ is a misleading label applied to a bill that would likely achieve the exact opposite effect,” the economists concluded.
Among the 230 economists who wrote the letter were former President of the Federal Reserve Board Robert Heller, former Directors of the Office of Management and Budget Jim Miller and Robert Heller, Nobel laureate Vernon Smith, former Chair of the Council of Economic Advisers Kevin Hassett, along with professors from the University of Chicago, Princeton, Duke, Columbia and Notre Dame, and others.
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