Top economists say Democrats’ health care and climate package will put ‘downward pressure on inflation’

(CNN) - Congressional Democrats' climate and health care package is getting a boost from a group of top economists, who wrote in a new letter that the so-called Inflation Reduction Act will lower prices for American consumers amid high inflation.

"This historic legislation makes crucial investments in energy, health care, and in shoring up the nation's tax system. These investments will fight inflation and lower costs for American families while setting the stage for strong, stable, and broadly-shared long-term economic growth," 126 economists said in a letter sent to congressional leadership Tuesday, which was first obtained by CNN.

The letter was signed by key economists including former Clinton Treasury Secretary Robert Rubin and Obama Treasury Secretary Jack Lew, Obama Labor Department chief economist Betsey Stevenson, Moody's Analytics chief economist Mark Zandi, former Congressional Budget Office Director Doug Elmendorf, and Nobel prize-winning economist Joseph Stiglitz, among others.

"This started to come together late last week with some of the signatories connecting with each other to discuss how they could highlight the economic value of the bill and push back on some of the economic disinformation surrounding it," a source familiar said of the letter.

The economists touted the bill's historic $369 billion investments in combating the climate crisis and, they wrote, it will "quickly and noticeably bring down health care costs for families" by allowing Medicare to negotiate certain prescription drug prices, along with extensions to expanded Affordable Care Act subsidies.

Those investments, the group wrote, "would be more than fully paid for," pointing to its provision to impose a 15% minimum tax on certain corporations.

"This proposal addresses some of the country's biggest challenges at a significant scale. And because it is deficit-reducing, it does so while putting downward pressure on inflation," the economists said.

That relief comes as prices continue to rise, with inflation hitting 40-year highs.

The latest data from the Bureau of Labor Statistics show that inflation surged to a pandemic-era peak in June, with US consumer prices jumping by 9.1% year-over-year.

The bill, which was negotiated by moderate Democratic Sen. Joe Manchin of West Virginia and Senate Majority Leader Chuck Schumer of New York, is currently undergoing a technical process with the Senate parliamentarian known as the "Byrd Bath," a test designed to keep out extraneous provisions from legislation using the reconciliation process.

Once the legislation has gone through that process, Democrats should be able to pass the bill with a simple majority.

It remains to be seen, however, whether key holdout Sen. Kyrsten Sinema, a moderate Democrat from Arizona, will vote with her party on the legislation.

Schumer said Monday he expects the parliamentarian's process to be complete and for the Senate to vote on the bill this week ahead of the August recess.

"This week the Senate will take action on a groundbreaking piece of legislation, one that we haven't seen in decades," he said on the Senate floor.

"Over the coming days, both sides will continue conversations with the parliamentarian in order to move forward the bipartisan 'Byrd bath' process. Our timeline has not changed, and I expect to bring this legislation to the Senate floor to begin voting this week."

Some economists have said the legislation would do little to curb rapidly rising prices, particularly in the short term.

Moody's Analytics estimates that the legislation would have a "small" impact on inflation, and the Penn Wharton Budget Model also indicated it would have little impact on prices.

And Senate Republicans opposed to the legislation are pointing to an analysis from the nonpartisan Joint Committee on Taxation, which said the bill would raise taxes on Americans.

Kimberly Clausing, one of the signers of the letter and an economist at the UCLA School of Law, disputed the JCT's analysis, suggesting in a tweet that it was incomplete.

"Many key factors are left out in these tables including, importantly, the effects of deficit reduction, the positive effects of the spending on clean energy, and the benefits from lower drug prices," Clausing wrote.