TUESDAY, AUGUST 9, 2022
Elsewhere, anthropology rules: Reactions to yesterday's events at Mar-a-Lago represent a sprawling anthropology lesson.
The lesson involves what happens to people—the things we people will say and do—when our nations divide into tribes.
As of today, our tribal division is much more advanced, but we'll postpone that discussion. For now, let's take one more look at the idea that the Inflation Reduction Act involves inflation reduction.
We'll start with Paul Krugman's new column. Here's what Krugman says:
KRUGMAN (8/9/22): Republicans like Mitt Romney are trying to lump this legislation in with last year’s American Rescue Plan, which they claim caused inflation to spike.
Never mind whether this claim is true. The key thing is to do the math. The Inflation Reduction Act calls for spending less than $500 billion over a decade, compared with the American Rescue Plan’s $1.9 trillion in a single year—and will actually reduce the deficit. That’s why independent analysts find that it will have little effect on inflation.
According to Krugman, independent analysts "find that [the Inflation Reduction Act] will have little effect on inflation." As we noted a few days ago, that's what the CBO has officially said.
Krugman links to an analysis by the Penn Wharton Budget Model. The analysis he links to says this:
PENN WHARTON: The Act 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.
PENN WHARTON: We estimate that the Inflation Reduction Act will produce a very small increase in inflation for the first few years, up to 0.05 percent points in 2024. We estimate a 0.25 percentage point fall in the PCE price index by the late 2020s. These point estimates, however, are not statistically different than zero, thereby indicating a very low level of confidence that the legislation will have any impact on inflation.
To the extent that they can make an estimate, Penn Wharton says the act will (very slightly) increase inflation up to and including 2024.
On the brighter if utterly pointless side, they estimate a small drop in the rate of inflation "by the late 2020s." That said, they offer a "very low level of confidence that the legislation will have any impact on inflation" at all.
With that, Penn Wharton largely agrees with the official assessment by the CBO. As noted, this is the analysis that Krugman, a top economist and an expert, has chosen to cite today.
We mention this because we looked in last night on the NBC Nightly News. At the end of a very brief report on this legislation, cable's own Ali Vitali had this cheerful, upbeat exchange with guest host Tom Llamas:
LLAMAS (8/8/22): The bill is expected to pass in the House. What are experts saying on how it will affect the current inflation crisis?
VITALI: Tom, top economists say this bill will put downward pressure on inflation. A group of former Treasury secretaries from Democratic and Republican administration had urged Congress to pass it, saying investments in energy and health care will fight inflation and lower costs, while setting the table for long-term economic growth.
Vitali seems to be referring to this brief, August 3 statement by five former Treasury secretaries—four Democrats and one lone Republican.
These top economists devoted exactly two words to their analysis of the bill's likely effect on inflation. Vitali chose to go with that, embellishing what the former secretaries said while failing to mention the CBO and pretty much everyone else.
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