If the Senate wants to address inflation, it should pass Build Back Better
New inflation data released last week showed that consumer prices increased 6.8 percent over the past 12 months. Some will claim that high inflation is a reason not to pass the Build Back Better Act, but actually, the opposite is true. Anyone who truly cares about the cost of living pressures families are facing should work to pass the Build Back Better Act as quickly as possible because the act is expected to do more to cut costs for families than any piece of legislation in more than a generation.
For decades, families have been dealing with rising prices alongside stagnant wages. According to the White House Council of Economic Advisers, a majority of families (those in the bottom 60 percent of the income distribution) spend a large share of their budget on essentials such as housing, health care, child care and elder care. The Build Back Better Act will help families with the high costs of these key necessities, which they have struggled with for years — not just the past few months.
Take the example of a typical family with children. Parents have long faced steep costs associated with raising children. For instance, from 2009 to 2019, child care prices increased by 210 percent, while overall prices and wages grew by much less. Under Build Back Better, the typical family with two young children could save over $14,000 annually on early childhood education in the coming years. Currently, the average family of a preschooler pays $8,600 a year per child. Under Build Back Better, preschool would be free. Parents with children in child care will also experience lower costs and economic relief. Proposed investments in child care will lower a typical families’ annual child care costs by around $5,000 to $6,500 per child. Investments in early childhood education also have the added benefit of increasing the labor force participation of caregivers, mostly mothers who would be able to return to paid work or work more paid hours. This investment would come at a time when mothers have struggled to reenter the workforce due to the pandemic and ongoing care crisis.
Health care costs have also been increasing, particularly affecting older Americans and those with a disability. Under the Build Back Better Act, prescription drug prices will become more affordable, with out-of-pocket expenses for seniors and people with disabilities capped at $2,000 annually. Currently, millions of seniors pay $6,000 out-of-pocket expenses for prescription drugs, meaning they will save $4,000 each year. Further, insulin costs will be capped at $35 per month. Currently, diabetics pay up to $1,000 per month for insulin. This means some diabetics will save more than $11,500 a year.
High energy costs have long been crippling families. For the past few months, energy prices have also pushed up inflation. Just like the costs of early childhood and prescription drugs, under Build Back Better, energy costs will fall. Proposed investments in clean electricity and energy efficiency will save the average household approximately $500 a year in reduced energy costs.
In addition to saving families money on some of their biggest ticket items, the Build Back Better Act will also provide direct income boosts to give families the flexibility to spend on whatever their biggest need is. The act will continue the expanded Child Tax Credit (CTC), which provides $250 every month per child over the age of 6 and $300 every month per child under the age of 6. This direct boost to incomes benefits nearly 90 percent of children, reducing child poverty by nearly half. Workers without children will also get a direct boost to incomes. Through the expanded Earned Income Tax Credit (EITC), over 17 million low-income working adults without children at home will get a tax credit of up to $1,500 annually. These much-needed income boosts will help ensure families are able to make their paychecks go further.
It is worth noting that higher prices are occurring against the backdrop of record profits for big corporations, who are squeezing families while raking in their biggest profit margins in 70 years. The Build Back Better Act will make big corporations start paying their fair share in taxes and invest those resources to lift up working people and reduce the costs facing families. Corporations must find ways to operate without gouging customers and without paying poverty wages.
The Build Back Better Act will help to ease inflationary pressures in the coming years. The investments in Build Back Better are spread out over many years. Unlike the American Rescue Plan, which was intentionally an economic stimulus, Build Back Better will not inject trillions of dollars into our economy overnight. The act is also a fiscally responsible investment that is fully paid for and will substantially lower long-term deficits. Build Back Better will expand care infrastructure — from child care to home care — which will help caregivers who are most often women return to work or work more hours, therefore expanding our economy’s productive capacity. This means that while Build Back Better reduces cost pressures facing families, it does so by easing inflation in the long term and boosting economic growth.
There’s no doubt that any price increase, no matter how small, can impact families’ bottom lines. That’s why the Senate must not squander this opportunity to cut the costs of some of the biggest expenses families face, including child care and prescription drugs.
Quite simply — if senators are worried about costs facing families, the solution is in their hands: Pass the Build Back Better Act now.
Rose Khattar is the associate director of rapid response and analysis on the Economic Policy Team at the Center for American Progress.
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