This article is part of HuffPost’s biweekly politics newsletter. Click here to subscribe.This week marked the one-year anniversary of the Inflation Reduction Act, President Joe Biden’s groundbreaking legislation. The administration had grand plans to celebrate and promote the accomplishments of the law through various appearances and a major speech by Biden himself. However, amidst the latest news about Donald Trump’s indictment, these events went largely unnoticed. It’s not surprising as official efforts to highlight legislation often struggle to break through the political noise and impact public opinion. Nonetheless, major policy changes can eventually shape the political conversation by influencing expectations and signaling priorities. Just like the Affordable Care Act, which initially faced resistance but eventually established itself as a transformative law that brought about lasting changes and became politically untouchable. President Biden’s Inflation Reduction Act has the potential to be his own transformative legacy, especially when seen as part of a larger series of investments aimed at changing American life in meaningful ways. However, the question remains: will these initiatives truly have a lasting impact? To explore this question, we asked three of our reporters who have closely covered different aspects of the Inflation Reduction Act to share their insights.
What The IRA Means For Climate
While the Inflation Reduction Act is often discussed in terms of its massive size, rivaling the total spending of China and the European Union, understanding its true significance requires considering the United States’ climate position just over a year ago. For decades, the US has been a major contributor to carbon emissions, with gas-guzzling vehicles, sprawling suburbs, and fossil-fueled power plants playing a dominant role. Even now, the US remains the second-largest emitter globally, continuously increasing its carbon output. While individual states have taken steps to adopt renewable-energy goals and limit emissions, the federal government’s approach to the climate crisis has flip-flopped depending on the party in power. However, a turning point came in 2007 when the Supreme Court ruled that the federal government had a responsibility to regulate carbon emissions under the Clean Air Act. Still, progress remained slow until the US and China acknowledged the threat of climate change in the 2015 Paris Agreement. The Obama administration made efforts to enact regulations to limit carbon emissions, but many of these were later undone under Trump. To break this cycle, Democrats made passing legislation on climate change a priority, and the Inflation Reduction Act codifies the federal government’s responsibility to regulate carbon. While the law is a significant step, its impact on emissions depends on state and local policies. To truly bend the curve on emissions, the US needs to embrace carbon-free energy sources and be willing to go even further.
What The IRA Means For Economics
At its core, the Inflation Reduction Act challenges the conventional economic wisdom that increased public investment leads to decreased private investment. Instead, the law aims to crowd in private investment through government-directed industrial policy. So far, it seems to be working. Since President Biden took office, private companies have announced over $200 billion in manufacturing commitments in clean energy, electric vehicles, and batteries. This level of business investment is unprecedented, particularly in research and development. The full impact of the law is yet to be seen as the Internal Revenue Service is still finalizing the rules and guidance for tax credits. Nevertheless, analysts predict that the Inflation Reduction Act could stimulate over $3.3 trillion in private investment over its 10-year duration. The goal of this crowding-in of private investment is to revitalize domestic manufacturing and create jobs in areas that have been left behind. The law includes “place-based bonuses” to incentivize companies to invest in economically disadvantaged regions.
In conclusion, the Inflation Reduction Act has the potential to be a transformative piece of legislation for both climate action and economic revitalization. However, its long-term impact will depend on a range of factors, including state and local policies, the willingness to embrace carbon-free energy sources, and the effective management of the allocated funds.
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