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An independent analysis of President Biden’s ballyhooed Inflation Reduction Act finds it won’t reduce inflation at all.
The Penn-Wharton Budget Model found that the proposal, which includes $433 billion in new spending on climate and other items, “would very slightly increase inflation until 2024 and decrease inflation thereafter.”
“These point estimates are statistically indistinguishable from zero, thereby indicating low confidence that the legislation will have any impact on inflation,” the study said Friday.
The president is proclaiming the bill as the antidote to 41-year-high inflation of 9.1%, which has contributed to Mr. Biden’s low approval ratings.
“This bill will reduce inflationary pressures on the economy,” Mr. Biden said Thursday after Senate Democrats reached a tentative agreement.
The Penn-Wharton researchers, after running the numbers, concluded that the bill would produce “a very small increase in inflation for the first few years, up to 0.05 percent points in 2024.”
After that, the study said, the measure would cause a drop of 0.25 percentage points in the PCE price index by the late 2020s.
The Federal Reserve, which determines a key interest rate to guide lenders, pays close attention to the PCE index as the most accurate measure of inflation. The latest report of the index on Friday showed that inflation is still rising.
Asked about the Wharton study, White House press secretary Karine Jean-Pierre pointed instead to economist Joseph Stiglitz, who called the Democrats’ legislation “a major step forward” for the economy.
“That’s how we see it as well,” Ms. Jean-Pierre said.
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