New CEI paper: End IRA Subsidies Now
Photo Credit: Getty
The Inflation Reduction Act (IRA) is the flagship climate spending law from the Biden administration. Estimates place its cost between $936 billion and $1.97 trillion over the next 10 years, potentially rising to $4.67 trillion by 2050. In a new CEI paper, Ryan Young and I refute the claim that the subsidies are net job creators. The current reconciliation bill may represent the last and best opportunity Congress has to repeal the IRA’s subsidies.
Many pro-subsidy members of Congress have fallen for make-work bias:
Make-work bias is the belief that the number of jobs is more important than how productive they are. The long-run employment impact of most public policies, including the IRA, is near-zero. Labor force size is tied to population size more closely than anything else.
Using subsidies to create jobs is a zero-sum game. This is because of opportunity costs:
IRA supporters often say that its subsidies will create new jobs in their states or districts. They have a kernel of a point in that any trillion-dollar spending program will create some jobs. It will also come with significant opportunity costs, including jobs lost or never created. Some important things will not happen because of this legislation, and those things turn out to be, historically, quite important to Americans’ widespread prosperity.
Every IRA dollar spent through the IRA to support politically favored industries is a dollar that could have been allocated more productively elsewhere. All the IRA does is take the money out of the pockets of some Americans and redistributes it to other Americans without incentivizing innovation or broader contributions to society, except in ways that Congress, in all its wisdom, has deemed beneficial.
Lawmakers now have their last and best chance to repeal the IRA subsidies through reconciliation. If they fail to do this, American taxpayers will pay trillions of dollars, and in return receive unreliable energy, regressive taxes that solely benefit the rich, and higher prices.
Read the whole paper here.
For additional discussion on the IRA see: