Wharton School analysis finds Inflation Reduction Act will increase inflation until 2024, likely to have ‘indistinguishable’ effect on rising prices

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Analysis from the Penn Wharton Budget Model – a nonpartisan group at the University of Pennsylvania’s Wharton School – found that the Democrats’ Inflation Reduction Act would have so little impact on inflation that the effects would be “statistically indistinguishable from zero.”

The Penn Wharton Budget Model analysis questioned the benefits of the Democrat-backed Inflation Reduction Act, especially when it comes to reducing inflation – which is the alleged purpose of the bill.

“The Act would very slightly increase inflation until 2024 and decrease inflation thereafter,” the study stated. “These point estimates are statistically indistinguishable from zero, thereby indicating low confidence that the legislation will have any impact on inflation.”

The climate change and health care bill that will usher in $433 billion in new spending could add 0.05 percentage points to inflation until 2024, followed by an estimated 0.25 percentage point decrease in the Personal Consumption Expenditures price index by the late 2020s.

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The Federal Reserve already predicted that inflation would likely remain above 2% through 2024 in its Summary of Economic Projections that was published in December 2021.

Curtis Dubay – chief economist at the U.S. Chamber of Commerce – forecast in May that inflation will not cool off until 2024.

“We project no impact on GDP by 2031 and an increase in GDP of 0.2% by 2050,” the study’s authors declared. “These estimates include the impact of debt and carbon reduction as well as capital and labor supply distortions from rising tax rates.”

“A decrease in spending on prescription drugs combined with increases in revenues from personal income taxes and business taxes lead to a decrease in government debt, which declines by 8.4 percent by 2050,” the study added.

Democrats have lauded the spending bill as a remedy to the country’s record inflation, which hit a 9.1% year-over-year inflation increase in June – the highest in 41 years.

President Joe Biden said of the Inflation Reduction Act, “This bill will, in fact, reduce inflationary pressure on the economy.”

“And the fact is that my message to Congress is this: This is the strongest bill you can pass to lower inflation, cut the deficit, reduce healthcare costs, tackle the climate crisis, and pro- — and promote energy security, all the time while reducing the burdens facing working-class and middle-class families,” Biden claimed.

The bill was introduced on Wednesday by Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Joe Manchin (D-W.Va.) – who has been a thorn in the side of Democrats who have tried to pass legislation during the Biden administration.

The bill features a 15% corporate minimum tax, which Democrats say will collect $739 billion in government revenue over ten years.

Senate Minority Leader Mitch McConnell (R-Ky.) scoffed at Democrats for raising taxes during a technical recession.

“Apparently, our Democratic colleagues do not want to be responsible for just skyrocketing prices alone. They want Americans to be faced with skyrocketing prices and higher taxes and fewer jobs, all at the same time,” McConnell stated on Thursday.

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