The Inflation Reduction Act increases inflation

On July 28, President Joe Biden announced his "support for a historic agreement to fight inflation and lower costs for American families.  It's called the Inflation Reduction Act of 2022."

He added, "This is the strongest bill you can pass to lower inflation ... while reducing the burdens facing working-class and middle-class families."

So, according to Biden and Senate Democrats, who apparently live in a fantasy world, when the federal government increases taxes and spending, we are supposed to believe that inflation will be reduced.

Back in the real world, where one plus one still equals two, recessions are defined by two consecutive quarters of negative GDP growth, and indisputable laws like gravity and supply and demand reign supreme, the Inflation Reduction Act would actually increase inflation.

At least, that is the official assessment from the University of Pennsylvania's Penn Wharton Budget Model, which predicts, "The Act would very slightly increase inflation until 2024."

First, the bill proposes $433 billion in new spending programs, including $369 billion for "energy security and climate change" and $64 billion (at least) for more Obamacare subsidies.

Given the fact that energy prices have been soaring ever since Biden entered the Oval Office and declared war on American energy production, doubling down on green energy policies by throwing another $369 billion in subsidies for renewable energy is an unwise decision.  It will have no effect on bringing down the price of energy for the vast majority of Americans, which is one of the key drivers of inflation throughout the economy.

When inflation is rapidly snowballing with no end in sight, increasing government spending exacerbates the problem.

Inflation is commonly defined as too much money chasing too few goods and services.  When the federal government increases spending, the money supply increases.  When the money supply increases, the value of each dollar in circulation decreases.  Hence, inflation.  This is not rocket science.

Second, the bill calls for $739 billion in new taxes, including a 15-percent hike in the corporate minimum tax.  But here's the thing: corporations do not pay taxes; people do.  When the government raises taxes on corporations, people end up footing the bill via higher prices, lower wages, less availability of goods and services, and reduced research and development.

In other words, increasing taxes on corporations compounds inflationary pressures because it deters production; therefore, we get less in goods and services.

Incredibly, Sen. Joe Manchin (D-W.Va.) supports the Inflation Reduction Act, despite his repeated statements that he would not vote for any bill that would increase inflation.

In a recent press release in which he officially stated his support for the bill, Manchin writes, "Over the last year, leaders in Washington have ignored repeated warnings about the severe threat of inflation and the consequences of unprecedented domestic spending.  Despite these concerns and my calls to give the country time to fully realize the impacts of such historic levels of spending and our inflation crisis, many Democrats have continued to push for trillions more in spending to meet a political deadline.  As difficult as it is for some to hear, political calls to action that ignore the severity of the crises we face and will continue to face are a recipe for national disaster."

However, in the same press statement, Manchin also says, "I support the Inflation Reduction Act of 2022 because it provides a responsible path forward that is laser focused on solving our nation's major economic, energy and climate problems.  The question for my colleagues is whether they are willing to put their election politics aside and embrace the commonsense approach that the overwhelming majority of the American people support and will best serve the future of this nation."

I am confused.  In one sentence, Manchin is describing how spending more money is the last thing Washington should do in the midst of the worst inflationary crisis in more than 40 years.  Yet, at the same time, he supports spending another $433 billion on Obamacare and electric vehicle subsidies?

Unfortunately, it seems as though Manchin is not the inflation hawk we all assumed he was.  But all is not lost yet.  Sen. Kyrsten Sinema (D-Ariz.) has not weighed in on whether or not she will support the Inflation Reduction Act.  Let us hope that Sinema, unlike her Democratic colleagues, continues to reside in reality, wherein inflation is increased (not reduced) by more government spending and taxing, as opposed to the upside-down world inhabited by Biden, Manchin, and far too many more.

Chris Talgo ( is senior editor at The Heartland Institute.

Image: Lawrencekhoo,

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