AMAC Exclusive – By Andrew Abbott
A new report from Goldman Sachs confirms what conservatives warned all along – Democrats’ “Inflation Reduction Act” (IRA) is actually just another enormous spending bill that will blow out the deficit in service of a far-left agenda. And despite the Biden administration’s attempts to distance itself from negative headlines, the IRA and policies like it are continuing to wreak havoc on the U.S. economy, affecting everything from persistently high inflation to ongoing instabilities in the banking sector.
According to a Wall Street Journal analysis of the Goldman Sachs report, “Democrats used accounting gimmicks to claim the partisan law would reduce the budget deficit.” But now, the investment giant “projects [the IRA’s] myriad green subsidies will cost $1.2 trillion—more than three times what the law’s supporters claimed.”
The reason for this discrepancy is the Biden administration’s loose interpretation of the conditions that must be met to earn tax credits outlined in the bill and the fact that the credits aren’t capped. In practice, this means that companies can vacuum up a virtually unlimited amount of federal dollars for a modest investment in so-called “green” infrastructure and production technology.
In addition to increasing the deficit, the Journal reports that the IRA will raise energy costs for American consumers because “Oil and gas companies will spend less on increasing production and more on developing carbon capture technologies, hydrogen and biofuels that are profitable only with the IRA’s rich tax credits.”
Blame for this bait-and-switch lies in large part at the feet of West Virginia Democrat Senator Joe Manchin, who brokered the deal on the IRA with President Biden last year.
In an op-ed for the Journal last week, Manchin subtly admitted that he’d been duped: “When President Biden and I spoke before Congress passed the Inflation Reduction Act last summer, we agreed that the bill was designed to pay down our national debt and shore up America’s energy security,” Manchin wrote. “Yet instead of implementing the law as intended, unelected ideologues, bureaucrats and appointees seem determined to violate and subvert the law to advance a partisan agenda that ignores both energy and fiscal security.”
Senator Manchin further demanded that Biden “instruct his administration to implement the Inflation Reduction Act as written and stop redefining its credits and other subsidies” and “sit down with congressional leaders and negotiate meaningful, serious reforms to the federal budget.”
But given Biden’s record thus far, Manchin should hardly be surprised at Biden’s radical re-interpretation of the IRA, and shouldn’t hold his breath for a course correction. Since day one, the White House – and Manchin’s fellow Democrats in Congress – have been pushing the same big spending policies despite clear evidence that they would cause an inflationary spike.
Back in 2021, top Obama economic advisor Larry Summers blasted Democrats’ $1.9 trillion “American Rescue Plan” as the “least responsible” economic policy in 40 years. Democrats continued their spending spree in 2022, including with the Inflation Reduction Act, which the Penn Wharton said at the time of its passage would actually cause inflation to increase – and that’s using Democrats’ cost projections, which have now been proven to be a gross underestimate.
In total, according to the Committee for a Responsible Federal Budget, the Biden administration has added more than $4.8 trillion to the deficit since taking office. Though inflation has come down from a high of over 9% in 2022, it still remains more than three times higher than the Fed’s target rate of 2%.
The drastic implications of inflation can be seen everywhere in the economy. 62% of Americans now report living paycheck to paycheck. In February, the Commerce Department assessed that consumer prices rose .6% from December to January, the fastest price increase since June last year.
The Federal Reserve has also been forced to raise interest rates in an attempt to bring down inflation, causing more instability. It was this in part that led to the collapse of Silicon Valley Bank in March and persistent fears about a broader banking crisis.
Yet in response to this crisis, Biden has only made things worse by directing the FDIC to backstop all deposits at Silicon Valley Bank and Signature Bank. This means the American taxpayer is potentially on the hook for over a quarter of a trillion dollars of additional debt.
Biden is also plowing ahead with his plan to forgive up to $20,000 of student loan debt for every American college graduate. Experts say the policy will cost $400 billion over the next 30 years and will do nothing to limit the cost of college. It will also make inflation worse.
On top of it all, Biden has just proposed a budget with an eye-watering price tag of $6.8 trillion. Just like the IRA, much of this money will be funneled to far-left special interests while American taxpayers are forced to foot the bill.
The spending policies pursued by President Biden and congressional Democrats caused an inflationary spiral, and their refusal to cut spending once inflation took hold has made it worse. Now, the country is facing signs of a broader recession and economic crisis for which Democrats once again are refusing to take responsibility.
Andrew Abbott is the pen name of a writer and public affairs consultant with over a decade of experience in DC at the intersection of politics and culture.
