Inflation Reduction Act: Americans will see ‘lower health costs,’ Biden official says
Yahoo Finance Video
Director of the National Economic Council Brian Deese joins Yahoo Finance Live to discuss the immediate and long-term effects of the Inflation Reduction Act, medical and taxpayer advantages, the economy, and the outlook for federal deficit.
Video Transcript
- President Biden expected to sign the Inflation Reduction Act into law this afternoon. The sweeping $750 billion legislation includes provisions aimed at drug pricing, domestic energy production, manufacturing, carbon emissions. White House National Economic Council Director Brian Deese here with more. Brian, great to have you on the program this morning. Talk to us about whether or not we should expect any sort of immediate reduction in inflation because that's what Americans are really concerned about right now at the present.
BRIAN DEESE: Well, this is a significant piece of legislation that will have both immediate impact and longer-term economic impact as well. In the immediate term, tens of millions of Americans are going to see lower health care costs and prescription drug prices as a result of this bill. And, immediately, Americans will be eligible for new tax credits and rebates to invest in energy efficiency in their homes and in other parts of their lives.
But also across time, this bill will reform the prescription drug system in a way that we haven't in decades to try to generate lower costs for consumers and for the federal government and also tackle the climate crisis and increase energy security here domestically in ways that the United States, our country, has never invested in before. So you will see both immediate impact, short-term impact, and also long-term economic impact. And that's what we need right now.
- Brian, this comes at a time when, of course, Americans are very concerned about inflation. And this is a package that's dubbed the Inflation Reduction Act. In the context of where inflation is today, how much reduction should Americans expect on that number?
BRIAN DEESE: Well, look, I think that the goal of this bill is to do what fiscal policy can do at our current economic moment. And if you ask that question, the Fed is operating monetary policy independently, what can Congress and a President do at this moment? The most consequential and significant step that they can take is passing this Inflation Reduction Act and the President signing it into law today.
And the reason for that is in addition to the benefits that I just described, this bill will reduce the federal deficit. It does so by not only allowing Medicare to negotiate prescription drug prices, but enacting tax reforms, specifically establishing a 15% minimum tax for all corporations. And by doing that, fiscal policy complements what the Fed is trying to do, reducing price pressures, even as we're going at some of the most important economic challenges we face around health care prices and energy costs.
- Brian, when we talk about just kind of the health implications of all of this, obviously, a lot of focus on the drug pricing aspects, the Medicare benefits as well. You've kind of unpacked this a little bit earlier. But can you just kind of outline exactly what the timing of that and how that kind of comes into effect because it's not something that's going to take effect necessarily this afternoon when the ink dries, right?
BRIAN DEESE: Well, there's a lot of families out there that when the ink dries today, they're going to have a lot more security knowing that these provisions are going to come into effect. But let me break it down for you. First, on health care premiums, there's 13 million Americans who starting this fall will benefit from lower health care premiums as a result of this bill. Insurers will be sending out letters in October of this year. And because of this legislation, people will see lower premiums in those letters and in their premiums that they have to pay over the subsequent year.
Second, there's going to be a cap on the out-of-pocket costs that Medicare beneficiaries pay for their prescription drugs, particularly for people with chronic conditions like cancer. This cap of $2,000 will begin to be implemented at the end of this year and will make a big difference in terms of the out-of-pocket costs that people have to pay. And third, Medicare beginning to negotiate for better prescription drug prices.
So what Americans can expect is to see these impacts coming into effect over time. But if you're one of the tens of millions of Americans who deals with high prescription drug prices or who is buying their health insurance through the Affordable Care Act exchanges, right today you can take some comfort in knowing that the President signing this into law gives you that certainty and that stability to operate your life with a little more breathing room, as the President would say.
- Brian, let's talk about some of the climate provisions in this particular bill. Obviously, huge investments to tackle the climate crisis, one of them being tax credits for EV purchases. We recently had the CEO of Fisker, obviously an EV maker, on who said that he was worried that there were too many strings attached to getting those tax credits. In fact, he thought this would actually slow down EV adoption. So if we're talking about $7,500 credit for a new car, in your estimation, how many cars, EV cars on the market right now, would actually be covered?
BRIAN DEESE: Well, let me start by zooming out and then get directly to your question. The core of this bill on the clean energy side is to provide long-term technology-neutral tax credits so that we generate lower carbon energy here in the United States and we generate the technology and the technological advances that come with that. So that means everything from wind and solar and battery storage to clean hydrogen, carbon capture, the batteries that go into electric vehicles. We want to not only produce those here, but generate the innovations here that we can then export around the world.
That's where the EV tax credit comes in. Certainly, it sets a high bar that that tax credit is eligible for batteries and vehicles that are produced in the United States or in North America or countries that we have free trade agreements with. And we think that that's an appropriate bar because what we want across time is to provide a strong incentive for us to have secure supply chains in those areas and for as much of that as is feasible to be happening here in America.
Look, we're seeing a resurgence in consumer demand for electric vehicles. And so that's something that's happening in the market today. And we certainly expect that because of this legislation, companies and the suppliers in the supply chain are going to respond quite significantly.
- Well, and we've already seen a lot of these EV makers respond in trying to source things back home. But that timeline is not just within the next year. We're talking several years. So if we're talking strictly where the market is right now, how many EVs would be covered? Are we talking 10% of the market? 20% of the market? What's your estimation?
BRIAN DEESE: Well, two things. One, these companies are racing towards generating more secure supply chains. It's in their economic interest as well as our national interest as well. And so I'm talking to CEOs of the auto companies as well as suppliers on a weekly basis. And what they're telling me is they want to move quickly and they, frankly, want an incentive to move even more quickly toward that goal.
The second-- and I think this is very important-- is in addition to the new vehicle tax credit, which as you say, companies are going to have to identify if they are eligible and when they can be eligible based on the domestic content, this bill also for the first time has a used vehicle credit for electric vehicles. And that's incredibly important because most Americans who are out there buying vehicles are actually buying used cars, particularly lower working class folks.
And so as we have more electric vehicles in our vehicle mix, having a credit for used vehicles is incredibly powerful. It helps broaden the number of Americans who could see themselves getting into an electric vehicle. Maybe not a new one, but one that is used a couple of years as well.
- Well, the bill signing certainly a big victory for the President. A long road for you as well. Brian, appreciate your time today. White House National Economic Council Director Brian Deese joining us from the White House.