'A very big deal': Paul Krugman explains why the Senate has taken a major step in fighting climate change

After a lot of debating and negotiating, the U.S. Senate narrowly passed the Inflation Reduction Act of 2022 on Sunday, August 7. The far-reaching $750 billion package, which now goes to the U.S. House of Representatives for consideration, addresses energy, climate change, health care and taxes.

Liberal economist/New York Times opinion writer Paul Krugman, in his August 8 column, analyzes this development — mostly from a climate change standpoint. And he stresses that that while the Inflation Reduction Act is not an environmental panacea, it is nonetheless an important step in dealing with the enormous threat that climate change poses.

“They really did it,” Krugman enthusiastically writes. “The Inflation Reduction Act, which is mainly a climate change bill with a side helping of health reform, passed the Senate on Sunday; by all accounts, it will easily pass the House. So, it’s about to become law. This is a very big deal.”

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Krugman continues, “The act isn’t, by itself, enough to avert climate disaster. But it’s a huge step in the right direction, and sets the stage for more action in the years ahead. It will catalyze progress in green technology; its economic benefits will make passing additional legislation easier. It gives the United States the credibility it needs to lead a global effort to limit greenhouse gas emissions.”

The economist notes that the Inflation Reduction Act of 2022 has its critics on both the left and the right. Some progressives believe that from a climate change standpoint, it doesn’t go far enough. But Krugman himself is obviously delighted that the bill passed.

“There are, of course, cynics eager to denigrate the achievement,” Krugman observes. “Some on the left rushed to dismiss the bill as a giveaway to the fossil fuel industry posing as environmental action. More important, Republicans — who unanimously opposed the legislation — are shouting the usual things they shout: Big spending! Inflation! But actual experts on energy and the environment are giddy over what has been accomplished, and serious economists aren’t worried about the effect on inflation.”

One of the best things about the bill, Krugman notes, is its “tax credits for green energy.”

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“Right at the beginning, the Biden Administration decided that its climate policy would be all carrots, no sticks — that it would provide incentives to do the right thing, not penalties for doing the wrong thing,” Krugman explains. “This strategy, it was hoped, would prove politically feasible in a way that, say, a carbon tax wouldn’t. And this hope has been vindicated…. So, what did the Biden administration lose?”

Krugman continues, “Unfortunately, much of the social spending (Build Back Better) originally included — child tax credits, universal pre-K and more — was cut. That’s tragic, although enhanced health insurance subsidies — which have helped bring America’s uninsured rate to a record low — have been extended. But Democrats delivered on their climate promises, more or less in full.”

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