Our friend Stephen Moore and the Committee to Unleash Prosperity have a new study by senior fellow and University of Chicago professor Casey Mulligan that runs the numbers on the Biden-Schumer-Manchin bill that just passed the Senate, and they aren't pretty:
Unlike many of the lowball estimates, noted Mr. Moore, this takes into account the combined effects of the supersized Obamacare subsidies, which like expanded unemployment insurance, reward people not to work, and the bill’s tax hikes on businesses.
Here is a brief summary of the analysis from Steve Moore’s latest must-read Committee to Unleash Prosperity Hotline:
By decreasing both the number of workers per capita and GDP per worker, respectively, the ACA and corporate-tax elements of the IRA reinforce to significantly reduce GDP per capita and average household incomes. Green energy provisions also reduce real wages and real GDP by shifting resources from high-productivity uses such as fossil-fuel extraction and drug development toward low-productivity green energy segments. This study estimates that, as a result of the IRA, real GDP per capita would be 1 to 2 percent less. In the long run, annual incomes would be reduced by about $1,300 per household, of which more than $1,200 would be reduced income from work.
There’s a lot more in Prof. Mulligan’s paper, “The Negative Economic Effects of the Inflation Reduction Act of 2022” and we urge CHQ readers to click the link to get the full study – it’s free.
Here’s the bottom line:
The new taxes in the IRA will affect Americans across the income scale while it discourages work and investment.
Although the legal obligation for the biggest IRA tax may fall on “corporations,” it will negatively affect the incomes of all workers across the income scale. The reduction in jobs and output will negatively affect incomes of middle- and lower-income workers as well. National income per household would be about $1,300 less.
The IRA does not “reward” work, but is likely to retard it. The tax credits for health insurance disincentivize work, as we saw with the original Affordable Care Act (ObamaCare).
The IRA will slow the economy—perhaps substantially. The tax components of the IRA increase average marginal tax rates on both labor and capital income. The study estimates the long-run result to be about 0.6 percent less full-time equivalent employment (almost one million employees), 2 percent less business capital, and about one percent less real GDP and national income.
Build Back Better
Inflation Reduction Act
Joe Manchin
Chuck Schumer
Joe Biden administration
Obamacare subsidies
inflation
fossil fuels
GDP
Green energy