In his prepared remarks, President Joe Biden called the 2022 Inflation Reduction Act (IRA) one of the most “significant laws in our history” and hyped it as a win for reducing inflation and tackling the “climate crisis.”
Similarly, Senate Democrats assert that the IRA “helps fight inflation”, while simultaneously lowering energy costs for Americans and “substantially” reducing global greenhouse gas emissions.
The IRA is indeed a significant win for renewable energy–it includes $369 billion in incentives for renewable energy, allowing the “most aggressive action ever” to meet Biden’s climate goals.
However, non-partisan third-party analysts state that the bill’s impact on inflation is “negligible.”
Experts add that the IRA can make inflation worse in certain situations.
Inflation Reduction?
On Aug. 16, Biden signed the 2022 IRA into law and touted it as the “biggest step forward on climate ever.”
“[ The IRAs] will allow us to take boldly additional steps towards meeting my climate goals,” Biden stated further at the signing.
Indeed, the IRA includes several significant tax credits, manufacturing incentives, and grants that Senate Democrats claim will lower energy costs for Americans.
They also believe that the IRA will improve U.S. energy security because it encourages domestic production and helps decarbonize the economy.
Specifically, the IRA includes a $9B energy rebate program that would enable Americans to retrofit or purchase energy-efficient homes. There are also ten-years of tax credit for consumers to equip their homes with roof solar and other energy-efficient heating or water systems.
Some programs include $60 billion in incentives for onshore clean energy manufacturing in the United States and billions in grants to retool or change manufacturing and farming operations.
Seneca Democrats assert that the above manufacturing provisions will be one way the IRA can fight inflation.
” These manufacturing incentives will reduce inflation and lower the likelihood of future price shocks. They bring down the price of clean energy, and relieve supply chain bottlenecks .”
Actual Impact on Inflation
On Aug. 4, the non-partisan Congressional Budget Office stated in a letter to Sen. Lindsey Graham (R-S.C.): “In calendar year 2022, enacting the [IRA] would have a negligible effect on inflation, in CBO’s assessment. In calendar year 2023, inflation would probably be between 0.1 percentage point lower and 0.1 percentage point higher under the bill than it would be under current law.”
Similarly, the Penn Wharton Budget Model at the University of Pennsylvania stated, “We estimate that the Inflation Reduction Act will produce a very small increase in inflation for the first few years, up to 0. 05 percent points in 2024.” After that, inflation will decline in the late 2020s.
Penn Wharton stated, “These point estimations, however, were not statistically different from zero. This indicates a low level of confidence in the likelihood that the legislation will affect inflation .”
On Aug. 12, the Tax Foundation, using its General Equilibrium Model, found that the IRA would “eliminate about 29,000 full-time equivalent jobs in the United States” and “may actually worsen inflation by constraining the productive capacity of the economy.”
The Tax Foundation found that although the IRA did not include many “major tax rates increases” as part of the House’s Build Back Better Act (H.R.S.), it would nevertheless reduce long-term GDP by about 0.2 percent.
Slimmed-Down BBB?
On July 1, Rep. Kevin Brady (R-Texas) stated, “This ‘slimmed-down’ Build Back Better couldn’t come at a worse time.”
On July 28, Biden said that while the IRA didn’t contain all of the proposals in Build Back Better, “you will see a lot of similarities” between BBB and the IRA. It’s not everything [BBB], however, we have made great strides .”
Before signing the IRA on Aug. 16, Biden rejoiced, “And now I’m going to take action that I’ve been looking forward to doing for 18 months.”
When discussing the IRA on Aug 16 and how it “Builds a Better Future for Young Americans,” Biden’s first remark asserted that the IRA “is delivering on his promise to meet the climate crisis.”
Biden said, “This bill represents the singular most aggressive U.S. action to address the climate crisis and provide clean energy solutions throughout American history .”
Indeed. While the IRA represents a major win for renewable energy causes it is not likely to help combat inflation. Independent experts say it could even make things worse.
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Katie is a journalist who covers politics and energy for The Epoch Times. Katie was proud to have served as an Airborne Operations Technician with JSTARS before she began her journalism career. From the University of Colorado, she received her Analytic Philosophy degree and a Minor in Cognitive Studies. Katie has written for CNSNews.com and The Maverick Observer as well as First Quarter Finance, The Cheat Sheet and Investing.com. Email her at [email protected]
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