A law signed by Joe Biden — the Inflation Reduction Act — will have a negative effect on medical innovation. It also will cost taxpayers far more than Biden claimed, notes a recent study from the Cato Institute:
The Inflation Reduction Act (IRA) became law on August 16, 2022. Despite its name, the act was mostly designed to decarbonize the US economy by providing subsidies to producers of clean energy and consumers of low-carbon-emitting preferred products such as electric vehicles.
A contentious point of debate surrounding the passage of the IRA was its budgetary impact—how much liability American taxpayers would have to take on to subsidize clean energy. Various governmental and nongovernmental organizations estimated fiscal costs that turned out to be too low and that they later revised upward.
Using a transparent budget scoring methodology, we estimate that the energy subsidies in the act will cost between $936 billion and $1.97 trillion over the next 10 years, and between $2.04 trillion and $4.67 trillion by 2050. This estimate is substantial because several of the IRA’s largest subsidies are uncapped.
When Congress passed the IRA, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimated the energy-related IRA subsidies would cost about $370 billion. An analysis by Goldman Sachs later estimated the IRA’s 10-year cost would be $1.2 trillion.
However, the IRA’s energy subsidies are multiple times larger than initial estimates, and they expose American taxpayers to potentially unlimited liability. Congress should repeal all the energy subsidies in the IRA. At a minimum, Congress should cap total spending on energy subsidies and require budget experts at the CBO, JCT, and other government organizations to publish transparent and updated estimates of the IRA’s long-term costs.
Biden had claimed the IRA would cost $433 billion, but financial experts at places like Goldman Sachs quickly concluded it would cost $1.2 trillion or more over a decade. And it is now apparent that even the Goldman Sachs estimate is probably too low.
Under the Inflation Reduction Act, taxpayers were put at risk for bad loans to crony capitalists. As Phil Kerpen noted, the “bill authorizes” the Commerce Secretary, “Jen Granholm to make $250,000,000,000 in loan guarantees for ‘energy infrastructure.’ That’s a lot of Solyndras. If any substantial portion of these loans go bad,” the national debt will get substantially bigger.
As the New York Post pointed out, the bill dumped billions of dollars into “boondoggles” that serve as “a slush fund for Democrats.” For example, it includes “$60 billion for ‘environmental justice‘”, a code word for race-based wasteful spending. It also predictably caused an increase in the launch price of certain drugs.
