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In the midst of inflation at its highest level in four decades, Congress gave its final approval to the historic Law on Friday Inflation Reduction of President Joe Biden. Although experts point out that, despite its name, the measure is not expected to dominate the increase in prices in the short term.
The Office The nonpartisan Congressional Budget Committee concluded last week that the changes would have a “negligible” impact on inflation this year and next. Meanwhile, the Penn Wharton budget model from the University of Pennsylvania concluded that, over the next decade, “the impact on inflation is statistically indistinguishable from zero.”
This is because the legislation will not directly address some of the main drivers of rising prices, from gasoline and food to rents and meals in restaurants.
Even so, the law could save money for some Americans by reducing the cost of prescription drugs for the elderly, extending health insurance subsidies, and lowering energy prices.
It would also modestly reduce the government budget deficit, which could reduce inflation slightly later this decade.
Biden himself, speaking of the ef ect of the inflation legislation, has cautiously referred to potentially lower prices in individual categories rather than reducing inflation as a whole.
A smaller deficit to lower inflation
The White House has published a letter signed by more than 120 economists who affirm that the law’s reduction in the government’s budget deficit, by an estimated $300,000 millions of dollars over the next decade, would put “downward pressure on inflation”.
The largest deficits low can reduce inflation. That’s because lower public spending or higher taxes, which help reduce the deficit, reduce demand in the economy
and thus relieve pressure on companies to raise prices.
However, other experts point out that the lower deficits will not be felt for another five years and will not be very large in the future.
How is it reflected in households
While the law could have the benefit of increasing the savings of millions of households in pharmaceutical and energy costs, unlikely to have much effect on headline inflation.
Prescription drugs represent only 1% of spending in the consumer price index and spending on electricity and natural gas represents only 3.6%.
From the The law will limit the amount that Medicare beneficiaries would pay for their prescription drugs to $2, 000 year.
Also would limit the costs of insulin for Medicare beneficiaries to $35 dollars per month. Insulin prescriptions averaged $54 in 2020, according to Kaiser Family Foundation.
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