inflation – Michmutters

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Business

Australia is in the middle of a cost of living crisis but we’re not the only ones. Here’s what inflation looks like around the world

A person pushing a big ball with a dollar sign on it up a steep slope.

Aussies are well aware that the cost of living is increasing. Prices of food, gas, petrol and rent have skyrocketed thanks to the inflation rate rising to 6.1 per cent in June – to 21-year high.

While the Australian Bureau of Statistics reported a 2.4 per cent rise in annual wage growth for the March quarter, this has not been enough to compete with the soaring cost of living, leaving people struggling around the country.

But we’re not the only ones.

The Organization for Economic Co-operation and Development (OECD) is an international organization that includes 38 countries such as Australia, the USA, Canada, New Zealand and the UK.

International events such as supply chain interruptions, COVID-19 implications and the war in Ukraine saw inflation in OECD countries rise to 9.6 per cent in May compared to 9.2 per cent in April. This represents the sharpest price increase since 1988.

Here’s a crash course in inflation and what it looks like around the world.

What is inflation and what causes it?

Inflation measures how much more expensive a set of goods and services has become over a certain period of time.

The most well-known indicator of this is the Consumer Price Index (CPI).

The CPI measures the percentage change in the price of a basket of goods and services consumed by households.

Temporary changes in inflation may be caused by events like supply disruptions or seasonal sales, according to the RBA.

More persistent changes in inflation generally arise when people and businesses change their expectations about future price moves, and thus start demanding higher wages or passing on cost increases to their customers to compensate for them.

In the worst case, these expectations of rising prices can cause inflation to spiral out of control.

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Business

How to ask for an inflation pay rise—and how much to ask for

Man pushing shopping cart of groceries up line chart arrow

When it comes to negotiating inflation pay rises, for a long time there’s been a simple rule: don’t mention inflation.

The reasoning has been that, basically, bosses don’t care how you’re doing financially, and whether or not you can make ends meet.

Pay rise negotiations should be about what you bring to the organization, and why they need you, rather than what you need.

But with inflation now at its highest rate since 1990, and most Australians worse off, some experts are tweaking their advice.

Many workers are sharing stories of asking their boss for a pay rise.

Emma, ​​29, a property manager in Melbourne, recently tried her luck.

“I told them that with the cost of everything going up, my salary wasn’t viable anymore,” she told hacker.

“I didn’t want to leave, but I was willing to go somewhere closer to home that offered a bit more.”

And it worked, after a few days her employer agreed to a 7 per cent pay rise.

Amy, 24, a designer in regional NSW, had a very different experience. She also brought up inflation with her boss from her — and got knocked back.

“They said they couldn’t justify paying me more,” she said.

So, how can you go about having the chat?

How much do you ask for?

The annual inflation rate in Australia is currently 6.1 per cent, meaning prices have risen this much over the last 12 months.

If your wage hasn’t been bumped up in that time, you’re effectively earning less than you were 12 months ago.

So if you’ve made $50,000 in the past year, you’re $3,000 worse off.

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Categories
US

Karine Jean-Pierre roasted over ‘Orwellian’ tweet touting ‘0% inflation’

Karine Jean-Pierre roasted over 'Orwellian' tweet touting '0% inflation'

President Biden’s top spokesperson was accused of lying on Wednesday in a tweet touting “0% inflation in July” — even as federal data indicated that the consumer price index rose by 8.5% year over year.

“We just received news that our economy had 0% inflation in July,” White House press secretary Karine Jean-Pierre tweeted on Wednesday.

“While the price of some things went up, the price of others, like gas, clothing, and more, dropped.”

Jean-Pierre also hailed the dip in gasoline prices, which she called “the fastest in a decade” which was “saving American families with two cars $106 per month on average.”

In the same tweet thread, Jean-Pierre wrote that “real wages went up for the first time in almost a year.” She also urged the House to pass the Inflation Reduction Act “as soon as possible” in order to “lower health care, prescription drug, and energy costs.”

But Twitter users pushed back against Jean-Pierre’s claims.

White House press secretary Karine Jean-Pierre toed the administration line that the country saw "0% inflation in June."
White House press secretary Karine Jean-Pierre toed the administration line that the country saw “0% inflation in July.”
REUTERS
Twitter users pushed back on Jean-Pierre's tweets on Wednesday.
Twitter users pushed back on Jean-Pierre’s tweets on Wednesday.

“Great. No need for the ‘Inflation Reduction Act’ anymore…” tweeted Yossi Gestetner.

Another Twitter user, Kevin Dalton, posted a link to a news article indicating that inflation was 8.5% in July, writing: “Other than the complete lie you just told, I totally believe you…”

Joel Griffith, a research fellow at the Heritage Foundation, posted a tweet showing the increased prices of key goods.

“Inflation this past year of 8.5% is near a 40-yr high,” he noted.

One Twitter user went so far as to add a “clown face” filter to a clip of Jean-Pierre touting the strength of the economy from the White House press room podium.

The rate of inflation was 8.5% in July -- hovering around record levels not seen in four decades.
The rate of inflation was 8.5% in July — hovering around record levels not seen in four decades.

Supporters of the administration, however, tried to clarify Jean-Pierre’s tweet. One noted that the press secretary meant that “inflation over the last month has been 0%” and that it “hasn’t increased in the past month.”

But another Twitter user responded: “You don’t compare inflation month to month. It is compared year to year. But you wouldn’t know that.”

Last month, Jean-Pierre was widely mocked for claiming that “we are stronger economically than we have been in history.”

Americans continue to be saddled with higher-than-usual food prices.
Americans continue to be saddled with higher-than-usual food prices.
Levine-Roberts/Sipa USA

She cited low unemployment as well as “more than 8.7 million new jobs created” — though critics noted that it was due to the end of pandemic-related lockdown measures and Americans returning en masse to the workforce after the vaccination drive.

The 8.5% rise in inflation last month was lower than the sharp, 9.1% increase in June, but still hovering at a high not seen since four decades ago.

Core inflation, which excludes food and gas prices, rose by 5.9% annually and by 0.3% compared to June.

Analysts said that a drop in demand has led to falling gas and energy prices, though that trend can easily reverse itself given volatile geopolitical conditions, including the ongoing Russian invasion of Ukraine, as well as possible hurricanes in the US.

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Categories
US

AP FACT CHECK: GOP skews budget bill’s impact on IRS, taxes

AP FACT CHECK: GOP skews budget bill's impact on IRS, taxes

Republican politicians and candidates are distorting how a major economic bill passed over the weekend by the Senate would reform the IRS and affect taxes for the middle class.

The “Inflation Reduction Act,” which awaits a House vote after passing in the Senate on Sunday, it would increase the ranks of the IRS, but it would not create a mob of armed auditors looking to harass middle-class taxpayers, as some Republicans are claiming.

While experts say corporate tax increases could indirectly burden people in the middle class, claims that they will face higher taxes are not supported by what is in the legislation.

A look at some of the claims about the package that emerged from a deal negotiated by Senate Majority Leader Chuck Schumer, DN.Y., and Sen. Joe Manchin, DW.Va.:

HOUSE MINORITY LEADER KEVIN MCCARTHY, R-CALIF.: “Do you make $75,000 or less? Democrats’ new army of 87,000 IRS agents will be coming for you — with 710,000 new audits for Americans who earn less than $75k.” – Tuesday tweet.

SEN. TED CRUZ, R-TEXAS: “The Manchin-Schumer bill will create 87,000 new IRS agents to target regular, everyday Americans.” —Friday tweet.

THE FACTS: That’s misleading. Last year, before the bill emerged, the Treasury Department had proposed a plan to hire roughly that many IRS employees over the next decade if it got the money. The IRS will be releasing final numbers for its hiring plans in the coming months, according to a Treasury official. But those employees will not all be hired at the same time, they will not all be auditors and many will be replacing employees who are expected to quit or retire, experts and officials say.

The IRS currently has about 80,000 employees, including clerical workers, customer service representatives, enforcement officials, and others. The agency has lost roughly 50,000 employees over the past five years due to attrition, according to the IRS. More than half of IRS employees who work in enforcement are currently eligible for retirement, said Natasha Sarin, the Treasury Department’s counselor for tax policy and implementation.

Budget cuts, mostly demanded by Republicans, have also diminished the ranks of enforcement staff, which fell roughly 30% since 2010 despite the fact that the filing population has increased. The IRS-related money in the Inflation Reduction Act is intended to boost efforts against high-end tax evasion, Sarin said.

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The nearly $80 billion for the IRS in the bill will also pay for other improvements, such as revamping the agency’s technology, said Janet Holtzblatt, a senior fellow at the Tax Policy Center and former Treasury official.

The Treasury says it will hire experienced auditors and workers who will improve taxpayer services, and that audit rates for those earning less than $400,000 are not expected to rise in relation to historical norms.

So that’s a long way from hiring 87,000 “agents” to go after average people in the United States, as the GOP claims have it. In any case, the bill has not mandated to hire that many people.

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REP. TROY NEHLS, R-TEXAS: “Americans asked for lower inflation and the Democrats gave us an armed IRS shadow army to spy on your bank accounts.” —Sunday tweet.

REP. MARJORIE TAYLOR GREENE. R-Ga.: “It’s going to hire 87,000 new IRS agents and it’s going to arm — as in guns, you know, Democrats are always upset about guns — 70,000 of these IRS agents.” — at the Conservative Political Action Conference, in an interview with the conservative Canadian news magazine The Post Millennial.

THE FACTS: That’s false. The bill will not create any such army, officials and experts say. Only some IRS employees who work on criminal investigations carry firearms as part of their work.

A division of the IRS called criminal investigation serves as the agency’s law enforcement branch. Its agents, who work on issues such as seizing illicit crypto currency and Russian oligarchs’ assets, carry weapons, Sarin said.

There were just more than 2,000 such special agents working at the IRS in 2021, according to agency documents. The branch will get money from the Inflation Reduction Act, but the bulk of the dollars will go toward other areas, according to Sarin.

The bill does not designate money specifically for a large number of armed IRS employees.

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NEVADA SENATE CANDIDATE ADAM LAXALT, criticizing his opponent, Democrat Sen. Catherine Cortez Masto: “.@CortezMasto just voted to raise taxes for Nevadans making as low as $30k/year.” —Sunday tweet.

THE FACTS: Nothing in the bill raises taxes on people earning less than $400,000, contrary to Laxalt’s claims. There are no individual tax rate increases for anyone in the bill, experts say.

It’s possible, though, that the bill’s new corporate taxes, including a minimum 15% tax for large corporations, could cause indirect economic impacts. A report from the Joint Committee on Taxation said some people who make less than $400,000 might see such impacts.

“Economists are generally in agreement that the corporate income tax is borne not just by the businesses, but also by shareholders and by workers,” Holtzblatt said. “So that tax that gets imposed on the corporation, some of that might end up getting shifted to workers in the form of lower wages.”

Added Garrett Watson, a senior policy analyst at the Tax Foundation: “Distinguishing between whether lower after-tax incomes happen because of a direct tax hike or indirect incidence may be a distinction without a difference for many households.”

However, supporters of the bill did not vote for tax increases on people earning $30,000, as Laxalt claimed.

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Associated Press writer Karena Phan in Los Angeles contributed to this report.

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EDITOR’S NOTE — A look at the veracity of claims by political figures.

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Find AP Fact Checks at http://apnews.com/APFactCheck

Follow @APFactCheck on Twitter: https://twitter.com/APFactCheck

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Categories
US

Biden, WH claims US has ‘zero inflation’ despite high rate

Biden, WH claims US has 'zero inflation' despite high rate

President Biden tried to claim Wednesday that the US had “zero inflation” in July hours after federal Consumer Price Index data showed annual inflation dipping only slightly to 8.5%, which outraged Republicans and other critics who pointed out it’s still near a four-decade high .

The latest figures reflected a demand-driven decline in fuel prices — including gasoline, which hit a record national average of $5 per gallon in mid-June before sliding to a still-high $4 average today — that offset increases in the cost of food, rent and other goods and services.

“I just want to say a number: zero,” Biden said in the White House East Room before signing legislation granting greater medical and disability benefits to veterans suffering illnesses linked to inhaling toxic smoke.

“Today, we received news that our economy had 0% inflation in the month of July — 0%,” Biden said. “Here’s what that means: while the price of some things went up — went up last month, the price of other things went down by the same amount. The result? Zero inflation last month.

US PresidentJoe Biden
President Joe Biden insists the US is undergoing “zero inflation” in spite of federal data showing its more than eight percent.
REUTERS/Kevin Lamarques

“But people are still hurting,” the president went on, before repeating: “But 0% inflation last month.”

Biden then proceeded to accidentally step on his own message by urging Congress to pass the Senate-approved Inflation Reduction Act, which he said would keep inflation “from getting better,” a view advanced by Republicans, before correcting himself to say “from getting worse.” .”

Biden’s rosy spin on the latest inflation report was quickly called out as misleading by critics, especially after White House press secretary Karine Jean-Pierre tweeted: “We just received news that our economy had 0% inflation in July. While the price of some things went up, the price of others, like gas, clothing, and more, dropped.”

“The Biden Administration has a tortured relationship with math,” joked Rep. Virginia Foxx (R-NC) on Twitter.

The Labor Department's Consumer Price Index shows inflation remains at a four-decade high at 8.5 percent.
The Labor Department’s Consumer Price Index shows inflation remains at a four-decade high at 8.5 percent.
New York Post Illustration

“Ridiculous BS from the White House,” tweeted Sen. Ted Cruz (R-Texas). “There’s 8.5% inflation and basically everything anyone ever buys went up in price. This is just cruel gaslighting from the Biden admin.”

“Either the White House doesn’t understand what inflation is or they just don’t care,” said Rep. Kevin Hern (R-Okla.). “That doesn’t change the pain and hardship that Americans are enduring because of their failed policies.”

“It’s a bogus math trick. This is the overall one-month index change. Overall that means that the big drop in fuel oil and gas (following previous massive monthly increases) swamped the huge increases everywhere else,” tweeted Jeffrey Tucker, president of the Brownstone Institute think tank.

“Using the same tactic, you could also observe a one-month 19.2% increase in electricity! But of course we would not do that because that’s dumb,” Tucker added. “The actual increase is 15.2% which we get from calculating year over year.”

John Cooper, director of media and public relations at the conservative Heritage Foundation, tweeted, “Joe Biden claims, multiple times, that there was ‘zero inflation’ in July. Absolutely false. Year-over-year inflation was 8.5% in July.”

The Bureau of Labor statistics laid the data out in black and white — reporting the highest annual jump in food prices since the 1970s, with a 1.3% bump in at-home food costs from June to July and a 10.9% food-cost jump in the past year.

“The all items less food and energy index rose 5.9 percent over the last 12 months,” the official report said, referring to so-called “core inflation.” “The energy index increased 32.9 percent for the 12 months ending July, a smaller increase than the 41.6-percent increase for the period ending June. The food index increased 10.9 percent over the last year, the largest 12-month increase since the period ending May 1979.”

Consumers fill up at a Shell gas station July 13, 2022, in Miami Beach, Fla.
National gas prices still remain at $4 a gallon or more.
AP Photo/Marta Lavandier, File

Overall annual inflation was 9.1% in June, the highest rate since 1981. Critics blame Biden’s policies, including large spending bills, while the White House has blamed an array of other factors — including COVID-19, supply chain bottlenecks and the Russian invasion of Ukraine.

The Federal Reserve has a target of about 2% annual inflation and has been increasing interest rates this year in an attempt to tamp down price increases.

The pending Inflation Reduction Act, which the House is expected to pass as early as Friday, provides nearly $400 billion for environmental programs, including tax credits of up to $7,000 to buy electric vehicles, and roughly $64 billion to extend more generous COVID-19- it was Obamacare subsidies.

Senator Ted Cruz speaks
Sen. Ted Cruz accused the White House of “cruel gaslighting” on Americans.
Lev Radin/Pacific Press/Shutterstock

The new spending is offset by new taxes on corporations, including a new 15% corporate minimum tax, increased IRS enforcement and by allowing Medicare to directly negotiate drug prices.

Republicans argue new taxes may result in higher consumer costs and point to independent analysis that says the bill won’t reduce inflation.

“The Orwellian named ‘Inflation Reduction Act’ will do no such thing, as a number of prominent experts and economic policy groups have indicated,” Sen. Ron Johnson (R-Wis.) said after the bill passed the Senate. “The Penn Wharton Budget Model, the Tax Foundation, and the Congressional Budget Office all found the bill won’t lower inflation and may make it worse. The IRS would more than double in size, unleashing 87,000 new enforcement agents on American families… [and the] nonpartisan Joint Committee on Taxation says that 78% to 90% of the revenue raised from misreported income would likely come from those making under $200,000.”

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Categories
Business

Why the Reserve Bank and Philip Lowe has failed Australian people with interest rate, mortgage rises

Media commentator Alan Jones has accused the Reserve Bank of failing the Australian people by being too slow to raise interest rates

Media commentator Alan Jones has accused the Reserve Bank of failing the Australian people by being too slow to raise interest rates.

The cash rate remained at a record-low of 0.1 per cent until May this year, even though inflation last year breached the central bank’s 2 to 3 per cent target.

But in May, June, July and August, borrowers have copped 1.75 percentage points of rate rises, taking the RBA cash rate to a six-year high of 1.85 per cent.

With borrowers copping the steepest rate increases since 1994, Jones blasted the Reserve Bank for being too slow to raise interest rates.

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Media commentator Alan Jones has accused the Reserve Bank of failing the Australian people by being too slow to raise interest rates

Media commentator Alan Jones has accused the Reserve Bank of failing the Australian people by being too slow to raise interest rates

‘The Reserve Bank has failed and the punter knows it,’ he said on his online ADH TV show.

‘Petrol’s up, food prices are up, electricity, gas, the mortgage.

‘This mob have failed in their job – they didn’t move quickly enough.

‘It’s now belting us with the highest, successive interest rate increases in 30 years and the governor says they’ll get inflation back to two to three per cent – quote – overtime – unquote.

‘What the hell does overtime mean?’

Inflation in the year to June surged by 6.1 per cent, which was the fastest pace since 1990 when the one-off effect of the GST introduction in 2000 and 2001 was taken out.

The consumer price index in June last year grew at an annual pace of 3.8 per cent, a level above the RBA’s 2 to 3 per cent target.

Inflation in the year to June surged by 6.1 per cent, which was the fastest pace since 1990 when the one-off effect of the GST introduction in 2000 and 2001 was taken out (pictured is a shopper at Paddy's Markets at Flemington in Sydney's west)

Inflation in the year to June surged by 6.1 per cent, which was the fastest pace since 1990 when the one-off effect of the GST introduction in 2000 and 2001 was taken out (pictured is a shopper at Paddy’s Markets at Flemington in Sydney’s west)

Despite that, Reserve Bank of Australia governor Philip Lowe in October 2021 said the cash rate would not increase, from 0.1 per cent, until 2024 when ‘actual inflation is sustainably within the 2 to 3 per cent target range’.

‘The central scenario for the economy is that this condition will not be met before 2024,’ Dr Lowe said.

Warwick McKibbin, who served on the RBA board from 2001 to 2011, last week said the Reserve Bank had made a mistake in delaying rate increases last year, only for Russia’s Ukraine invasion to push average petroleum prices above $2 a liter.

‘I was already arguing for rates to be rising by the middle of last year,’ he told Daily Mail Australia.

‘To make a statement that he had to wait for wages to change, if there was a war in Ukraine, that would cause inflation as well – of course, that’s not on the horizon until it happens.

‘So the uncertainty just isn’t communicated well enough.’

The consumer price index in June last year grew at an annual pace of 3.8 per cent, a level above the RBA's 2 to 3 per cent target. Despite that, Reserve Bank of Australia governor Philip Lowe (pictured) in October 2021 said the cash rate would not increase, from 0.1 per cent, until 2024 when 'actual inflation is sustainably within the 2 to 3 per cent target range'

The consumer price index in June last year grew at an annual pace of 3.8 per cent, a level above the RBA’s 2 to 3 per cent target. Despite that, Reserve Bank of Australia governor Philip Lowe (pictured) in October 2021 said the cash rate would not increase, from 0.1 per cent, until 2024 when ‘actual inflation is sustainably within the 2 to 3 per cent target range’

The Reserve Bank and Treasury are both expecting headline inflation later this year to hit a 32-year high of 7.75 per cent and remain outside the RBA’s 2 to 3 per cent target until 2024.

The ANZ back is expecting the cash rate to hit a 10-year high of 3.35 per cent by November with 0.5 percentage rate rises in September, October and Melbourne Cup Day.

All the big four banks are expecting the RBA to raise raises by another 50 basis points in September, which mark the fourth consecutive increase in that size.

The May rate rise was the first since November 2010, ending the era of the record-low 0.1 per cent cash rate that had been in place since late 2020.

The June rate rise of half a percentage point was the biggest since February 2000.

Warwick McKibbin, who served on the RBA board from 2001 to 2011, last week said the Reserve Bank had made a mistake in delaying rate increases last year

Warwick McKibbin, who served on the RBA board from 2001 to 2011, last week said the Reserve Bank had made a mistake in delaying rate increases last year

Surging inflation and a series of interest rate rises are making Australians feel gloomy, with the Westpac-Melbourne Institute consumer sentiment index in August falling by another three per cent to a two-year low of 81.2 points.

This was well below the 100 mark where optimists outnumber pessimists, with the monthly reading declining for nine straight months.

Sentiment is 22 per cent weaker compared with a year ago, despite unemployment in June falling to a 48-year low of 3.5 per cent.

Confidence in regional or rural areas fell by five per cent in August to a record low of 72.8 points – the lowest since January 1996 shortly before Labor prime minister Paul Keating lost an upcoming election in a landslide.

What borrowers could be paying by November every month compared with May

$500,000: Up $883 from $1,922 to $2,805

$600,000: Up $1,060 from $2,306 to $3,366

$700,000: Up $1,236 from $2,691 to $3,927

$800,000: Up $1,413 from $3,075 to $4,488

$900,000: Up $1,590 from $3,459 to $5,049

$1,000,000: Up $1,767 from $3,843 to $5,610

Calculations based on the cash rate rising from a record-low of 0.1 per cent in May to 3.35 per cent by November, as predicted by ANZ. Monthly repayments based on a popular variable Commonwealth Bank rate increase from 2.29 per cent to a projected 5.39 per cent

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Categories
Australia

Peter Dutton says Liberals will not attend government’s national jobs summit

Peter Dutton holds one finger up while sitting in the house of representatives

The federal Liberals have rejected an invitation to attend a national jobs summit next month, labeling it a stunt.

The federal government is preparing to agree to a summit for the first week of September that it hopes will be a keystone for its economic policy in the term ahead that will unify business, government and unions.

Government ministers had expressed hesitation over inviting the opposition, saying it would only be invited if it was prepared to be constructive.

On Tuesday Treasurer Jim Chalmers wrote to Opposition Leader Peter Dutton, extending an invitation for him or another Coalition MP to attend.

But Mr Dutton has rejected the invitation.

“It’s a stunt with the unions,” Mr Dutton said.

“We’ll support all sorts of good policies from the government … but we’re not going to support stunts.

“The fact that Jim Chalmers wrote to me and then within a couple of hours dropped it to The Australian newspaper demonstrates it is nothing more than a stunt.”

Unions lay down reform agenda ahead of summit

Overnight, the peak union body outlined its goals for the upcoming jobs summit, with “full and secure” employment being its first priority.

The Australian Council of Trade Unions said despite unemployment being at a historic low, real wages were declining and insecure work was “rife”.

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Categories
US

Biden says ‘inflation’ bill funds healthcare, ‘God knows what else’ in bizarre speech

Biden says 'inflation' bill funds healthcare, 'God knows what else' in bizarre speech

President Biden seemed unfamiliar Monday with the specifics of the massive spending bill dubbed the Inflation Reduction Act that Senate Democrats passed Sunday, saying only that it funds healthcare “and God knows what else.”

Moments earlier, the president misstated the size of last year’s $1.2 trillion bipartisan infrastructure spending law while touring flood damage in Kentucky.

“We’ve never done this before, but because of a number of things we got done on a bipartisan basis — like a billion, two hundred million-dollar infrastructure project — like what we’re doing today, we passed yesterday, helping take care of everything from health care to God knows what else,” said Biden, standing in front of a flood-damaged home on his first official trip since recovering from a “rebound” case of COVID-19.

“What we’re going to do is — we’re going to see, for example, they got to put a new water line in the community,” the president stumbled. “There’s no reason why they can’t at the same time be digging a line that puts in a whole new modern line for Internet connections. why? Why can’t we do that? So it’s going to be different. We’re going to come back better than before.”

Joe Biden
As President Biden toured flood damage in Kentucky, he said that the Inflation Reduction Act recently passed in the Senate funds health care and “God knows what else.”
AP

Biden spoke for only about four minutes, much of the time with his back to cameras as he looked around at buildings and people impacted by the recent flooding.

At one point in his remarks, the president — who turns 80 in November — suggested it may become possible to control the weather, before jokingly telling his destitute storm-ravaged audience, which included the commonwealth’s Democratic Gov. Andy Beshear and Rep. Hal Rogers (R-Ky.), that it was time to “run laps.”

“We’re all Americans. Everybody has an obligation to help. We have the capacity to do this. It’s not like it’s beyond our control. The weather may be out beyond our control for now. But it’s not beyond our control,” Biden said.

Joe Biden
Biden incorrectly stated the size of last year’s $1.2 trillion bipartisan infrastructure spending law during his speech.
REUTERS
Joe Biden
The legislation passed Sunday contributes almost $400 billion for environmental programs to combat climate change.
REUTERS

The Senate-passed legislation, which is expected to pass the House of Representatives as early as Friday, provides nearly $400 billion for environmental programs, including tax credits of up to $7,000 to buy electric vehicles, and roughly $64 billion to extend more generous COVID- 19-era Obamacare subsidies.

The spending is offset by new taxes on corporations, including a new 15% corporate minimum tax, increased IRS enforcement and allowing Medicare to directly negotiate drug prices.

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Categories
US

Here’s what’s in the Inflation Reduction Act, the sweeping health and climate bill passed Sunday

Here's what's in the Inflation Reduction Act, the sweeping health and climate bill passed Sunday

The Senate passed Democrats’ Inflation Reduction Act on a party-line vote Sunday afternoon, delivering the long-awaited centerpiece to President Biden’s agenda.

Democrats rallied behind the $430 billion climate, health care and tax overhaul after Senate Majority Leader Charles Schumer (DN.Y.) reached a last-minute deal with Sen. Joe Manchin (DW.Va.), who had held up previous proposals.

The House is expected to approve the legislation on Friday and send it to Biden’s desk.

Here’s a summary of what’s in the Inflation Reduction Act:

ENVIRONMENT, ENERGY AND CLIMATE

Businesses would get incentives for deployment of lower-carbon and carbon-free energy sources.

  • Tax credits are extended for energy production and investment in technologies including wind, solar and geothermal energies. The investment tax credit also now applies to battery storage and biogas.
  • Tax credits would be created or extended for additional technologies and energy sources including nuclear energy, hydrogen energy coming from clean sources, biofuels and technology that captures carbon from fossil fuel power plants.
  • Many of the incentives also contain bonuses for companies based on how much they pay their workers and offer credits for manufacturing their steel, iron and other components in the US

Consumers and businesses get incentives to make cleaner energy choices.

  • Tax credits are extended for residential clean energy expenses including rooftop solar, heat pumps and small wind energy systems. Consumers can get credits for 30 percent of expenditures through 2032, and the credit phases down after that.
  • Tax credits of up to $7,500 are offered to consumers who buy electric vehicles — but this credit comes with stipulations that may make it difficult for vehicles to actually qualify.
  • A tax credit would be expanded for energy efficiency in commercial buildings.

Some fossil fuel production on public lands would be bolstered.

  • The future of solar and wind on public lands and wind in public waters would be tied to requirements to hold lease sales that open up new oil and gas production.
  • The bill reinstates the results of a recent offshore oil and gas lease sale that was struck down on environmental grounds. The Interior Department would be required to hold at least three more offshore oil and gas lease sales by next October.

New programs boost investment in climate.

  • A new program aims to reduce emissions of the planet-warming gas methane from oil and gas by both providing grants and loans to help companies reign in their emissions and levying fees on producers with excess methane emissions.
  • $27 billion would go to a green bank that would provide more incentives for clean energy technology.

Costs increase for fossil fuel production on public lands.

  • Minimum royalties increase for companies to pay the government for oil and gas they extract on public lands and waters. A royalty is added to the extraction of gas that is later burned off or released as waste instead of sold as fuel.

Communities that face high pollution burdens get relief.

  • $3 billion would go to environmental justice block grants — community-led programs addressing harms from climate change and pollutants, including $20 million for technical assistance at the community level, through fiscal 2026.
  • More than $3 billion is allocated to funds for air pollution monitoring in low-income communities. Nearly half of the funds — $117 million — would specifically go to communities in close proximity to industrial pollutants.
  • An excise tax on imported petroleum and crude oil products to fund the cleanup of industrial disaster sites increases from 9.7 cents to 16.4 cents per barrel. The reinstatement of the tax is projected to raise $11 billion.
  • The bill permanently extends and increases the Black Lung Disability Trust Fund, a tax on coal production to finance claims from workers with the condition. Black lung, caused by long-term exposure to and inhalation of coal dust, is believed to affect at least 10 percent of coal miners with at least 25 years’ experience, according to a 2018 study by the National Institute for Occupational Safety and Health.

— Rachel Frazin and Zack Budryk

HEALTH CARE

Medicare can negotiate lower prices.

The bill would allow Medicare to negotiate prices for some drugs for the first time, a policy Democrats have been trying to enact for years over the fierce objections of the pharmaceutical industry. The provisions save more than $200 billion over 10 years.

  • It would allow Medicare to negotiate lower prices for 10 high-cost drugs beginning in 2026, ramping up to 20 drugs by 2029. There is a steep penalty if a drug company doesn’t come to the table: a tax of up to 95 percent of the sales of the drug. There is also a ceiling that the negotiated price cannot rise above.
  • In a deal with moderates including Sen. Kyrsten Sinema (D-Ariz.), only older drugs are subject to negotiation after a period of nine years for most drugs and 13 years for more complex “biologic” drugs. That means the negotiations are more limited than many Democrats wanted.

Drug costs can be capped but largely only for Medicare.

The bill includes other measures to cap drug costs. The provisions still largely apply only to seniors on Medicare, not the millions of people who get health insurance through their jobs, in part because complex Senate rules limited how expansive the provisions would be.

  • If drug companies raise prices in Medicare faster than the rate of inflation, they must pay rebates back to the government for the difference.
  • Democrats tried to apply this provision to the private market, but the parliamentarian ruled it violated the Senate rules used to bypass a GOP filibuster.
  • In one of the most tangible provisions for patients, the bill caps out-of-pocket drug costs at $2,000 a year for seniors on Medicare, starting in 2025.
  • The bill also caps patients’ insulin costs at $35 a month, but only for seniors on Medicare. Republicans voted against overruling the Senate parliamentarian to extend that protection to patients with private insurance.

People enrolled in ACA plans get an extension on premium assistance.

The measure also builds on the Affordable Care Act (ACA) by extending enhanced financial assistance to help people enrolled in ACA plans afford premiums for three years. The extra help would otherwise have expired at the end of this year, setting up a cliff. The provision expands eligibility to allow more middle-class people to receive premium help and increases the amount of help overall.

—Peter Sullivan

TAXES

Large corporations will pay for climate and health measures within the bill.

The bill introduces new taxes on corporations to pay for its climate and health care measures.

The centerpiece of its tax plan is a 15 percent minimum tax on the income that big corporations report to their shareholders, a tax known as the minimum book tax. Initial proposals put the amount of revenue raised by the book tax at $313 billion — more than 40 percent of the $740 billion raised by the legislation as a whole.

The tax applies to companies reporting $1 billion in annual earnings. It would impact only around 150 large firms, according to the Joint Committee on Taxation.

Sinema demanded some last-minute exclusions to the minimum tax that were favorable to the US manufacturing sector and private equity firms.

  • The tax will exempt companies taking advantage of accelerated depreciation, a popular deduction that helps pay for capital investments such as new equipment.
  • Small businesses that are subsidiaries of highly profitable private equity firms will also be exempted from the minimum tax.

The IRS gets a funding boost.

Another key measure allocates $80 billion to increase enforcement at the IRS. Democrats hope that, with more employees and better technology, the IRS can more closely examine wealthy individuals and ensure they aren’t dodging taxes. That extra revenue is expected to lower the deficit by $203 billion over the next decade.

Stock buybacks will get an additional tax.

The bill enacts a 1 percent excise tax on stock buybacks to replace the revenues lost by appeasing Sinema. Democrats expect the provision to raise $74 million over a decade.

Share repurchases by S&P 500 companies have soared in recent years and are on track to surpass $1 trillion this year. Companies buy back their stock to reward shareholders and increase their stock price by artificially limiting supply.

  • The tax will impact the nation’s largest companies that rely on multibillion-dollar buybacks to raise their stock price, including Apple, Nike and Exxon Mobil.
  • Democrats have criticized the practice, arguing that companies should invest in workers and innovation instead of repurchasing stock.

To further recover revenue lost to the private equity sector, the bill also extends a set of limitations on losses that businesses can deduct from their taxes. The limits prevent wealthy individuals from significantly bringing down or even wiping out their income tax liability. Sen. Mark Warner (D-Va.) said that extending the caps would raise $52 billion.

— Tobias Burns and Karl Evers-Hillstrom

.

Categories
US

Here’s what’s in the Inflation Reduction Act, the sweeping health and climate bill passed Sunday

Here's what's in the Inflation Reduction Act, the sweeping health and climate bill passed Sunday

The Senate passed Democrats’ Inflation Reduction Act on a party-line vote Sunday afternoon, delivering the long-awaited centerpiece to President Biden’s agenda.

Democrats rallied behind the $430 billion climate, health care and tax overhaul after Senate Majority Leader Charles Schumer (DN.Y.) reached a last-minute deal with Sen. Joe Manchin (DW.Va.), who had held up previous proposals.

The House is expected to approve the legislation on Friday and send it to Biden’s desk.

Here’s a summary of what’s in the Inflation Reduction Act:

ENVIRONMENT, ENERGY AND CLIMATE

Businesses would get incentives for deployment of lower-carbon and carbon-free energy sources.

  • Tax credits are extended for energy production and investment in technologies including wind, solar and geothermal energies. The investment tax credit also now applies to battery storage and biogas.
  • Tax credits would be created or extended for additional technologies and energy sources including nuclear energy, hydrogen energy coming from clean sources, biofuels and technology that captures carbon from fossil fuel power plants.
  • Many of the incentives also contain bonuses for companies based on how much they pay their workers and offer credits for manufacturing their steel, iron and other components in the US

Consumers and businesses get incentives to make cleaner energy choices.

  • Tax credits are extended for residential clean energy expenses including rooftop solar, heat pumps and small wind energy systems. Consumers can get credits for 30 percent of expenditures through 2032, and the credit phases down after that.
  • Tax credits of up to $7,500 are offered to consumers who buy electric vehicles — but this credit comes with stipulations that may make it difficult for vehicles to actually qualify.
  • A tax credit would be expanded for energy efficiency in commercial buildings.

Some fossil fuel production on public lands would be bolstered.

  • The future of solar and wind on public lands and wind in public waters would be tied to requirements to hold lease sales that open up new oil and gas production.
  • The bill reinstates the results of a recent offshore oil and gas lease sale that was struck down on environmental grounds. The Interior Department would be required to hold at least three more offshore oil and gas lease sales by next October.

New programs boost investment in climate.

  • A new program aims to reduce emissions of the planet-warming gas methane from oil and gas by both providing grants and loans to help companies reign in their emissions and levying fees on producers with excess methane emissions.
  • $27 billion would go to a green bank that would provide more incentives for clean energy technology.

Costs increase for fossil fuel production on public lands.

  • Minimum royalties increase for companies to pay the government for oil and gas they extract on public lands and waters. A royalty is added to the extraction of gas that is later burned off or released as waste instead of sold as fuel.

Communities that face high pollution burdens get relief.

  • $3 billion would go to environmental justice block grants — community-led programs addressing harms from climate change and pollutants, including $20 million for technical assistance at the community level, through fiscal 2026.
  • More than $3 billion is allocated to funds for air pollution monitoring in low-income communities. Nearly half of the funds — $117 million — would specifically go to communities in close proximity to industrial pollutants.
  • An excise tax on imported petroleum and crude oil products to fund the cleanup of industrial disaster sites increases from 9.7 cents to 16.4 cents per barrel. The reinstatement of the tax is projected to raise $11 billion.
  • The bill permanently extends and increases the Black Lung Disability Trust Fund, a tax on coal production to finance claims from workers with the condition. Black lung, caused by long-term exposure to and inhalation of coal dust, is believed to affect at least 10 percent of coal miners with at least 25 years’ experience, according to a 2018 study by the National Institute for Occupational Safety and Health.

— Rachel Frazin and Zack Budryk

HEALTH CARE

Medicare can negotiate lower prices.

The bill would allow Medicare to negotiate prices for some drugs for the first time, a policy Democrats have been trying to enact for years over the fierce objections of the pharmaceutical industry. The provisions save more than $200 billion over 10 years.

  • It would allow Medicare to negotiate lower prices for 10 high-cost drugs beginning in 2026, ramping up to 20 drugs by 2029. There is a steep penalty if a drug company doesn’t come to the table: a tax of up to 95 percent of the sales of the drug. There is also a ceiling that the negotiated price cannot rise above.
  • In a deal with moderates including Sen. Kyrsten Sinema (D-Ariz.), only older drugs are subject to negotiation after a period of nine years for most drugs and 13 years for more complex “biologic” drugs. That means the negotiations are more limited than many Democrats wanted.

Drug costs can be capped but largely only for Medicare.

The bill includes other measures to cap drug costs. The provisions still largely apply only to seniors on Medicare, not the millions of people who get health insurance through their jobs, in part because complex Senate rules limited how expansive the provisions would be.

  • If drug companies raise prices in Medicare faster than the rate of inflation, they must pay rebates back to the government for the difference.
  • Democrats tried to apply this provision to the private market, but the parliamentarian ruled it violated the Senate rules used to bypass a GOP filibuster.
  • In one of the most tangible provisions for patients, the bill caps out-of-pocket drug costs at $2,000 a year for seniors on Medicare, starting in 2025.
  • The bill also caps patients’ insulin costs at $35 a month, but only for seniors on Medicare. Republicans voted against overruling the Senate parliamentarian to extend that protection to patients with private insurance.

People enrolled in ACA plans get an extension on premium assistance.

The measure also builds on the Affordable Care Act (ACA) by extending enhanced financial assistance to help people enrolled in ACA plans afford premiums for three years. The extra help would otherwise have expired at the end of this year, setting up a cliff. The provision expands eligibility to allow more middle-class people to receive premium help and increases the amount of help overall.

—Peter Sullivan

TAXES

Large corporations will pay for climate and health measures within the bill.

The bill introduces new taxes on corporations to pay for its climate and health care measures.

The centerpiece of its tax plan is a 15 percent minimum tax on the income that big corporations report to their shareholders, a tax known as the minimum book tax. Initial proposals put the amount of revenue raised by the book tax at $313 billion — more than 40 percent of the $740 billion raised by the legislation as a whole.

The tax applies to companies reporting $1 billion in annual earnings. It would impact only around 150 large firms, according to the Joint Committee on Taxation.

Sinema demanded some last-minute exclusions to the minimum tax that were favorable to the US manufacturing sector and private equity firms.

  • The tax will exempt companies taking advantage of accelerated depreciation, a popular deduction that helps pay for capital investments such as new equipment.
  • Small businesses that are subsidiaries of highly profitable private equity firms will also be exempted from the minimum tax.

The IRS gets a funding boost.

Another key measure allocates $80 billion to increase enforcement at the IRS. Democrats hope that, with more employees and better technology, the IRS can more closely examine wealthy individuals and ensure they aren’t dodging taxes. That extra revenue is expected to lower the deficit by $203 billion over the next decade.

Stock buybacks will get an additional tax.

The bill enacts a 1 percent excise tax on stock buybacks to replace the revenues lost by appeasing Sinema. Democrats expect the provision to raise $74 million over a decade.

Share repurchases by S&P 500 companies have soared in recent years and are on track to surpass $1 trillion this year. Companies buy back their stock to reward shareholders and increase their stock price by artificially limiting supply.

  • The tax will impact the nation’s largest companies that rely on multibillion-dollar buybacks to raise their stock price, including Apple, Nike and Exxon Mobil.
  • Democrats have criticized the practice, arguing that companies should invest in workers and innovation instead of repurchasing stock.

To further recover revenue lost to the private equity sector, the bill also extends a set of limitations on losses that businesses can deduct from their taxes. The limits prevent wealthy individuals from significantly bringing down or even wiping out their income tax liability. Sen. Mark Warner (D-Va.) said that extending the caps would raise $52 billion.

— Tobias Burns and Karl Evers-Hillstrom

.