On Sunday, 7 August, the US Senate passed a major $740 piece of legislation. The ‘Inflation Reduction Act’ will now head to the House of Representatives which is likely to pass it, who will then present it on President Joe Biden’s desk for a signature. After a rough few years since taking office, Democrats are presenting this as a much-needed win. The bill is full of Democratic priorities including new rules on healthcare, the introduction of more taxes, and the expansion of some federal agencies. Strikingly, just under half the bill is a $369 billion climate spending package, the largest investment in the issue in US history.
After more than a year of hard work, the Senate is making history.
The bill has set aside $60 billion to be given to communities that have suffered the most from fossil fuel pollution and it will invest billions in an effort to speed up the production of clean technology, such as solar panel and wind turbines. It contains a 16.4¢ per barrel tax on crude oil and petroleum products imported into the US. Some households could receive up to $7,500 in tax credits to buy an electric car or $4,000 for a used one, although a report from The Associated Press suggests that most vehicles won’t qualify for the higher amount. In all, according to analysis conducted by Senate Majority Leader Chuck Schumer, the spending will help cut carbon emissions by 40% by 2030.
As expected on a party-line bill, Democrats hailed the passing and Republicans criticised it. Schumer said: “After more than a year of hard work, the Senate is making history. To Americans who’ve lost faith that Congress can do big things, this bill is for you.” Senate Minority Leader and Republican, Mitch McConnell, said on the Senate Floor: “Democrats want to ram through hundreds of billions of dollars in tax hikes and hundreds of billions of dollars in reckless spending – and for what? For a so-called inflation bill that will not meaningfully reduce inflation at all.”
The spending will help cut carbon emissions by 40% by 2030.
This bill has been passed in an America facing different climate and energy issues. The country is experiencing a surge of extreme weather including both heatwaves and drought (as well as extreme flooding), all of which have been attributed to climate change. However, the country has also seen the price of gas surge with Biden releasing oil from the country’s emergency stockpile. At the same time the Biden administration works to put barriers in the way of domestic production. The news of a tax increase on oil will likely send those costs even higher.
It’s a watered-down version of the $3.5 trillion version first proposed by the administration.
Politically, Biden and the Democrats were hoping for a big win with this bill. Though they hold incredibly narrow majorities in the House and Senate (making passing any major laws difficult), in a small sense, this is a win as there was no guarantee the climate bill would pass at all. Both moderate senators, Joe Manchin and Krysten Sinema, initially held out because of their opposition to inflationary spending and Bernie Sanders was dismissive of it for a similar reason. Ultimately, it was a party-line affair with Vice-President Kamala Harris casting the deciding vote. It’s a watered-down version of the $3.5 trillion version first proposed by the administration but they still hoped to celebrate the news, particularly as Biden has made climate issues a tentpole of his governance.
However, events took a turn. Biden hoped to tout the bill as a grand legislative accomplishment, but the story has been knocked off the front pages by the FBI raid on the home of former President Donald Trump. It’s also likely that the bill will worsen America’s economy by raising taxes, mandating new regulations, and instituting price hikes in the name of climate action (that’s without noting the expansion of the IRS and the employ of 87,000 new agents with increased powers). Democrats have made a big deal about getting things done and passing the bill without any Republican support – further exacerbating the US recession and hitting Americans in the pocket, likely going down with them very poorly whilst the issue is likelier to be yet another nail in the coffin of Democrat hopes in the November mid-term elections.
The bill is almost certain to become enacted but it will unlikely affect any real change before the elections. However, if Biden continues to push the ambition of the bill he may argue that the US is serious about tackling climate change and inequality, and it will be seen as a challenge to other nations to follow suit.