STATEMENT: Joseph Stiglitz on the Inflation Reduction Act

In response to the announcement of the Inflation Reduction Act agreement, Joseph Stiglitz, Roosevelt Institute Chief Economist, made the following statement:

NEW YORK, NY — “The compromise agreed to under the rubric of the Inflation Reduction Act of 2022 is far more than just an act addressing inflation—although it does that in several ways. It simultaneously addresses several key and long-standing problems facing our economy and society.

“First, on inflation: There is a simmering debate on the causes of inflation, but whatever side one takes in that debate, this bill is a step forward. For those worried about excessive demand, there is more than $300 billion in deficit reduction. 

“A key driver of today’s inflation is the high cost of energy; the $369 billion investment in energy security and climate change will help bring down energy costs, as it takes an important step forward in protecting us from the ravages of climate change by lowering carbon emissions by some 40 percent by 2030. The costs we bear, year after year, as we repair the damage done by climate change—through wildfires and hurricanes and tornadoes and a host of other extreme weather events—lower our standard of living even more than today’s inflation, with the costs borne disproportionately by those of lower income, people of color, and future generations. Indeed, those costs are far larger and harder to rectify than the costs of deficits.

“Moreover, rising health-care costs have long plagued America, and this bill will help lower the costs American families pay for health care, both by lowering ACA health-care premiums for millions of Americans and by capping out-of-pocket costs for drugs for those on Medicare. Importantly, the long-standing “gift” to the pharmaceutical industry—the tens of billions of dollars extra they receive because the government, the largest buyer of drugs in the world, is prohibited from negotiating with the drug companies—is at last being curbed, for an estimated saving of almost $300 billion.

“Confidence in our democracy is eroded when the richest people and corporations don’t pay their fair share of taxes. Some companies seem to put as much effort into tax avoidance as they do in serving their customers. And when they do that, it undermines not just fairness, but economic efficiency. Tax revenues are necessary if we are to finance essential public expenditures without inflationary deficits. Russia’s invasion of Ukraine has reminded us of why defense expenditures are necessary. If America is to keep its competitiveness, we have to invest heavily in education, research, technology, and infrastructure. And that’s why the more than $450 billion raised through a 15 percent corporate minimum tax, increased IRS tax enforcement, and closing of a gaping loophole that benefited some of the richest people on Wall Street are so important. 

“The 15 percent corporate minimum tax is especially important. The US led a global negotiation to stop the race to the bottom, with a few countries trying to steal tax revenues and jobs by cutting special deals for corporations. But the global agreement we forged is unlikely to go forward if we do not go along with the very agreement we urged others to sign up to. There are so many issues—including the fight for democracy in Ukraine—for which we need global cooperation. Passing the 15 percent minimum tax not only raises badly needed revenue; it saves American jobs from being unfairly competed away, and, like the climate measures, is an important step in showing that we can be good global citizens.”

You can find the Roosevelt Institute’s full statement on the Inflation Reduction Act here.