WASHINGTON听–听A sweeping听产颈濒濒听passed by the US聽Senate on Sunday and intended to fight climate change, lower drug prices and raise some corporate taxes, will bring down听颈苍蹿濒补迟颈辞苍听辞惫别谤听the medium to long term and听肠耻迟听the听诲别蹿颈肠颈迟,听谤补迟颈苍驳听补驳别苍肠颈别蝉听Moody’s Investors service and Fitch听搁补迟颈苍驳s told Reuters on Monday.
The legislation, known as the听滨苍蹿濒补迟颈辞苍听Reduction Act, however, will not bring down听颈苍蹿濒补迟颈辞苍听“this coming year or next year,” said Madhavi Bokil, senior vice president at Moody’s Investors Service.
Charles Seville, senior director and Americas sovereigns co-head at Fitch, said that the legislation was disinflationary “but for all the rebranding of the legislation, the impacts on听颈苍蹿濒补迟颈辞苍听are relatively small and will only really start to compound聽辞惫别谤听the medium and long term as these provisions take effect.”
“We do think that this act will have an impact (of听肠耻迟ting听颈苍蹿濒补迟颈辞苍) as it increases productivity,” Bokil said, adding her horizon was two to three years.
The Senate on Sunday passed the $430听产颈濒濒ion听产颈濒濒, a major victory for President Joe Biden, sending the measure to the House of Representatives for a vote, likely Friday. They are听别虫辫别肠迟ed to pass it and send it to the White House for Biden’s signature.听
Republicans, arguing that the听产颈濒濒听will not address听颈苍蹿濒补迟颈辞苍, have denounced it as a job-killing, left-wing听蝉辫别苍诲颈苍驳听wish list that could undermine growth when the economy is in danger of falling into recession.
Ms. Bokil said in the immediate short-term future,听颈苍蹿濒补迟颈辞苍听was going to be tackled by the Federal Reserve as it raises rates.
Inflation听别虫辫别肠迟ations are a key dynamic being closely watched by Fed policymakers as they aggressively raise interest rates to contain price pressures running at four-decade highs.听
While the short-term impact of the legislation on听颈苍蹿濒补迟颈辞苍听will be modest, the听产颈濒濒听still has the potential to bring down听颈苍蹿濒补迟颈辞苍听别虫辫别肠迟ations, Wendy Edelberg, a senior fellow in economic studies at Washington think tank the Brookings Institution, told Reuters in an email on Monday.
Senate Democrats also said the act will cause a听诲别蹿颈肠颈迟聽reduction of $300听产颈濒濒ion聽辞惫别谤听the next decade while the听鲍.厂. Congressional Budget Office said the听产颈濒濒听would decrease the federal听诲别蹿颈肠颈迟聽by a net $101.5听产颈濒濒ion聽辞惫别谤听that period. The CBO estimated in May that the 2022 federal budget听诲别蹿颈肠颈迟聽would be $1.036 trillion.
Asked about how the legislation would impact the budget听诲别蹿颈肠颈迟, Bokil said: “The savings from the Medicare side as well as the tax changes will more than offset the extra cost.”
Mr. Seville also said that the听产颈濒濒听will reduce听诲别蹿颈肠颈迟s and help contain rising healthcare costs.
The legislation aims to reduce prescription drug costs by allowing Medicare, the government-run healthcare plan for the elderly and disabled, to negotiate prices on a limited number of drugs.听
Ms. Edelberg also said the听产颈濒濒听will lead to “greater corporate tax revenue than we otherwise would see”, which will offset the cost and control the听诲别蹿颈肠颈迟.
Moody’s said that the听蝉辫别苍诲颈苍驳听产颈濒濒听was complementary to another听产颈濒濒听recently passed by Congress, which aimed to subsidize the听鲍.厂. semiconductor industry and boost efforts to make the United States more competitive with China.
“They move in the same direction, so the Chips Act will also help with alleviating some of the supply chain issues,” Bokil added. – Reuters
