“One big question is whether a bill called the Inflation Reduction Act will lower the decades-high inflation numbers that consumers are feeling at the grocery store and the gas pump.
As economists told Vox’s Li Zhou, the average American likely won’t feel the impact immediately or particularly significantly — its effect will be in a longer-term and macroeconomic sense.
“For the most part, this isn’t a bill about 2022,” Marc Goldwein, the senior policy director at the Committee for a Responsible Federal Budget, told Vox. “This is about 2023, 2024, 2025. It’s about helping the Federal Reserve to fight against persistent inflation. It’s not gonna be bringing down the inflation rate in the month of September.””
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“the bill will allow Medicare to negotiate for cheaper prescription drug prices for certain very expensive medications and cap out-of-pocket prescription costs for Medicare beneficiaries at $2,000 per year. That unprecedented measure will lower the cost for consumers. A further measure requires pharmaceutical companies to pay a rebate to Medicare if they raise drug prices faster than inflation increases, NPR reported — presumably disincentivizing those companies from repeated price increases.”
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“In addition to cementing Medicare’s new negotiating power, the bill also holds insurance subsidies for the Affordable Care Act through 2025, making health insurance more affordable for the millions of people who are insured through the health care marketplace. The initial subsidies were supposed to end this year, which would have meant increased premiums for the millions of people who qualified for free health insurance when Congress eliminated the income cap to qualify for federal assistance paying premiums.
The IRA also includes the largest-ever investments in climate change mitigation efforts, clean energy production, and climate justice programs, all designed to mitigate harmful effects of climate change in underserved areas.”
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“While much of the financial incentives for pursuing clean energy and climate change mitigation are geared toward companies, there are rebates and tax credits available for people buying clean energy sources like heat pumps and rooftop solar panels. Those measures are aimed at making clean energy more available to more people, although solar panels, for example, cost about $11,000 in 2021 for a household setup.
The legislation also offers a $4,000 tax credit for low- and middle-income drivers to buy a used electric vehicle, and up to $7,500 for a new electric vehicle. Additionally, a study by the Rhodium Group estimates that the bill’s provisions will save households an average of $1,025 per year by 2030.”
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“Even though all of these measures are in place, there is no question that the environmental actions and funding aren’t enough. The bill provides far less than what’s actually needed: a total system overhaul. It will be years before these programs will be implemented and pay off in the form of lower greenhouse gas emissions, better health outcomes for low-income communities, and improved clean energy infrastructure. However, it’s hard to deny that the IRA provides a glimmer of hope that it’s possible to start addressing some of the most pressing problems — including overwhelming health care costs and climate change.”
“Farms cover roughly 40 percent of the country, and they’ve replaced countless ecosystems with vast fields of soybeans, corn, and cattle. Agriculture also accounts for about 11 percent of US greenhouse gas emissions.”
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“The biggest chunk of money — roughly $8.5 billion — goes toward a program run by the US Department of Agriculture called the Environmental Quality Incentives Program. It pays for projects that restore the ecosystem or reduce emissions on farmland.
Farmers often use the money to buy and plant cover crops. These are plants, such as clover, radishes, or rye, that are rooted in fields that might otherwise be fallow to improve the health of the soil and prevent erosion. The idea is that the ground is always “covered” with something.
Cover crops also have a range of other superpowers, said Rob Myers, director of the Center for Regenerative Agriculture at the University of Missouri. During a drought, for example, they can lock moisture in the soil; during a flood, meanwhile, they help water more easily penetrate the ground.”
“One of the most damaging legacies of the intersection between racism and fossil fuels is how highways were built to cut through Latino and Black communities. The Federal-Aid Highway Act of 1956 alone displaced more than 1 million people, according to the Department of Transportation. People who remained near these roads, overwhelmingly communities of color, were exposed to more fine particulate matter from the tailpipes of cars and trucks.
That legacy lingers today. A mountain of research has shown how Black people nationwide are exposed to more damaging pollution from construction, power plants, roads, and industry than white people.
The Inflation Reduction Act includes a federal infusion of cash for community projects aimed at addressing some of the harmful effects of these projects. There is $3 billion marked for Neighborhood Access and Equity Grants, in addition to $1 billion already approved under the bipartisan infrastructure law last fall.
The money can be used for many things, including improving walkability, capping wells, installing noise barriers, and reducing the urban heat island effect. But one way communities could use the funding is to just remove a road, highway, or other types of damaging infrastructure. They can also reconnect communities divided by highways in other ways: “multi-use trails, regional greenways, or active transportation networks and spines.””
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“Slashing climate emissions requires doing two things at once: electrifying things like cars and stoves that typically run on fossil fuels, while also cleaning up fossil fuels in the power sector so that pollution doesn’t just come from another source. That’s the reason the US will have to shut down its last 172 coal plants within the decade to finally make good on its climate promises.
One surprising policy to help with this transition made it into the final bill, even though it needed Sen. Joe Manchin’s (D-WV) sign-off: $10 billion in direct payments to rural electric co-ops that pay for the cost of a clean energy transition. The USDA will administer direct payments for these co-ops to retire coal-fired power plants.
Many of the last coal plants standing are serving rural communities. E&E News noted that “about 32 percent of the power that supplies co-ops nationwide came from coal in 2019.” Investor-owned utilities, by contrast, generated 19 percent of their electricity from coal in 2020.
These rural co-ops, which are collectively owned and governed by the communities they serve, have moved away from coal slowly more for economic reasons than political ones. These coal plants tend to be newer, and the communities they serve may be more risk-averse to transitioning to renewables because they have to pay directly for the cost of the transition.
But before rural communities can even think about transitioning to solar and wind, first they have to shut down the coal plants. And that can be expensive because it includes paying off any debts. (A separate $5 billion Department of Energy program in the bill offers loans that lower debts and costs for privately owned utilities to transition to renewables.)”
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“The more controversial part of the bill is its funding of carbon capture for oil, coal, and industrial sites. Typically, these technologies have been used to just pump CO2 back in the ground for more drilling, rather than to do anything about the climate crisis. Still, prevailing climate science shows that some of this technology is probably needed to address the harder-to-decarbonize parts of the economy. So the federal funding for scaling new technologies could manage to go a long way over the long term.”
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“the act includes $20 billion for “climate-smart” agriculture, which could help farmers store more carbon in their soil and plants.
Part of that money, for example, will go toward an initiative called the Conservation Stewardship Program, which essentially pays farmers to make their land more environmentally friendly, such as by planting cover crops. Cover crops, planted when the ground would otherwise be fallow, are one way to increase a farm’s potential to store carbon (and can also help avoid emissions).
Another $5 billion in funding goes toward preventing wildfires and protecting old-growth forests, which are rich in carbon. This is critical because the US is expected to lose more of its natural carbon sinks over time under business-as-usual scenarios.”
“So-called “core CPI,” which filters out the more volatile categories like food and fuel prices, rose by 0.6 percent in August. In short, falling gasoline prices helped to offset broader and more pernicious inflation across the rest of the economy.”
“The latest Consumer Price Index (CPI) by the Bureau of Labor Statistics (BLS) shows that prices ticked up by 0.1 percent for urban consumers in August, for an annualized increase of 8.3 percent for the year. The marginal increase in inflation comes in spite of fuel costs falling 10.3 percent last month.
“Increases in the shelter, food, and medical care indexes were the largest of many contributors to the broad-based monthly all items increase,” said the BLS in its news release today. The latest CPI numbers show a 0.7 percent increase in shelter costs in August and 6.2 percent over the past year.
The BLS measures both cash rents paid by tenants and something called Owners’ Equivalent Rent—a measurement of how much an owner-occupied home could be rented for. The bureau doesn’t include home prices in the CPI.
Spot rents reported by listing companies are growing at an even faster rate. Apartment List reports a 7.2 percent increase in rental prices so far this year. That’s moderate compared to the 17.6 percent increase in rents the company reported in 2021. It’s still well above pre-pandemic increases from 3.4 percent and 2.3 percent in 2018 and 2019 respectively.
Rents plunged during 2020, driven by an urban exodus from high-cost coastal metros like New York City, San Francisco, Los Angeles, and Seattle. Many of those same cities are where rents are growing the fastest—alongside many of the Sun Belt metros where people fled to during the pandemic.
That suggests at least a partial reset of migration patterns during the pandemic. People are returning to the city (although not necessarily to the office).
The upshot is that the country’s housing affordability struggles aren’t going anywhere. Some analysts warn that they’re likely to get worse.”
“The bill also puts restrictions on which EVs can qualify. Starting in 2024, an EV that qualifies for the full rebate amount must source at least 40 percent of its battery’s components—including minerals such as lithium, cobalt, manganese, and graphite—from either the U.S. or a country with which the U.S. has a trade agreement. Also starting in 2024, no minerals can be sourced from a “foreign entity of concern,” such as China.
The stipulation was part of a compromise with Sen. Joe Manchin (D–W.Va.), whose support was critical to the bill’s passage. Manchin insisted that the bill take a hard line on China, telling reporters: “I don’t believe that we should be building a transportation mode on the backs of foreign supply chains. I’m not going to do it.”
But 60–80 percent of EV batteries’ mineral ingredients are controlled by China. That country currently produces 76 percent of the world’s lithium-ion batteries, while the U.S. produces only 8 percent. Despite ambitious plans to scale up, the U.S. and Europe together will likely account for only about a quarter of total global production of EV component minerals by 2030.”
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“Politico suggests that the government can simply get around these strictures by issuing waivers, much as it has done for steel tariffs. In practice, steel waivers incentivized cronyism, with Washington bureaucrats picking and choosing which companies received waivers and which did not. And if a law has problems, surely the best place to deal with that is in the text of the legislation itself, not an unstated hope that the administrative state will fix the issues when they arise.”
“many Fed watchers say some of the root causes of inflation lie outside the central bank’s control, like the U.S. labor shortage, global supply chain snags and Russia’s war on Ukraine. They’re raising concern that higher rates could crimp growth without leading to much relief on prices — a point that Sen. Elizabeth Warren (D-Mass.) has hammered away at Powell for months.”
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“Markets are expecting rates to rise nearly 2 more percentage points by the end of the year. That would bring them to a level that is more normal by historical standards — the Fed’s main borrowing rate would sit above 4 percent — but is staggeringly high compared to the near-zero rates that have mostly prevailed for more than a decade.”
“Despite the bill’s name, independent analysts have found it will have virtually no impact on inflation. In reality, it is a pared-down version of what Biden originally pitched as the “Build Back Better” plan—it leaves aside much of the original bill’s spending, but it maintains a huge corporate tax increase, huge spending on green energy initiatives, and a plan to swell the ranks of IRS agents. What was originally a roughly $4 trillion proposal that would have relied heavily on borrowing ended up being something of a rarity in Washington: a bill that will raise more revenue than it spends.
And where will it get that revenue? Quite possibly from you. Households earning as little as $50,000 annually are more likely to see a tax increase than a tax break from the legislation.
In the final hours before the House vote, the Joint Committee on Taxation (JCT) completed a breakdown of how the bill’s corporate tax increases would affect households at various income levels. The JTC, a nonpartisan number-crunching agency within Congress, found that households earning between $50,000 and $75,000 are more likely to see a tax increase than a tax decrease next year.
Higher-earning households are more likely to see tax increases, but households earning more than $1 million next year are actually far more likely than lower-earning households to get a tax break.
That fits with what The Tax Foundation, a tax policy think tank, found when it analyzed the bill. The Inflation Reduction Act will “would also reduce average after-tax incomes for taxpayers across every income quintile over the long run,” the Tax Foundation reported on Wednesday. Those tax increases will reduce long-term economic output by about 0.2 percent and could eliminate 29,000 jobs, the group found.”
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” Tax increases on corporations get passed along from the board room table to the kitchen table in a variety of ways: lower pay for workers, higher prices for consumers, and smaller investment returns for shareholders.”
“Housing keeps getting more expensive — and even though new data shows that overall price increases are slowing down, surging rent prices underscore how difficult it could be to bring inflation under control.
Prices were 8.3 percent higher in August compared to a year before, according to the Consumer Price Index report released on Tuesday. That’s slower than it was the month before, when inflation climbed 8.5 percent, but it’s still uncomfortably high for consumers and policymakers. Prices picked up 0.1 percent from July to August.
One of the biggest drivers of inflation has been higher rent prices. According to data from Zillow, the typical US monthly rent was $2,090 in August, up 12.3 percent from a year before. That is much higher than it was before the pandemic — in February 2020, the nation’s average rent was $1,660.
According to the CPI report, shelter prices — which include rent, lodging away from home, and household insurance — rose 0.7 percent in August from the month before, the biggest monthly jump since 1991. The rent index by itself also increased 0.7 percent from July, and was up 6.7 percent from a year ago.”
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“Sarah House, a senior economist at Wells Fargo, said that rent prices could be decelerating as supply improves and landlords start to “get a little bit more realistic” about how much they can charge before they see more pushback from renters. But she said that rent prices in the CPI measure tend to move slowly, so it could take time for the government data to reflect the price deceleration that private-sector data may already be picking up.
That’s largely because the government data also takes into account existing rentals, while many private data sources only examine prices for new leases to capture current market conditions. Since rents typically change when leases expire, which tends to happen annually, this can lead to a lag in government data.
“I think we’re close to beginning to see a slowdown in the monthly rate of the price gain,” House said. “But it’s still likely to remain pretty strong in a historical sense for some time.”
Omair Sharif, the founder and president of research firm Inflation Insights, also said rent price gains could slow in the coming months as the CPI measure eventually catches up to private-sector data.
“Around the end of this year into the first quarter of next year, we should probably start to see the CPI data start to mimic more closely what we’re seeing in terms of that deceleration,” Sharif said.
A deceleration in rental price growth could help bring down overall inflation closer to the Fed’s goal of 2 percent annual inflation. Although prices for rent, food, and medical care climbed in August, prices for gasoline, used cars, and airline fares dropped.
Still, mortgage rates have skyrocketed to their highest levels since 2008 and home prices remain much higher than they were before the pandemic. That has made it harder for people to afford monthly payments, leading to some potential homebuyers being priced out of the market. If people continue renting rather than buying, that could drive up demand for rentals and keep prices high.”
“Tens of thousands of freight rail workers are prepared to go on strike on Friday at 12:01 am, which could have wide-ranging effects across the economy. It’s already causing some disruptions for rail passengers, freight companies, and others.
The cause is a dispute between the freight industry and the workers who make it run.
Most of the 12 unions representing the workers have already agreed to a proposal put together by a presidential emergency board established by the White House over the summer to try to help resolve the dispute. The proposal includes a 24 percent increase in wages for workers by 2024, but many workers have complained that it fails to address leave, on-call scheduling, and poor working conditions.
The holdout unions’ position is that pay increases aren’t enough to make up for some real downsides — and dangerous aspects — of the job.
The two most powerful unions involved in the negotiations, which represent engineers and conductors, are continuing to resist the proposal, putting both sides in a deadlock. If workers do go on the strike they appear to be hurtling toward, it would be the first such strike in 30 years.”
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“If a freight strike were to occur — and especially if it’s long-lasting — it could have disastrous effects across an already fragile economy still reeling from supply chain disruptions and inflation.
“Rail moves a lot of the foundational, basic goods that we don’t think about day-to-day,” said Rachel Premack, editorial director at FreightWaves, which covers supply chains. “They’ll move sand and gravel that would then be crushed into concrete for roads or for laying home foundations. Railroads move the chemicals used to purify water or to compromise fertilizer for crops, soybeans that could become food for humans or [animals] that are then food for humans. It’s a lot of early-chain-type goods.”
Many passenger trains also run on freight rails, and their service could be suspended. Amtrak has already warned of potential disruptions and canceled cross-country trains in anticipation of a strike, though so far its Northeast service will not be affected.”
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“Replacing freight with other forms of transportation is not easy if workers do walk out. Mike Steenhoek, executive director of the Soy Transportation Coalition, told Vox in an interview that one train has the freight capacity of 400 semi-trucks. “I don’t know of a shipper who just has 400 semis sitting in a garage ready to be accessed,” he said. He noted that for agriculture, the timing couldn’t be worse because of harvest season, adding more urgency for a deal.”
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“Under the Railway Labor Act, Congress has the ability to block or end a rail strike. Since 1963, it has passed legislation more than 10 times to intervene in rail disputes.
So far, though, Democratic leaders have been reluctant to commit to doing so, while Republicans have been eager to pressure workers into agreeing to the terms set by the presidential emergency board.
If Congress were to intervene, there are a few routes lawmakers could take. They could require the unions and carriers to accept the presidential emergency board’s conditions, which included a pay increase but no acknowledgment of other demands like sick leave. They could extend the existing cooling-off period so both sides have more time to negotiate. Or they could turn the talks over to independent arbitrators who would be tasked with finding a resolution.
For now, congressional Democrats are waiting to see what might come out of the talks the Labor Department is leading between unions and railroad carriers on Wednesday before they lay out a policy response.”