Biden Celebrates ‘One of the Most Significant Laws’ Ever

Biden celebrated Wednesday
Reuters
By Yuval Rosenberg

Happy Wednesday! Here’s your fiscal update.

Biden Celebrates Climate Law, but Americans Aren’t Sure What It Is

President Joe Biden today marked the one-year anniversary of the landmark Inflation Reduction Act, calling it “one of the most significant laws” ever enacted.

In an event at the White House, Biden sought to use the anniversary to again trumpet the success of his economic agenda, which he has labeled Bidenomics. “This law is one of the biggest drivers of jobs and economic growth this country has ever seen,” Biden said of the legislation, which included hundreds of billions of dollars in climate-related spending and tax breaks along with measures to lower health care and prescription drug outlays. “We have a plan that’s turning things around. The Inflation Reduction Act is a part of that plan.”

Biden highlighted the private-sector investments spurred by the law and the jobs those investments will generate. He said the law had already helped create some 170,000 clean energy jobs since it passed. And he reminded his audience that Republicans did not provide a single vote for the law, though some have sought to capitalize on benefits in their states and districts.

But Biden faces several challenges as he looks to sell voters on the Inflation Reduction Act. As we’ve mentioned recently, polling has found that provisions of the law are popular but most Americans aren’t aware of the legislation. A Washington Post-University of Maryland poll conducted this summer found that 71% of those surveyed said they know little or nothing about the law.

Similarly, July polling by the health care non-profit KFF found that just a quarter of the public is aware that there is now a law enabling the federal government to negotiate some drug prices for Medicare, capping insulin costs for Medicare beneficiaries and limiting Medicare enrollees’ out-of-pocket drug costs. Only 10% know that the law now penalizes drug companies that raise drug prices for Medicare faster than the rate of inflation.

The White House’s efforts to raise those numbers may struggle to reach the public in a news environment dominated by the historic criminal charges facing former president Donald Trump, a GOP presidential primary, persistent questions about Hunter Biden, natural disasters and other events. “It’s very, very frustrating,” Democratic pollster Celinda Lake told The Washington Post about the lack of public awareness of the law. “But I think it just speaks to how difficult it is to break through, how much repetition and volume you need to break through.”

The political challenge is made even greater because some of the law’s biggest changes won’t be visible to voters in the immediate future. The first negotiated Medicare drug prices, for example, won’t take effect until 2026 — and that’s only if the program survives legal challenges.

Some Democrats and analysts reportedly suggest that those legal challenges may help build awareness of the law’s health policy changes. “The fact that Big Pharma is suing, to me, I wear that as a badge of honor,” said Democratic Rep. Angie Craig of Minnesota told the Post. And KFF’s Larry Levitt, who said the law is “probably the biggest political victory over the pharmaceutical industry ever,” tweeted this week: “Politically speaking, getting sued by the pharmaceutical industry over curbing drug prices is likely to be perceived by voters as a badge of honor.”

True cost unclear: Bloomberg’s Leslie Kaufman notes that, while the White House and others have tagged the cost of the climate measures in the law at about $370 billion, the popularity of the tax breaks mean that “the cost of the tax credits and incentives to the US Treasury is clearly going to be much higher — and even after a year, there’s no way to pinpoint the amount of spending that will ultimately occur.”

Bill Hoagland, senior vice president at the Bipartisan Policy Center, tells Bloomberg that the budget scoring of the law fails to account for the climate impact it can have. “If you believe in — and I do — that climate change is an existential threat to the economy and that this law will reduce some of these external costs, whether it's health care or disaster coverage,” said Hoagland, “then that could be a plus to revenues in the long haul.”

Prices of Top Medicare Drugs Have Tripled: Report

The prices of the 25 most expensive drugs covered by Medicare have more than tripled since they were introduced, according to an analysis released last week by the AARP Public Policy Institute.

On average, the prices of the top 25 drugs have risen by 226% since introduction — “greatly exceeding the corresponding rate of general inflation,” as AARP’s Leigh Purvis notes. The longer a drug has been on the market, the larger its price increase. And the majority of the current price — 60% on average — is the product of price increases since the time the drug first became available.

The drug in the study with the largest price increase is Sanofi’s Lantus, an insulin used to treat diabetes. Since Lantus first hit the market in 2000, its list price has increased by 739%.

Overall, Medicare spent nearly $81 billion on the 25 most expensive drugs in 2021.

AARP’s Purvis said the analysis sheds light on the Biden administration’s effort to control Medicare drug prices. “These findings highlight the importance of the Inflation Reduction Act and its inflation-based rebates that will require drug companies to pay Medicare when they increase their prices faster than inflation,” she wrote. “The Congressional Budget Office has estimated that these inflation-based rebates will reduce enrollee and Medicare Part D program spending by billions of dollars, and lead to lower drug prices in the commercial insurance market.”

However, the Pharmaceutical Research and Manufacturers of America, or PhRMA, the powerful trade group that represents drug makers, is making it clear that it does not agree with the AARP analysis. PhRMA’s Sarah Ryan said last week rejected it as a “flawed report” that spins “a misleading narrative” designed to support the “flawed and unconstitutional” pricing program for Medicare drugs included in the Inflation Reduction Act. Ryan questioned the report’s focus on list prices and said that insurers and pharmacy benefit managers play an important role in determining the prices that seniors actually pay for their medications.

Fed Officials Worried About ‘Upside Risk’ of Inflation

Officials at the most recent Federal Reserve policy meeting expressed concerns about the potential for inflation to persist longer than expected, requiring more interest rate increases in the future.

According to the minutes of the central bank’s July 25-26 policy meeting, published Wednesday, “Most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy.”

Some officials also said they were worried about the downside risks for the economy overall, driven in part by the Fed’s effort to control inflation through tighter monetary conditions. “Some participants commented that even though economic activity had been resilient and the labor market had remained strong, there continued to be downside risks to economic activity and upside risks to the unemployment rate; these included the possibility that the macroeconomic effects of the tightening in financial conditions since the beginning of last year could prove more substantial than anticipated,” the minutes said.

The Federal Open Market Committee raised its benchmark interest rate at the July meeting to a range of 5%-5.25% — the highest in more than 22 years — and many analysts think that could mark the highpoint of the Fed’s campaign. The meeting notes suggest, however, that Fed officials will be ready and willing to raise rates again if the battle against inflation encounters setbacks.

At the same time, while almost all meeting participants supported the rate increase, there were concerns about whether the Fed had already gone far enough in its tightening campaign. “Participants generally noted a high degree of uncertainty regarding the cumulative effects on the economy of past monetary policy tightening,” the minutes said.

The bottom line: Although inflation has come down, it remains well above the Fed’s target rate of 2%. As the July meeting minutes make clear, officials recognize that their battle against inflation is not yet over and may require additional — and potentially painful — monetary tightening in the months to come.

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