U.S. Senate Climate, Drug Bill Estimated To Cut 10-year Deficit By $101.5 Billion

A $430 billion drug pricing, energy and tax bill that Democrats hope to fast-track through the U.S. Senate would decrease the federal deficit by a net $101.5 billion over the next decade, the nonpartisan Congressional Budget Office said on Wednesday.

The official CBO forecast is only about one-third of the $300 billion in deficit reduction predicted by Senate Democrats. The CBO estimate did not include a $204 billion tax revenue gain expected from increased Internal Revenue Service enforcement, due to congressional guidelines.

The bill known as the Inflation Reduction Act, introduced last week by Senate Majority Leader Chuck Schumer and Democratic Senator Joe Manchin, represents a key priority for Democrats and President Joe Biden ahead of November's election battle for control of the U.S. Congress.

With the 100-seat Senate split 50-50, Democrats plan to pass the bill without Republican support through a parliamentary process known as reconciliation.

But they cannot afford to lose support from a single lawmaker and one Democrat, Senator Kyrsten Sinema, has not voiced her position on the bill.

Lawmakers are also waiting to hear whether a legislative referee known as the Senate parliamentarian will accept the entire bill as part of the reconciliation process.

With Democrats facing headwinds over inflation and Biden's low job approval numbers, Senate Democrats insist that the bill's deficit reduction effect will help ease inflationary pressures while reducing carbon emissions, lowering prescription drug prices and hiking taxes on wealthy corporations.

"America is on our side. They want us to pass this bill," Schumer said on the Senate floor ahead of the CBO report, citing polling data showing strong public support for the bill and backing from a bipartisan group of former U.S. Treasury secretaries.

The former Treasury secretaries said the bill was "financed by prudent tax policy that will collect more from top earners and large corporations," echoing comments from current Treasury Secretary Janet Yellen

Republicans have rejected Democratic claims that the bill would reduce inflation.

"The only things their 'Inflation Reduction Plan' will reduce is American jobs, wages, after-tax incomes, energy affordability and new life-saving medicines," Senate Republican leader Mitch McConnell said this week.

The CBO said the bill would cut the deficit by $17.9 billion in fiscal 2023, but would increase deficits somewhat from fiscal 2024 though 2027, while cutting deficits again from 2028, with a $42.6 billion deficit reduction in 2031.