Smucker says Democrats' bill will make inflation worse

The Democrats' Inflation Reduction Act of 2022, passed by the Senate on Sunday and now headed to the U.S. House floor as soon as this week, won't live up to its name and may actually increase inflation, according to U.S. Rep. Lloyd Smucker, a Republican who represents Lancaster County and the southern half of neighboring York County.

The scaled-back version of the Building Back Better plan, pushed by President Joe Biden and most congressional Democrats, includes a grab-bag of provisions addressing health care and climate change issues, as well as steps its backers say will reduce the national debt.

But the bill "will have very little positive impact on inflation," Smucker told LNP | LancasterOnline on Friday, two days before senators passed the bill along party lines.

Currently in his second year serving on the prestigious House Ways and Means Committee, which writes tax and trade laws, Smucker said the Democrats' bill "will probably increase inflation," a view he said he arrived at after talking with economists. And tax increases on large businesses included in the bill will negatively impact the economy, he said.

"Rising prices are the number one thing I hear about from people across the district," Smucker said in the interview. "So I don't know who in their right mind actually proposes to raise a lot of taxes at that time. I think it's going to be a bad bill. I think it is a continuation of the Democrats' approach – the American Rescue Plan and other bills – spending trillions and trillions of dollars. And we're going to see impacts of that in the economy."

Senate Majority Leader Chuck Schumer, D-New York, argued the opposite during debate on the bill. It will "close tax loopholes and reduce the deficit," Schumer said.

Schumer helped craft the compromise bill with longtime Democratic holdout, Sen. Joe Manchin of West Virginia. Manchin pushed to limit the scope of the original Build Back Better legislation, pointing to rising inflation over the first year-and-a-half of Biden's term. The Associated Press quoted non-partisan analysts as saying the bill is one-tenth the size of the initial 10-year, $3.5 trillion plan.

Will it rein in inflation?

Biden needs a win on the spending proposal to boost Democrats' chances in the November midterm elections, which have historically favored the party out of power, in this case Republicans. Whether the bill passed on Sunday is enough remains to be seen. Biden's disapproval numbers in recent polls have been in the mid-50% range.

In a wide-ranging interview Friday, Smucker said he's had "probably thousands of people call us about the impact of inflation." Many callers, he said, have had to take on second jobs and they must decide on a weekly basis whether to buy groceries or put gas in the tank.

Smucker agreed that multiple factors – from stimulus spending to help people during the pandemic, to supply chain issues and Russia's invasion of Ukraine – contributed to sending inflation, now averaging 9%, to its highest levels in 40 years.

"But the largest problem here is spending policies with the Democrats and administration," Smucker said. "If Biden had taken office, walked down the street and hid in a closet, we'd be better off today than with the policies he's implemented."

Both Democrats and Republicans heard from economists and fiscal experts with conflicting views on the anti-inflationary impact of the bill that passed the Senate on Sunday.

The Congressional Budget Office, in a letter responding to Republican Sen. Lindsey Graham, ranking Republican on the Senate Budget Committee, said the impact on inflation this year would be "negligible" and in 2023 would fall under a range of 0.1 percent higher or lower than under current law.

The CBO also noted it's uncertain how the bill would affect overall demand in the economy and the labor supply, nor it is easy to predict how long disruptions in product supply chains will last or how the Federal Reserve will respond to inflationary pressure. All of that could dramatically change the final price tag of the Democrats' bill.

Democratic House Speaker Nancy Pelosi of California released a letter from 126 leading economists who offered a more upbeat assessment. It declared that the new bill "makes crucial investments in energy, health care and in shoring up the nation's tax system."

Those investments, the economists said, "will fight inflation and lower costs for American families, while setting the stage for strong, stable, and broadly-shared long term economic growth."

The AP reports that the bill would cap out-of-pocket drug costs for seniors on Medicare to $2,000 a year and extend expiring subsidies that help 13 million people afford health insurance. Republican senators successfully challenged a provision to cap out-of-pocket insulin costs at $35, stripping it from the bill, though it will still apply to Medicare recipients.

But separately, over 230 economists warned the bill will contribute to ongoing inflation, Fox Digital News first reported last week. According to the AP, the 10-year legislation will cost $740 billion, though higher corporate taxes are predicted to offset that by about $300 billion.

As for what he and Republicans would prescribe to tame inflation, Smucker offered a simple remedy: "Stop spending. Stop printing money."

Then, he said, Biden should take a page from former President Trump's playbook on Operation Warp Speed, which produced a COVID-19 vaccine in 18 months, to address energy prices. The president should call on all the CEOs of oil and gas companies to boost "our supply of energy so we can bring down gas prices," Smucker said.

Making more federal lands available for drilling and streamlining the permitting process would help. Permits for natural gas processing facilities have been languishing in the Biden administration, he said

That wasn't true in Biden's first year in office, when his administration approved more oil and gas drilling permits on public lands than any single year of the Trump administration. But to Smucker's point, that pace fell off significantly in 2022, according to an analysis by E&E News, a publication covering the energy sector.

Taiwan and the midterms

Smucker spoke with LNP a day after Speaker Pelosi visited Taiwan on an official trip that drew an angry response from China.

Dismissing China's objections to Pelosi's trip, Smucker said, "I don't agree with the speaker on much, but in this case I thought it was important to go," Smucker said. "For her to back down and allow China to tell us where to travel would have been a huge mistake."

"China should know if they use something like that to be aggressive, that we will stand up for Taiwan," Smucker said.