President Joe Biden has acknowledged that the Inflation Reduction Act (IRA), his flagship legislation, was not accurately named, as its success should not be measured by its effect on inflation. The IRA is now primarily associated with decarbonization efforts, although it remains relatively unknown to most Americans. In an effort to highlight the benefits of the law, President Biden and his administration embarked on a nationwide tour to commemorate its passage. However, what impact has the IRA actually had?
Initially, the IRA was named in an attempt to gain support from voters who were concerned about high inflation in 2022. President Biden had originally included climate policies in his expansive Build Back Better agenda, but it faced opposition within his own Democratic Party and ultimately collapsed in December 2021. Its revival in the form of the IRA was a surprising victory for Democrats.
The IRA consists of three main components: tax credits and funding to incentivize green-energy projects, expanded government-subsidized healthcare and lower prescription drug costs, and adjustments to tax codes to generate more revenue from corporations. While not all provisions have been implemented yet, progress reports from the White House and research firms indicate potential positive outcomes.
Investments have already begun, with a significant portion of the IRA funds directed towards combating climate change. Data shows that companies involved in clean-energy production, such as wind turbines and solar panels, are ramping up their production. Since the passage of the bill, 83 manufacturing plants have been announced, with over 50 focused on solar-power equipment and the rest on wind-turbine parts or batteries. These projects represent a substantial $270 billion investment, equivalent to the previous seven years of clean-energy investment combined.
Furthermore, significant investments have been announced for factories producing electric vehicles (EVs) and their components. By the time President Biden took office in 2021, $50 billion had already been committed to EV investment. The IRA has further accelerated these trends, with uncapped subsidies potentially leading to climate spending ranging from $369 billion to trillions of dollars, depending on private sector projects. These incentives are expected to have a significant impact on America’s ability to reach emissions-reduction targets.
Aside from climate-related initiatives, the IRA also includes provisions to lower healthcare costs. Although some policies, such as Medicare’s ability to negotiate drug prices, will not take effect until 2026, smaller fixes have already been implemented. For instance, the IRA introduced a cap of $35 per month on out-of-pocket spending for insulin, benefiting Medicare beneficiaries. Additionally, drugmaker Eli Lilly voluntarily capped its insulin prices.
Despite Republicans in the House of Representatives voting to repeal the IRA, the Democrat-controlled Senate would never have approved such a measure. Interestingly, Republican-leaning areas are projected to benefit the most from the law, with numerous clean-energy projects planned for red states. This includes wind farms in the plains and hydrogen hubs in states like Texas and Utah. Surprisingly, $47.5 billion of EV investments are heading to Republican districts, compared to $6.7 billion for Democratic ones.
Although the IRA is likely safe from serious Republican opposition while President Biden is in office, Democrats have struggled to effectively promote the law’s achievements. According to a poll conducted in August, two-thirds of Americans had little to no knowledge about the IRA, with only a quarter aware of its climate subsidies.
In conclusion, the IRA has made significant strides in promoting decarbonization efforts and reducing healthcare costs. Investments in clean energy and electric vehicles have surged, with substantial funding directed towards Republican-leaning regions. However, the law’s achievements remain relatively unknown to the majority of Americans, highlighting the need for better communication and awareness.
Original Story at www.economist.com – 2023-08-17 20:16:39
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