Two years ago, the Biden administration’s key legislation, the Inflation Reduction Act, passed with the narrowest of margins and zero bipartisan support.
Even its name is misleading, and the president acknowledges the law has little to do with reducing inflation. If anything, it has driven up costs; purchasing power continues to shrink as more and more Americans are forced to tighten their wallets.
We must re-evaluate the IRA and consider eliminating the massive subsidies that are included. This bill is not only driving up the federal deficit and overall energy costs, but it is doing so on the backs of the middle and lower classes.
The IRA’s goal to cut carbon emissions to 25 percent of 2005 levels is on track to far exceed its original budget figures of $391 billion. Goldman Sachs came out months after the IRA’s passage with estimates of a cost of $1.2 trillion. Cato claims it is closer to $1.8 trillion. Wood McKenzie calls the act “indefinite,” with a price tag approaching $2 trillion to $3 trillion.
What the administration dubbed “the most ambitious climate action in history” will continue to be extremely expensive.
The subsidies offered to wind, solar and electric vehicle manufacturers are hefty, constituting the vast majority of “goodies” included within the legislation. One of the primary reasons the IRA’s costs are ballooning beyond initial budgets is because more people are applying for and receiving the handouts than anticipated. The subsidies will not expire until electric industry carbon emissions fall to the designated levels. This could take decades.
The beneficiaries of the giveaways are doing so at the expense of those with little to no discretionary income. For example, those who can afford an EV do not need the $7,500 tax credit. Meanwhile, the typical American who makes $60,000 and likely drives a 12-year-old car is picking up the tab.
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Kristen Walker is a policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.theamericanconsumer.org or follow us on Twitter @ConsumerPal.