Sen. Joe Manchin, D-W. Va.
Bill Clark/CQ-Roll Call, Inc via Getty Images
Paul Constant is a writer at Civic Ventures and the cohost of the “Pitchfork Economics” podcast.
Interest rates are rising as the Federal Reserve attempts to combat inflation by slowing down the economy.
In response, Democrats are pushing the Inflation Reduction Act, which aims to address the inflation crisis in a new way.
The deal would raise the corporate minimum tax rate to 15%, add a cap on pharmaceutical prices, and put more money into the green economy.
Last week, Senate Democrats shocked political observers when they made a surprise announcement: Senator Joe Manchin of West Virginia and Senate Majority Leader Chuck Schumer had quietly hammered out a budget deal called the Inflation Reduction Act (IRA).
It’s a catchy name that’s garnered a lot of media attention, but the political risks of tying the bill directly to the inflation crisis could damage the Democratic Party in the midterm elections. If, for instance, the inflation rate continued to skyrocket in September and October after the passage of the IRA, voters would likely continue to question the economic stewardship of the Democratic Party.
But on the flip side, the potential political payoff is massive, especially for a package that’s a dramatic shift in how politicians, even Democrats, approach economic policy and inflation.
The 2 approaches to addressing inflation
Right now, there are two major economic schools of thought about solving inflation. The first is what’s currently happening: The Federal Reserve is raising interest rates in an effort to slow down the economy and decrease consumer demand, which has been the mainstream response to inflation since the stagflation crisis ended in the early 1980s. But by raising interest rates, the Fed is making it harder for individuals and companies to borrow money, which …read more
Source:: Business Insider