While Jones Street remains relatively quiet since the short session adjourned in July, Capitol Hill has been particularly busy over the last few weeks. After more than a year of negotiations, Congress passed the Inflation Reduction Act of 2022 and sent this massive piece of legislation to Pres. Biden’s desk in early August. With a signature from the President expected soon, we’re unpacking the highlights of the package, how it came to be and its impact on Americans.
What’s In The Bill
The Inflation Reduction Act of 2022 (IRA) is the most recent iteration of Democrats’ attempt to enact Pres. Biden’s domestic agenda. The legislation, which will be officially signed at a 330-person ceremony on Tuesday, Aug. 16, focuses on climate and health care with an emphasis on alleviating the effects of recent inflation and spurring domestic industry. Some of the major highlights of the 10-year, $739 billion package include:
- Lowers prescription drug costs by allowing Medicare to negotiate the prices and requiring drug companies to pay rebates for raising prices faster than inflation;
- Extends certain Affordable Care Act subsidies;
- Imposes a 15% tax on corporations making annual profits of $1 billion or more and imposes a 1% fee on stock buybacks;
- Reduces the federal deficit by about $100 billion over the next decade;
- Establishes $370 billion in clean energy tax credits to incentivize the development of renewable power sources and lower the costs of energy efficient appliances;
- Places the country on track to reduce emissions by 40% below 2005 levels by 2030.
How We Got Here
The long road to the passage of the IRA began in spring of 2021 with the introduction of the Build Back Better (BBB) framework and subsequent act. The original BBB package was unveiled by the White House on March 31, 2021, and proposed spending $2 trillion on a range of infrastructure improvements. Originally, BBB focused on implementing Pres. Biden’s domestic priorities while combating the effects of the coronavirus pandemic and strengthening the country’s economy. Shortly after introduction, the proposal was split into two packages: one containing funding for tangible infrastructure projects (like roads and bridges) and another focused on “human” infrastructure (like social programs). Throughout the spring and into the summer, Democrats negotiated the package amongst themselves, with centrists opposing the bill’s high price tag. Negotiations continued on and into the fall, when party centrists like Sen. Joe Manchin (D-W. Va.) and Sen. Kristen Sinema (D- Ariz.) began vocalizing opposition, before ultimately falling apart around the New Year.
Following the BBB package’s New Year’s breakdown, Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Manchin quietly began private negotiations to work out a package that would be palatable for moderate Democrats. Discussions between the two offices shaped a package more narrow in scope and lower in cost, defining what eventually became the IRA.
The heavily negotiated package cleared the Senate along party lines on Sunday, Aug. 7. Less than a week later, the House of Representatives voted to approve the bill on Friday, Aug. 12, with all Democrats voting in favor and all Republicans voting against.
Impact On North Carolina And Beyond
As the IRA prepares to take effect, there is some debate about to what extent it will ease the effects of inflation. The legislation seeks to ease the economic strains of inflation by clamping down on costs via provisions like drug price negotiations and clean energy tax credits, and by spurring domestic industry. Though much of the IRA’s financial impact will be realized over time, it is largely expected to reduce deficits and, in conjunction with other measures, ultimately relieve inflation pressures.
In North Carolina, one provision in particular might impact implementation of 2021’s major energy policy reform legislation, House Bill 951 “Energy Solutions for North Carolina” (H951). A provision to expedite the Mountain Valley Pipeline (MVP), running from West Virginia through North Carolina, was added to secure Sen. Manchin’s support of the IRA package. This comes at a critical time as H951 implementation continues, and as the N.C. Utilities Commission and various stakeholders deliberate proposals to generate reliable energy at least cost while meeting H951-outlined carbon reduction goals. Completion of the MVP would align with the utility’s preference to add more natural gas, though various models show new natural gas construction is uneconomical and not in the best interest of North Carolina’s energy customers.
Beyond its impact on the lives of Americans and on state policies, the IRA could impact the upcoming 2022 midterm elections as Democrats and Republicans alike message on the package while on the campaign trail between now and Nov. 8.