Doing the Math on the Inflation Reduction Act

The bill would give a boost to biofuels.Credit…Tannen Maury/EPA, via Shutterstock

Doing the math on the Inflation Reduction Act

Soon after he entered the White House, President Biden announced a $4 trillion domestic spending agenda. More than a year later, the chunk of that plan that appears most likely to pass — the result of an agreement struck last week between Senator Chuck Schumer of New York, the majority leader, and Senator Joe Manchin of West Virginia, a centrist Democrat — will be considerably smaller.

The bill, the Inflation Reduction Act of 2022, involves at least $260 billion in spending over 10 years, but it would also raise taxes by $326 billion in the same period. That’s according to an analysis by the Joint Committee on Taxation, a nonpartisan congressional commission. A separate analysis, released on Friday by the Wharton School, found that the bill would have almost no effect on G.D.P., and would slightly increase inflation for the next two years but then lead to lower prices.

Republicans have denounced the bill as a giant tax increase and a major expansion of government spending.But the new estimates suggest that it is neither of those things, reports The Times’s Jim Tankersley.

Here’s what’s in the bill (all of the figures are over 10 years, and most come from the Joint Committee’s study):

  • Tax credits to increase production of electricity from renewable or non-carbon sources.Cost: $98 billion.

  • New and expanded tax credits for electric vehicle purchases and for improving the energy efficiency of homes. Cost: $51 billion.

  • An incentive and tax credit for companies developing biofuels and other renewable fuels for cars and planes. Cost: $19 billion.

  • New and expanded subsidies to bring down the cost of buying health insurance through the Affordable Care Act. Cost: $70 billion, according to the Wharton analysis.

How it raises taxes and lowers costs:

  • Imposes a new federal minimum income tax of 15 percent, based on the profits that companies report to investors, not just to the I.R.S. Tax increase: $313 billion.

  • Closes the so-called carried interest tax loophole that allows private equity and hedge fund managers to pay lower taxes on some compensation. Tax increase: $13 billion.

  • Allows the government to negotiate and in some cases set prescription drug prices for people enrolled in Medicare. Estimated savings: $266 billion, according to Wharton’s analysis.

To secure the deal, Democrats had to make some concessions that are likely to displease environmental activists, The Times’s Brad Plumer and Lisa Friedman report.

  • The bill would require the Interior Department to hold lease sales for oil and gas exploration in the Gulf of Mexico and the Cook Inlet in Alaska.

  • It expands tax credits for carbon capture technology that could allow coal or gas-burning power plants to keep operating with lower emissions.

  • Manchin also secured a promise from Democratic leaders to vote on a separate measure to speed up the permit process for energy infrastructure, potentially smoothing the way for projects like a gas pipeline in West Virginia.

“We just made a deal with Joe Manchin,” said Senator Brian Schatz, Democrat of Hawaii, who had pushed for more expansive climate provisions. “I don’t think anybody should have expected that this is the bill I would have written.”


The U.S. warns China against a hostile reaction to Speaker Nancy Pelosi’s expected trip to Taiwan. American officials have become convinced that China may respond militarily in some way, though not with an outright attack on Taiwan or an effort to intercept Pelosi’s plane. Pelosi, who arrived in Singapore yesterday, has not officially confirmed her plan to stop in Taiwan, but reports said she could arrive late Tuesday.

Stephen King will testify today in the Justice Department’s lawsuit to block Penguin Random House’s acquisition of Simon & Schuster. In yesterday’s opening arguments for the case, John Read, a lawyer for the government, argued that the deal would minimize competition for large advances on much-anticipated books. Penguin’s lawyer, Dan Petrocelli, said the government’s focus on those advances was misguided.

Uber reports record revenue and says more drivers are using its platform than ever before. The company outperformed analysts’ expectations, posting $8 billion in revenue, a 105 percent increase from a year earlier. In other earnings news, BP reported a profit of $8.5 billion.

Wells Fargo brings back a hiring practice that led to fake interviews. It paused the policy this year after former employees revealed that managers were interviewing nonwhite candidates for jobs that had already been filled. It is now reinstating the process for certain openings, with improvements like increased training for managers.

The tea leaves in Twitter’s subpoenas

Days after Elon Musk filed his response to Twitter’s lawsuit aimed at forcing him to complete his acquisition of the company, Twitter sent out a score of subpoenas to the banks that are backing him in the bid, as well as to people in Musk’s inner circle. The subpoenas offer some hints about Twitter’s legal strategy — and clues as to what Musk said in his response to the suit.

Here’s a recap of where things stand on Musk’s side. Musk filed his response to Twitter’s lawsuit on Friday.It is temporarily sealed to the public while he and Twitter work out which parts to redact. But we know that his arguments have focused on the company’s public disclosures about bots and fake accounts, which he has argued are materially misleading, giving him grounds to walk away from the deal. (Twitter’s lawyers have asked what, exactly, was misleading.)

Now, Twitter has sent subpoenas to the long list of banks working with Musk, including Morgan Stanley, Bank of America and Barclays. The banks are critical players in the deal. That is because Twitter’s ability to sue Musk to force him to close the deal (under the deal’s “specific performance clause”) is voided if his debt financing falls apart. But that out only works if the banks, which have signed commitment letters, walk away independently — not if Musk coerces them.

Twitter wants to know more about how the banks think about bots. Among other things, it wants learn about the analysis that banks have done on Twitter’s bot statistics and about investigations they have performed at Musk’s instruction. Twitter may be trying to discern how much the banks actually care about bots, and whether Musk has been prodding them to care.

And it really wants to know what happened to Bob Swan. Swan, a former C.E.O. of Intel, played a key role in putting together the deal. To support its claims that Musk appeared to stop efforts to complete his financing, which would put him in breach of their contract, Twitter has claimed that Musk fired Swan. His replacement on Musk’s team was Antonio Gracias, Musk’s longtime friend. Now, Twitter is asking the banks for documents detailing Swan’s firing, and any briefing materials that were supplied to Gracias. Twitter may be trying to prove that Musk’s personnel shuffling was just another attempt to quash the deal — and that Gracias was never really involved.

“If she does go ahead with a visit to Taiwan this week, against President Biden’s wishes, she will be doing something that is utterly reckless, dangerous and irresponsible.”

— Thomas Friedman, a Times Op-Ed columnist, on the risks of Pelosi visiting Taiwan.

Crypto’s hidden bombshell

There was a grenade nestled inside a $300 million S.E.C. Ponzi bust announced yesterday. Alongside an international cast of apparent scammers lurked the existential threat that the agency could deem crypto assets to be securities, and regulate them into oblivion.

A classic scam in a futuristic package. Forsage, a company ostensibly selling investors’ stakes in crypto transactions known as “smart contracts,” was actually a pyramid scheme reliant on constant recruitment for new inflows, according to the S.E.C. Among those charged were the company’sfounders, who were last known to be in Russia, Indonesia and elsewhere, along with some members of a group called the “Crypto Crusaders” and several U.S.-based promoters. “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts,” Carolyn Welshhans, the acting chief of the agency’s crypto unit, said in a statement.

A question almost as old as crypto. The Forsage offerings also broke the law because the promised products would have qualified as securities, the S.E.C. contends: “The offer and sale of slots in Forsage’s smart contracts, and the attendant right of investors to earn compensation from sales of those slots and profit-sharing from spillover payments through those slots, was an offer and sale of securities.” This raises the big crypto question: What’s in a name … or, rather, an investment contract? Legally speaking, the answer is in a test that the Supreme Court articulated in a mid-20th century case about a Florida orange grove, which many industry players say is outdated.

Coinbase has petitioned for new rules. Last month, its policy chief, Faryar Shirzad, argued in a blog post about a petition to the S.E.C. that past rule drafters could not anticipate crypto and that “securities law is thus not well-suited to govern digital assets.” That same day — coincidentally, Coinbase contends — the S.E.C. and the Justice Department charged a former Coinbase employee with misusing confidential information to profit from listings on the exchange. The S.E.C. characterized some of the assets as securities, an idea that Coinbase’s chief legal officer rebutted in a post entitled “Coinbase does not list securities. End of story.” But based on the agency’s latest moves, we could soon see more scrutiny for the crypto industry, including Coinbase, which is reportedly facing S.E.C. inquiries about how it characterizes some asset listings.

Elsewhere in crypto:Meet the Bitcoin maxis. They’re the hard-core Bitcoin evangelists who believe the original cryptocurrency differs from the unstable crypto projects that sent the market into a tailspin, reports The Times’s David Yaffe-Bellany.



  • TD Bank is acquiring the investment bank Cowen for $1.3 billion. (TD Bank)

  • Estée Lauder is reportedly in talks to purchase the luxury fashion brand Tom Ford for $3 billion or more. (WSJ)

  • Nikola will buy the battery supplier Romeo Power, which like Nikola went public through a SPAC. (CNBC)

  • Pepsi is investing $550 million in the energy drink maker Celsius. (Barron’s)


  • Amazon hired a Senate staff member who was key to drafting tech antitrust bills. (Politico)

  • The F.T.C. settled a $62 million false advertising case with the property listing site Opendoor. (NYT)

Best of the rest

  • Attackers drained Nomad, a so-called token bridge, of nearly $200 million in crypto. (CoinDesk)

  • On commercial vessels, Russians and Ukrainians still live side by side. (NYT)

  • For poor children, having friendships across class lines contributes to future financial success, a vast study found. (NYT)

  • Workers in smaller American cities skipped the return-to-office angst and just … returned. (NYT)

  • Beyoncé will modify the lyrics in a new song after disability rights activists criticized the use of a term. (NYT)

  • Elon Musk’s father says he is not proud of him. (Guardian)

  • Acoustic designers are creating a cacophony for virtually silent electric vehicles. (New Yorker)

David F. Gallagher contributed to today’s DealBook.

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