The Inflation Reduction Act: Should truth in labeling be expected?
By signing the Inflation Reduction Act of 2022 (IRA) into law, President Biden brought to fruition a major effort to confront climate change, health care costs, clean (and not-so-clean) energy development, minimum corporate income taxes and taxes on financial transactions engaged by some of America’s wealthiest firms and individuals. By any measure (the new law comes in at more than 700 pages long and authorizes more than $700 billion in spending) and by reach of implied federal action, the IRA is a major legislative action.
But what about inflation? Does the statute deliver the goods implied by its name? Or are these politically useful words merely a case of deceptive and misleading advertising? If so, should the Federal Trade Commission (FTC) get involved in the name of consumer protection or, as the case may be, voter protection?
Well, come on. Of course not. The FTC polices the private marketplace, not politics. Still, let’s consider what might happen if we held our lawmakers to a similar standard and FTC enforcement entered the picture.
Interestingly enough, the Biden administration tends to change the subject when asked to put dimensions on the inflation reduction that may be generated by the IRA. Indeed, when pushed during an Aug. 8 National Public Radio interview to talk about inflation, Brian Deese, director of the Biden administration’s National Economic Council, brushed against the matter but spoke more fully about how the new law would cap the annual cost of individuals’ prescriptions at $2,000, provide subsidies for the purchase of electric automobiles and empower Medicare to bargain with pharmaceutical companies so as to hammer down drug costs.
Deese’s response was not about inflation (what happens to all prices taken together) but about the relative prices of some important items purchased by consumers. His comments followed almost to the word the administration’s Aug. 6 description of the legislation: “This legislation would lower health care, prescription drug, and energy costs, invest in energy security, and make our tax code fairer—all while fighting inflation and reducing the deficit.” The wording suggests inflation is almost a side effect.
An analysis of the two most exhaustive treatments of the matter, one by the Congressional Budget Office and the other by the Penn-Wharton center at the University of Pennsylvania indicates that there is no forthcoming inflation reduction generated by the misnamed law. The Penn-Wharton summary indicated: “The impact on inflation is statistically indistinguishable from zero for either estimate.”
We can acknowledge that the administration’s reluctance to talk about inflation reduction is perfectly understandable from a political standpoint, even if the statute’s title seems to be patently false. But, returning to our original premise, if this finding involved a labeling or advertising issue for a private firm or agency, the FTC would have a basis for opening an investigation under its consumer protection program that focuses on false and misleading advertising.
The agency’s policy says, “Objective claims for products or services represent explicitly or by implication that the advertiser has a reasonable basis supporting these claims. These representations of substantiation are material to consumers. That is, consumers would be less likely to rely on claims for products and services if they knew the advertiser did not have a reasonable basis for believing them to be true.”
What about citizens? What about voters? Should they be able to rely on the implied promise found in the title of a piece of legislation? Is truthful advertising less important in developing a political package than when an advertiser works up a statement about ready-to-eat cereal, tires, weight-loss remedies or automobiles?
Our political leaders should be expected to substantiate their claims. Yes, telling the truth should matter, even in political markets.
Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson College of Business and Behavioral Sciences. He is a former executive director of the Federal Trade Commission.