Biden’s presidency has been a disaster, a reflection of the crisis-ridden system he represents. His approval rating currently stands at a mere 41%—up ever so slightly from a record low of 38%. Congress, which is controlled by Biden’s party, has a 17% approval rate. Another poll says 74% of the country believe it is on the wrong track. These are not good numbers for the November 2022 midterms elections if the Democrats want to retain control—even as they cynically attempt to harness anger over Roe v. Wade to gain votes. All of this is very concerning from the point of view of the ruling class, which hoped Biden could stabilize the situation after the chaotic years of Donald Trump.
It is in this context that the passage of the Inflation Reduction Act (IRA) has been celebrated in the liberal press as a great victory for the Biden Administration and the Democratic Party as a whole. The IRA is welcomed in liberal corners as a set of meaningful reforms that will help ordinary Americans while combating climate change. After Biden’s Build Back Better Plan (BBB) was killed last November—due to opposition from Democratic Senators—many doubted the Democrats would be able to pass any significant legislation.
While much of the original BBB has been entirely eliminated, including investment in infrastructure and funding for social welfare programs, some minor aspects of it remain. These include the extensions of some subsidies for Obamacare, allegedly “historic” breakthroughs on energy spending and “tackling” climate change, and new taxes/spending cuts to pay for the bill. But an honest appraisal of the bill shows that this is simply a case of the ruling class rearranging the deck chairs on a sinking ship, with the hope that it will inspire more confidence in the favored party of American capital.
Healthcare: very little and you don’t get it until later
The new spending on healthcare falls into two categories: an extension of 2021–2022 subsidies to the Affordable Care Act (ACA), and an increase to Medicare prescription drug benefits. Subsidies to the ACA, passed in 2021, pay for part or all of a household’s healthcare premiums, based on their household income. While extending this subsidy will provide some breathing room for those who qualify, it only postpones the day when millions will have to go back to paying through the nose for healthcare—or doing without it altogether. Furthermore, this subsidy is largely a handout to health insurance companies, as it doesn’t provide healthcare directly to beneficiaries, but rather, uses federal funds to pay private healthcare companies on behalf of recipients.
Another provision allows the federal government to negotiate drug prices for Medicare with pharmaceutical companies, but with limitations. First, negotiations won’t begin for four years, in 2026. Second, it applies to only certain kinds of drugs, and is limited to ten drugs in the first year, expanding to 60 drug price negotiations by 2029. If the IRA’s estimates are correct, this provision will save the federal government $99 billion over ten years. But this really only amounts to reducing the generous federal subsidies to the pharmaceutical industry, to be reinvested elsewhere in the interests of the capitalists as a whole. How does this help workers and retirees who can’t afford their prescriptions now?
Changes to Medicare prescription benefits are more substantial. The Medicare expansion increases benefits, by placing caps on costs for prescription drugs. Two notable examples are a $35 cap on copays for insulin, and a $2,000 annual cap on copays for all prescription medication. Penalties will also be imposed on pharmaceutical companies that raise drug prices at a rate higher than overall inflation. These modest reforms do provide some benefit, however minor, to the working class, and will have to be defended from attack in the future. But as we’ve seen from the Supreme Court’s abortion ruling this summer, there are no gains safe from the capitalist class. Most importantly, this falls far short of what is really needed: a socialized healthcare system, free at the point of service for all.
Funding the capitalist state
One of the major changes between the BBB and IRA is the question of funding. New taxes and enforcement, in conjunction with spending cuts in the IRA, will result in a net decrease in the deficit. The main sources for these savings are: increased IRS enforcement resulting from increased funding for the IRS ($124 billion); savings resulting from the Medicare reform ($283 billion); and two new taxes ($296 billion).
The first new tax is a 15% minimum tax on any profits corporations report to shareholders, which is expected to raise $222.2 billion. Before the IRA, many companies like Amazon, Nike, and FedEx paid nothing in tax despite recording profits. Through loopholes, deductions, and credits dozens of Fortune 500 companies regularly pay no taxes on profits, despite the existing 21% tax on corporate earnings. With this new tax, companies with an annual income of $1 billion or more must pay either 21% of profits with deductions, or 15% without deductions, whichever amount is greater.
The second new tax is a 1% tax on companies buying back their own stock. Stock buybacks are one way companies can increase stock prices to benefit their shareholders without actually investing in production. After the 2008 crisis, the federal government adopted monetary policies of low interest rates and quantitative easing to try to prop up the economy. However, these policies failed to meaningfully change the investment habits of the capitalists, who have generally preferred to use their profits to engage in stock buybacks, mergers, and investing in speculative assets. Capitalists invest in order to make as much profit as possible. While tax incentives and disincentives can encourage or discourage capitalist investment in ventures that are marginally profitable, they cannot force capitalists to invest in an unprofitable scheme or prevent them from investing in a profitable enterprise.
Taken altogether, these taxes and spending cuts amount to a redistribution of funds from individual capitalists, to the capitalist class as a whole in the form of the bourgeois state. Pharmaceutical companies may receive less money from the state, and some profitable companies pay higher taxes, but none of this does anything to improve workers’ wages, benefits, or working conditions—let alone challenge which class rules society.
Climate change and energy: continuing fossil fuels alongside green energy incentives
Researchers at the Political Economy Research Institute (PERI) at the University of Massachusetts at Amherst have explained in the Greenhouse 100Index how just a handful of companies account for a huge proportion of US greenhouse gas emissions. The IRA does nothing to address this. Despite this, the parts of the IRA that have garnered the most attention, both positive and negative, are the provisions intended to address climate change. These include tax incentives for individuals to purchase electric cars, install renewable energy sources, and update home heating systems. Tax incentives are also given to companies to reduce emissions and manufacture renewable energy technologies.
Democrats were quick to celebrate this as a huge win for combating climate change, pointing out this is the biggest federal investment in clean energy and emissions reduction ever made ($369 billion). Democrats further stated that with this bill, carbon emissions will be reduced by 40% of 2005 levels by the end of the decade. Models support this claim, but it is misleading, since without the bill the same models show that the country is already on track for a roughly 35% reduction in emissions.
Other provisions in the IRA require the federal government to offer at least two million acres of public lands and 60 million acres of public waters for oil and gas leases each year that any new wind or solar projects are launched on public land. A series of permitting reforms are also included in the bill with the aim of streamlining pipelines and other energy projects, in particular a natural gas pipeline in West Virginia.
The real problem with the way the IRA tries to address climate change, is that it leaves this colossal task to the capitalists and the market. Of course, this is exactly what we should expect from the Democrats and the “Fossil Fuel President,” Joe Biden. While some on the left blur the class line and argue that the Democrats can be “pressured” or worked with, the Democrats themselves have always been clear that they are a capitalist party through and through. Just as tax policies cannot stop the capitalists’ unproductive investment practices, tax incentives can’t force capitalists to combat climate change. Renewable energy poses a difficult problem for capitalist investment, since once the technologies that can produce cheap energy exist, not much profit can be made from energy production unless there is a monopoly. While credits may encourage some capitalists looking to garner a “green” image to reduce emissions, the investment required to eliminate emissions in production can’t be made profitable to the capitalist class as a whole.
This is why the only way to seriously tackle climate change is through a democratically and rationally planned economy on a world scale, i.e., international socialism. As long as production is controlled by a minority looking to extract as much profit as possible, the long-term effects on the world and society can’t be seriously taken into account. Contrary to the status quo under capitalism, a socialist society would plan production to satisfy human needs in a way that it doesn’t undermine our species’ continued existence on the planet.
The dead end of capitalism
To name this legislation the “Inflation Reduction Act” is a mere public relations trick. The basic idea is that since this bill reduces the deficit and some drug prices, it will put downward pressure on inflation. This is ridiculous. Historically high inflation rates have been hammering working people for over a year now for several reasons, including the reckless monetary policies the ruling class utilized to keep capitalism afloat in 2020, and the economic shockwaves from the war in Ukraine. Of course, the reason for naming this bill the “Inflation Reduction Act,” is so the Democrats can be seen as “doing something” to fight inflation. But these measures do nothing to address the unplanned nature of the capitalist market, the bottlenecks in the production and distribution of commodities, or the increase in protectionism and sanctions, which are major components of the overall inflation picture.
The Democrats failed to enshrine the right to abortion into law—even though Democrats controlled both Congress and the White House under Carter, Clinton, and Obama. Now, in the aftermath of that betrayal they urge voters to cast their ballots for them in order to protect that right. In the absence of a viable mass working-class alternative, some voters have fallen into that trap. But many others wonder why they should bother voting for Democrats. The youth, in particular, are increasingly disgusted by both parties, with a recent poll showing that 26% of young people “don’t know or refuse to say which party they want to control Congress.” This is a clear sign of where political consciousness is headed, in this epoch of crisis and decline.
The driving idea behind the IRA is to pretend that Democrats can offer something—anything—and that workers should come out to prevent a Republican victory in November. Many in the ruling class are acutely aware that they are sitting on a societal volcano—and yet this is all that the liberal wing of the capitalist class could scrap together to try to hold things in check. Neither the Democrats or Republicans can offer what workers really need when it comes to healthcare, climate change, inflation, and living conditions generally. Only a mass working-class party basing itself on a revolutionary socialist program can begin to address the interrelated crises brought about by capitalism and lay the conditions for a high quality of life for all.