As this is being written the U.S. House has completed the legislative process for passage of the “Inflation Reduction Act of 2022.” It will become law without any votes for the legislation beyond the members of the political party controlling the two legislative bodies. It wasn’t going to happen until two members of the U.S. Senate worked out their deal in the basement of the U.S. Capital and one of the other members of the Senate agreed to go along with their deal, as long as she got what she wanted added too.
When it came to voting, every member did what they were told, and the legislative process has been completed. The U.S. Senate vote came down to a 50-50 tie and the Vice President settled the tie by voting for the passage. The U.S. House vote came on a 220 to 207 vote. As is frequently noted…”elections have consequences.”
The final $740 billion dollar bill wasn’t as big as the version which passed the U.S. House the first time and also changed from the “Build Back Better” name to the “Inflation Reduction Act of 2022.”
Along with the increases in taxes, embodied in the bill, there is also the breath-taking plans – and funding – to increase the Internal Revenue Service’s (IRS) workforce by 87,000 new IRS agents.
The outline of the revenue side of the legislation includes:
- $313 billion increases through the 15 percent Corporate minimum tax
- $288 billion through prescription drug pricing “reforms”
- $124 billion by way of IRS tax enforcement (sort of gives you an idea what the 87,000 extra IRS people will be working on…)
It wouldn’t be a true tax and spend bill without the spending side of the plan…
- $369 billion in the form of energy security and climate change spending
- $300 billion in “buying down” deficits
The version of the legislation that eventually passed includes nearly $38 billion for agricultural conservation, credit, renewable energy and forestry. This funding would remain available only through fiscal year 2031. The numbers presented here are taken from the Congressional Research Service’s August 10th “Inflation Reduction Act: Agricultural Conservation and Credit, Renewable Energy and Forestry” briefing paper.
Breaking down the Agricultural Conservation portion of the “Inflation Reduction Act of 2022,” there’s over $18 billion in additional funding for existing farm bill conservation programs…
- $8.46 billion for Environmental Quality Incentives Program (EQIP)
- $4.95 billion for Regional Conservation Partnership Program (RCPP)
- $3.25 billion for Conservation Stewardship Program (CSP)
- $1.40 billion for Agricultural Conservation Easement Program (ACEP)
- $1.0 billion for conservation technical assistance
- $300 million for a carbon sequestration and greenhouse gas emissions quantification program
- $100 million for administrative expenses
Agricultural credit programs for distressed farm borrowers and assistance for underserved farmers and ranchers will provide $3.1 billion for debt modifications, including debt forgiveness for “distressed borrowers of USDA’s Farmer Service Agency (FSA) direct or guaranteed farm loans “whose agricultural operations are at financial risk.” The same legislation also includes nearly $2.9 billion to help “underserved farmers, ranchers and forest landowners.” These categories are defined to include those living in high poverty areas and veterans. Limited resource producers and beginning farmers and ranchers.
Renewable Energy is another area included in the “Inflation Reduction Act of 2022.” There’s $13.3 billion for farm bill energy title programs…
- $1 billion for electric loans for renewable energy under the Rural Electrification Act
- $1.7 billion for eligible projects under the Rural Energy for America Program (REAP)
- $304 million for grants and loans for underutilized renewable energy technologies and technical assistance with REAP applications
- $500 million for grants to increase the sale and use of agricultural commodity-based fuels through infrastructure improvements for blending, storing, supplying or distributing biofuels
- $9.7 billion for rural cooperatives for loans to eligible entities for the long-term resiliency, reliability and affordability of rural electric systems through purchasing renewable energy, renewable energy systems, zero-emission systems, carbon capture and storage systems
- $5 million goes to the U.S. Environmental Protection Agency (EPA) to carry out the Renewable Fuel Standard program (to be used in part for data collection and analyses for lifecycle greenhouse gas emissions of fuel)
- $10 million for new grants to support investment in advanced biofuels
The “Inflation Reduction Act of 2022,”will provide $5 billion for forest management planning and restoration activities for federal and non-federal forest. The U.S. Forest Service gets $2.15 billion of this amount with the funding aimed at hazardous fuel reduction or vegetative management projects on national forest lands. Also included in areas where this funding is intended will be covering inventory and protecting old-growth and mature forest and for improving environmental reviews.
Non-federal forest management will get $2.75 billion in the form of grants and other financial assistance. These dollars could include funding for urban and community forestry programs. The grant programs are envisioned to support climate mitigation activities and facilitate participation in forest carbon markets. Several of the grant programs would be specifically targeted to support the participation of “underserved forest landowners.”
Beyond the political rationale to call this tax and spend legislation the “Inflation Reduction Act of 2022,” it’s a little unusual for sound economic policy to involve taxing and government spending as a strategy for reducing inflation.
The Federal Reserve Bank’s activities got us into the current inflation situation we’re in. They increased the money supply by $6.4 trillion from 2020 through early 2022, an increase of 42 percent. Increased spending and increased money supply overstimulated the economy.
Although we’re supposed to believe that the slight downtick in the inflation from June’s inflation rate of 9.1 percent to July’s 8.5 percent level Roger Cryan, the Chief Economist for the American Farm Bureau Federation (AFBF) believes that the inflation rate will bounce around in the 5 to 9 percent between now and early into 2024.
Farmers and ranchers aren’t alone in facing a tough economy. Many agricultural producers however, are struggling to hang on in the face of skyrocketing input costs. Like consumers, who are having to deal with food price increases near the 11 percent rate over last year’s levels, farmers and ranchers are price takers – not price makers. They can’t pass increased costs of the products they produce on up the supply chain.
General inflation, as noted by Cryan, is a long-term problem, regardless of what those who passed the “Inflation Reduction Act of 2022,” call their next round of tax and spend legislation. We’re going to need to deal with extra burdens on our wallets for the next few years.
By Doug Busselman | NFB, Executive Vice President