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.
Data indicates that 78 percent of the EV tax credits are claimed by filers earning over six figures, and 73 percent of EV owners who qualify for the credit would have bought one anyway.
Speaking of tax breaks for the wealthy, companies with more than $1 billion in sales have received more than 90 percent of the tax breaks built into the IRA. This is, once again, another massive transfer of wealth from working-class families to the very well-off, which, in this case, are multi-billion dollar companies.
Much of this money is flowing to foreign companies. Overseas manufacturers are the biggest winners of the climate law since the supply chains for alternative energy sources largely reside outside the United States. Taxpayer money is filling the coffers of organizations abroad.
On top of being a costly piece of legislation, the IRA is forcing a shift toward second-rate energy sources.
To transition away from affordable and dependable petroleum-based energy, these subsidies are given to alternative sources that have proven time and again they are not only expensive but unreliable. Americans are not only financing wind and solar energy through taxation but are also paying record-high electricity rates for energy with some of the lowest capacity factors.
Several U.S. regions have suffered because of wind and solar failing to adequately supply energy needs. With demand set to substantially increase in the coming years, it makes zero sense to bolster and vigorously pursue inferior yet costly energy sources to trade out the more practical ones.
Even the North American Electric Reliability Corp.’s reliability assessments warn that risks of blackouts are increasing due to state and federal mandates for carbon-free electricity. The “future resource mix could fail to deliver the necessary supply of electricity under energy-constrained conditions.”
The IRA should not make it to a third anniversary without a repeal of its colossal wind, solar and EV subsidies. The American public cannot afford the expensive price tag nor the disastrous consequences the law generates.
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