With inflation raging near its highest level in four decades, Congress is poised to approve President Joe Biden’s signature Inflation Reduction Act.
over the next decade,"the impact on inflation is statistically indistinguishable from zero.”
Yet Douglas Holtz-Eakin, who was a top economic adviser to President George W. Bush and later a director of the CBO, noted that the lower deficits won't kick in until five years from now and won't be very large over the next decade considering the size of the economy. While the act could have the benefit of increasing the savings of millions of households on pharmaceutical and energy costs, it’s unlikely to have much effect on overall inflation. Prescription drugs account for only 1% of the spending in the U.S. consumer price index; spending on electricity and natural gas makes up just 3.6%.
The legislation authorizes Medicare to negotiate prices of 10 expensive pharmaceuticals, starting next year, though the results won't take effect until 2026. Up to 60 drugs could be subject to negotiation by 2029.
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