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What is the Inflation Reduction Act of 2022?
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Blog...What is the Inflation Reduction Act of 2022?

What is the Inflation Reduction Act of 2022?

Ecology News
Policy
american flag and someone holding USD bills with gloves against grass
What is the inflation reduction act of 2022, and how does it help to fight inflation?
Ecology News
2023-07-28T00:00:00.000Z
en-us
american flag and someone holding USD bills with gloves against grass

Inflation is worse than it’s ever been before, and most governments around the world have been too preoccupied with other predicaments to implement something like the Inflation Reduction Act of 2022.

Will the new inflation reduction act actually help to stabilize rapidly increasing prices and the economy? How does the new inflation reduction act plan to prevent prices from skyrocketing more than they already have?

What is the Inflation Reduction Act of 2022?

The Inflation Reduction Act of 2022 is a historic law in the United States that will aim to fight inflation, reduce deficit, lower the price of prescription drugs, reallocate funds to the use of domestic energy production, clean energy, and manufacturing, and simultaneously help to reduce carbon emissions. 

This new inflation reduction bill will also grant Medicare the ability to negotiate the prices for prescription drugs prices and extend the expanded Affordable Care Act program until 2025.

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What are some of the categories included in the Inflation Reduction Act of 2022?

Specifically, the new inflation reduction act plans to accomplish its goal of stabilizing prices by expanding medicare benefits such as providing those who qualify for medicare with free vaccines by 2023, offer insulin for only $35 a month, and to cap the prices on out-of-pocket drug costs. 

The new inflation reduction act plans to lower overall health care costs by allowing the average prospect to save $800 a year, and also allow for more benefits with medicare. The new inflation act also plans to negotiate prices for more than one hundred drugs throughout the next decade, with an ultimate goal to encourage more companies to increase their rebates on medication.

The inflation reduction act also plans to help lower energy bills with the intent to reduce energy bills anywhere from $500 to $1,000 annually.

The United States has already revealed their revolutionary climate bill to help reduce climate change, but the new inflation act also plans to help benefit the environment with a goal to reduce carbon emissions by nearly 40% by 2030.

The Inflation Reduction Act of 2022 also plans to create more jobs in manufacturing and invest in communities that are suffering by offering to help clean up the effects of pollution and assisting these developing communities to implement plans to reduce the negative environmental impacts they are suffering from. 

Finally, the new inflation reduction act aims to prevent the common tax loopholes that the wealthy are known to take advantage of by implementing a 15% minimum tax on corporate, a 1% fee on stock buybacks and also pontificate the importance of enforcement by the IRS. In addition to mitigating cheat schemes regarding taxes for the wealthy, the inflation reduction act also plans to help families and small businesses that aren’t raking it in. Any family or small business making $400,000 or less annually will be able to benefit from the inflation reduction act.

Yes – the Inflation Reduction Act of 2022 has many subcategories, but it has proven to be necessary in order to mitigate the current impact inflation is having on society.

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Why was the Inflation Reduction Act of 2022 necessary?

The cost of living in the United States is already more difficult: as healthcare isn’t included for most, even with jobs – and the need for a car is almost always essential for general transportation unless you live in an area with excellent public transportation like New York City.

The Inflation Reduction Act of 2022 doesn’t only seek to reduce the impact of inflation, but to aid those who are in dire need of improved healthcare benefits and overall financial stability. The new inflation reduction act will be able to help those Americans who are not financially equipped to handle periods of inflation, while also providing them with other long-term benefits like extended, improved healthcare.

What causes inflation?

Inflation is common amongst any product or service like housing, food, medical care, and utilities – but inflation also impacts unnecessary, personal expenditures like cosmetics, cars, and clothing.

Inflation occurs when there is an imbalance in the relationship between supply and demand. When the demand outweighs the supply, prices must increase in order to prevent a shortage in the product in question. Even if there is a perceived shortage of the product, the product immediately becomes more valuable and therefore, the price increases.

Inflation is concerning because it decreases the value of money at any given moment.

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For instance, a traveler from the United States could be saving up for a trip to Europe for a few months. They may be under the impression that they have finally hit their goal and can hop on the next flight across the pond, but in reality – the exchange rate between the dollar and the euro aren’t what they were a few months ago when the traveler in question was planning their flight.

This is a classic example of inflation. Inflation can also occur due to production costs, demand, and fiscal policy all influence inflation.

Consumers suffer from inflation, but it could prove lucrative for businesses or investors temporarily. Those who own stocks could see a momentary increase in their assets during a period of inflation. 

Sometimes inflation is good, as it can help businesses to increase production – but ultimately, inflation makes it difficult for consumers to purchase goods and pay their bills.

Why is inflation so high right now?

Inflation isn’t just happening in the United States, but around the world.

Specifically, the prices of food and energy are going up the most during this current period of inflation. Most notably, this period of inflation is being caused by a post-pandemic demand for goods and also due to the situation between Russia and Ukraine. 

While this current spike has been deemed as historical, it isn’t expected to last forever – as the inflation is most certainly a cause of the atypical demand for goods as countries around the world resume normal activities such as shopping, concerts, and travel. After a long time of slow economic activity, there was bound to be a temporary uptick like the one we’re experiencing now.

The United States also increased the amount of jobs and amount employees are paid in the last year – as The Labor Department shared that the United States created 372,000 jobs in June 2022 alone. Just like life in any big, populous city like San Francisco or New York City isn’t sustainable without a high wage due to the high cost of living, the same goes for all these new employees without newfound higher payrolls.

In short, the demand for goods around the world has been dramatically higher than usual, and when demand is greater than the supply available – there is either a shortage in the goods, or an increase in the price. There isn’t a shortage on most of the products where prices are going up, therefore – an increase in price is what’s happening instead.  

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Were there previous measures implemented to reduce inflation in the United States?

The United States is no stranger to experiencing inflation before. However, no bill has ever been passed like the Inflation Reduction Act of 2022 before.

Most governments are often advised that while there are things that they can do to decrease the impact of inflation, that it is often a cause of external locus of control – and that time is really the only thing the country can rely on when it comes to ending inflation.

Local governments could do things like temporarily lower the tax on a product like gas so that citizens do not feel overwhelmed by the increase in prices. While this doesn’t change the imbalance between supply and demand for a product that will often be influenced by inflation like gas, it can help a little bit for those suffering financially during a period of inflation

However, it is important to note that ultimately, there isn’t much a government can do to reduce the impact of inflation. In fact, even the new inflation reduction act isn’t likely to have an impact on inflation for the next few months, and by then – most of the culprits of the current spike in prices will have resolved themselves on their own. Still, the bill is imperative to help Americans get the healthcare rights they deserve and to establish an effort to mitigate climate change.

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Does inflation impact the environment? 

Rising inflation doesn’t necessarily impact the environment, but the state of climate change does seem to have an impact on inflation itself.

👉 Although many independent analyses believe that the Inflation Reduction Act of 2022 will help the U.S. achieve their goal of reducing their greenhouse gas emissions to 50% below of the levels of emissions in 2005 by 2030 – it’s important to recognize the power that establishing measures to reduce climate change itself can have a direct, positive impact on the inflation problems the world is suffering from today. 

Most will attest the multiple COVID-19 lock downs that forced business owners into foreclosures as a primary reason for the economy’s current state. While this is both evident and true as to why so many prices are being driven higher in order to compensate for lost time where businesses weren’t able to fully operate, economists delineate to not negate how extreme weather events due to climate change are also a primary reason behind inflation.

There are many reasons as to why climate change is negatively affecting inflation. For instance, natural disasters have prevented crops from being harvested, deterred the use of energy supplies, and destroyed public transportation lines. These devastating occurrences are only likely to continue as climate change worsens.

The efforts for nations around the world to mitigate climate change and strive to reach net-zero emissions by 2050 is costly in itself, too. Both public and private sectors have and will continue to spend trillions of to make the transition from fossil fuels to renewable energy sources, and new regulations that will increase the cost of goods and services that emit a high rate of carbon dioxide emissions such as in the new Corporate Sustainability Reporting Directive in the European Union – will also drive prices higher than they already are.

Just in the past year alone, the United States has suffered from over $20 billion in damage from natural disasters: such as the tropical storms in Florida and droughts on the west coast. The economic impact of these natural disasters provoked by climate change is substantial. 

Massive storms or wildfires are not only costly to repair in conjunction with the communities and developing countries that suffered from the natural disaster, but these drastic, climate change induced weather patterns impact other sectors that impact the economy, as well. A chemical shortage caused by a natural disaster could spike prices for consumers, out of character cold weather could alter harvest times for crops, and various facilities could have to shut down due to unprecedented weather conditions.

Therefore, it’s clear that governments must implement stronger policies to mitigate climate change – or the world could see even more economic implications due to inflation. 

All in all, the Inflation Reduction Act of 2022 is a great place for the U.S. government to stabilize skyrocketing prices, but it isn’t likely to have an impact on inflation immediately. This is why in order to implement long-term habits to reduce occurrences like inflation, that the United States, alongside the rest of the world – shouldn't mitigate the importance of establishing concrete measures to fight against climate change: the ultimate root of the multitude of problems, such as inflation, that the world is battling from today.

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