Inflation Reduction Act is the real deal

Opinion editor's note: Editorials represent the opinions of the Star Tribune Editorial Board, which operates independently from the newsroom.

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Persistence and patience pay off. That is a lesson America's last president never learned, but one that President Joe Biden has displayed in abundance. Case in point: a new deal struck by Sen. Joe Manchin, the very senator who proved such an obstinate block to Biden's Build Back Better bill.

The new version, dubbed the Inflation Reduction Act is, in fact, a better deal. The new bill is more tightly focused on several key areas: deficit reduction, historic investments in climate change and long overdue reforms in health care that will save consumers and the government billions on prescription drug costs.

It is also fiscally responsible. The bill pays for expenditures by closing existing tax loopholes that for too long have allowed the largest corporations and wealthiest individuals to escape paying their fair share of taxes. Among the revenue raisers: a modest 15% minimum tax on the largest corporations — those with more than $1 billion in profit. No one who makes less than $400,000 will see an increase in their tax rates.

On Thursday, however, Senate Democrats picked up the support of their last remaining holdout, Kyrsten Sinema of Arizona, reportedly at the cost of not closing the carried interest tax loophole. That's regrettable, because removing the loophole is overdue.

Minnesota Sen. Amy Klobuchar told an editorial writer that the measure makes possible $300 billion in deficit reduction, along with climate initiatives that will lower energy costs and reduce carbon emissions by 40% over the next decade.

"This is a landmark bill," Klobuchar said. "Americans, Minnesotans, are struggling so much with costs right now. What this bill does is, after getting through pandemic, put us on a path forward to reduce costs for families. This is not just a baby step, but a big step to bringing down inflation, and taking on climate change and the pharmaceutical industry — two things deemed impossible for years."

Klobuchar said she was especially pleased that the bill will finally take the most common-sense of health measures: allowing Medicare to begin negotiating drug prices. "That's something I've been working toward since I came to the Senate," Klobuchar said. She acknowledged that it isn't everything she wanted. "I wanted all drugs to be negotiated." The bill starts with 10 of the most expensive drugs and will add another 50 over about a decade. That alone is expected to save taxpayers $288 billion, she said.

"These are big, blockbuster drugs we're starting with," Klobuchar said. "I think once we see the savings for consumers and taxpayers, it will be easier to negotiate more."

Another big victory for Medicare seniors, she said, is capping out-of-pocket drug costs at $2,000. There are now nearly 1.2 million American seniors who pay more than that for their prescription drugs.

Tax credits for Affordable Care Act premiums will remain in place for several more years, preventing premium increases to some 9 million Americans.

More vaccines would also be covered under Medicare, Medicaid and the Children's Health Insurance Program starting next year. The shingles vaccine alone can cost seniors $190 under Medicare.

Additionally, Klobuchar said, the bill does contain some bipartisan measures, including an extended biofuel tax credit proposed earlier this year by her and Iowa Republican Sen. Joni Ernst as an alternative to importing foreign oil. "There is a lot in this bill for both sides to like," Klobuchar said.

Mark Zandi, chief economist of Moody's Analytics, said recently that "the Inflation Reduction Act will lean against inflation over the next decade. It also adds a bit to growth and is more than paid for with tax hikes on large corporations and the well-to-do."

Former Treasury Secretary Larry Summers told CNN the bill fights inflation in several ways: "It reduces demand, because it will bring down the budget deficit over time." Unlike Build Back Better, he said, "we're raising more revenue than we're increasing spending. ... We're putting direct pressure on [drug] prices that are too high. And we're taking a set of steps that will expand the availability of energy and reduce the price ... . This is disinflationary policy that's also going to make the economy more efficient."

Biden has showed time and again that old-fashioned ways sometimes still work best in Washington: patience, diligence, the willingness to come back again and again in search of common ground.

Shortly after the deal was locked down, Biden said this: "The work of the government can be slow and frustrating and sometimes even infuriating. Then the hard work of hours and days and months for people who refuse to give up pays off. History is made. Lives are changed."

The few Republicans willing to stand up to Sen. Minority Leader Mitch McConnell would be well-advised to take a second look at a bill that does much for the constituents in their states and the country as a whole.