News analysis

Biden signs climate, health Bill into law as other economic goals remain

US President Joe Biden speaks before signing the Inflation Reduction Act in the White House on Aug 16, 2022. PHOTO: EPA-EFE

WASHINGTON (NYTIMES) - US President Joe Biden signed into law a landmark tax, health and energy Bill on Tuesday (Aug 16) that takes significant steps towards fulfilling his goal to modernise the US economy and reduce its dependence on fossil fuels.

The vast legislation will lower prescription drug costs for seniors on Medicare, extend federal subsidies for health insurance and reduce the federal deficit. It will also help electric utilities switch to lower-emission sources of energy and encourage Americans to buy electric vehicles through tax credits.

What it does not do, however, is provide workers with many of the other sweeping economic changes that Mr Biden pledged would help Americans earn more and enjoy the comforts of a middle-class life.

Mr Biden signed the Bill, which Democrats call the Inflation Reduction Act, in the State Dining Room at the White House. He and his allies cast the success of the legislation as little short of a miracle, given it required more than a year of intense negotiations among congressional Democrats. In his remarks, Mr Biden proclaimed victory as he signed a compromise Bill that he called "the biggest step forward on climate ever" and "a godsend to many families" struggling with prescription drug costs.

"The Bill I'm about to sign is not just about today; it's about tomorrow. It's about delivering progress and prosperity to American families," Mr Biden said.

Administration officials say Mr Biden has passed far more of his economic agenda than they could have possibly hoped for, given Republican opposition to much of his agenda on taxes and spending and razor-thin Democratic majorities in the House and Senate. His wins include a US$1.9 trillion (S$2.6 trillion) economic rescue plan last year designed to get workers and businesses through the pandemic and a pair of bipartisan Bills aimed at American competitiveness: a US$1 trillion infrastructure Bill and US$280 billion in spending to spur domestic semiconductor manufacturing and counter China.

But there is little dispute that Mr Biden has been unable to persuade lawmakers to go along with one of his biggest economic goals: investing in workers, families, students and other people.

Both parts of the equation - modernising the physical backbone of the economy and empowering its workers - are crucial for Mr Biden's vision for how a more assertive federal government can speed economic growth and ensure its spoils are widely shared.

In a warming world with increased economic competition from sometimes adversarial nations, Mr Biden considers investment in low-emission energy sources and advanced manufacturing critical to US businesses and the nation's economic health.

Mr Biden also sees human investment as crucial. The US economy remains dominated by service industries like restaurants and medicine. Its recovery from the pandemic recession has been stunted, in part, by breakdowns in support for some of the workers who should be powering those industries' revival. The cost and availability of child care alone is keeping many potential workers sidelined, leading to an abundance of unfilled job openings and costing business owners money.

Yet Mr Biden has so far been unable to deliver on many of the programmes he proposed to help Americans balance work responsibilities with care for children or ageing parents, and to pursue high-quality education from a young age. He could not secure universal prekindergarten or free community college tuition. He could not find support to fund child care subsidies or to extend a tax credit meant to fight child poverty. And his plans to spend hundreds of billions of dollars to expand and improve home health services for seniors and disabled people have also foundered.

Those omissions add up to what liberal economists call a missed opportunity to help Americans work more and earn more, and to make the economy run more efficiently.

Mr Biden has had more success in getting Democrats, and some Republicans, to invest in the physical economy and to embrace a more interventionist view of federal power, said Lindsay Owens, executive director of the liberal Groundwork Collaborative in Washington. By embracing industrial policy and government-induced emissions reduction, she said, "he's moved to an economic system and an economic agenda where the government is really throwing its weight around, putting its thumb on the scale," she said.

But, she added, "we didn't get the care agenda. That's a huge miss. Until we get affordable child care, our economy's not going to be at full strength."

In Congress, that agenda, which Mr Biden largely packed into his "American Families Plan", always faced a much rockier path than the competitiveness efforts in his "American Jobs Plan". It had almost no support from Republicans, ruling out the bipartisan path that delivered Mr Biden wins on infrastructure, research and development and domestic manufacturing. And it ran into problems with some Senate Democrats, including Joe Manchin of West Virginia, who pushed early for Mr Biden to limit the size and scope of what morphed into the bill Biden signed Tuesday.

President Joe Biden (seated) signs the Inflation Reduction Act of 2022 in the State Dining Room of the White House on Aug 16. PHOTO: NYTIMES

Opposition from another critical Senate Democrat, Kyrsten Sinema of Arizona, forced Mr Biden to drop much of what he promised would be an overhaul of the tax code to "reward work, not wealth." He did not, as he repeatedly proposed, end up raising top marginal income tax rates for high earners or taxing investment returns for millionaires at the same set of rates as income earned from wages, which he had promised would help reduce economic inequality.

The legislation he signed on Tuesday is projected to increase taxes by about US$300 billion, largely by imposing new levies on big corporations. The law includes a new tax on certain corporate stock repurchases and a minimum tax on large firms that use deductions and other methods to reduce their tax bills. It also bolsters funding for the IRS in an effort to crack down on tax evasion and collect potentially hundreds of billions of dollars that are owed to the government but not paid by high earners and corporations.

Those increases represent only a small slice of the tax revenue from corporations and high earners that Biden initially offered to fund his agenda.

"On the tax side, the president fell far short of his promises," said Steve Rosenthal, a senior fellow in the Urban-Brookings Tax Policy Centre in Washington. "On the other hand, what he did accomplish was substantial."

Ben Harris, a campaign economic aide to Biden who is now the assistant secretary for economic policy in the Treasury Department, said the increased IRS enforcement against tax evasion by high earners and corporations would by itself help balance the tax system in favour of workers.

The Bill Mr Biden signed on Tuesday invests US$370 billion in spending and tax credits in low-emission forms of energy to fight climate change. It is aimed at helping the United States cut greenhouse gas emissions by an estimated 40 per cent below 2005 levels by 2030. That would put the country within striking distance of Mr Biden's goal of cutting emissions at least 50 per cent over that time period.

It extends federal health insurance subsidies, allows the government to negotiate prescription drug prices for seniors on Medicare and is expected to reduce the federal budget deficit by about US$300 billion over 10 years. Administration officials call the health components crucial to millions of workers, and they say the climate components will create high-paying union jobs in an emerging clean-energy economy.

But the climate provision is also instructive for what Biden has been unable to deliver. Mr Biden called on Congress to create a civilian climate corps - what he described in his American Jobs Plan outline as a US$10 billion effort to create "the next generation of conservation and resilience workers." Patterned after the Civilian Conservation Corps of the 1930s, which put more than 3 million men to work building roads and parks, cutting trails and planting trees across the country, the reenvisioned climate workforce was part of a bill that passed the House in November.

It was a direct investment in workers. And after Mr Manchin walked away from that package and negotiations restarted this year on a new agreement, it was left on the cutting-room floor.

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