OPINION:
There has some talk among the legacy media about how recent legislative victories (the semiconductor giveaway and the pending reconciliation) might give President Biden and congressional Democrats new momentum and help them hold onto their majority, at least in the Senate.
Unfortunately, voters don’t care about legislative victories. Nor should they. Legislative victories are only important to voters if they lead to improvements in their lives; if they make the economy better or the nation or their neighborhood safer.
So far, the “victories” to date have consisted of taking money from taxpayers (either current or future) and spending it on a bunch of things that matter to folks in Washington. The most recent example is, of course, the newly revived reconciliation legislation.
That legislation, misnamed the Inflation Reduction Act, is going to be much like the semiconductor legislation or the infrastructure legislation before that or the American Rescue Plan before that — an outsized and pointless giveaway to special interests that would do nothing to improve the lot of Americans or, in the worst case, actively damage Americans.
The current legislation would, according to the Tax Foundation, increase taxes on those in every income quintile and, consequently, reduce economic growth.
It also would increase federal spending by more than $400 billion over 10 years, which is, of course, the entire purpose of the exercise.
Here’s what it would not do: reduce inflation.
Our friends at the University of Pennsylvania have done some analysis that indicates that the legislation would have no measurable effect on inflation. Even Mark Zandi, the in-house apologist for Democrats at Moody’s Analytics, admitted that, at best, the legislation might reduce inflation — nine years from now — by one-third of 1%.
How about deficit reduction? While squeezing more out of the taxpayers by spending $80 billion on the IRS, an agency whose current annual budget is $12.7 billion, might be good fun, it doesn’t score as a revenue raiser. It turns out that the Congressional Budget Office assumes that the federal agency is already enforcing the law. So right away, the amount of revenue available for “deficit reduction” is less than anticipated.
One thing that does count as a revenue raiser is letting the federal government impose price controls on prescription drugs through Medicare. That money would be used to subsidize health insurance for rich people.
If that sounds unfair and inequitable, it’s because it is. If federal control of prescription drugs scares you, it should. Researchers at the University of Chicago have concluded that such an approach would wind up killing people because less research would lead to fewer lifesaving drugs.
Finally, there has been a lot of talk about the cash directed at climate change. At $370 billion, it is most of the spending. The only problem is that we’ve been down this road before, and it leads nowhere.
Since 2005, the federal government has spent about $850 billion on alternative energy. Here are the results: In 2005, the United States relied on coal, oil and natural gas to produce about 80% of its primary energy. Last year, after all that money was spent, the United States relied on coal, oil and natural gas to produce about 80% of its primary energy.
An analysis from the Rhodium Group indicates that the legislation may have no effect at all on greenhouse emissions, or it may reduce emissions by as much as 500 million tons a year (close to 10% of what we emit now). If the legislation results in 500 million fewer tons of greenhouse gas emissions by 2030, we would have paid about $7,000 per ton of the reduction ($370 billion divided by 500 million).
If that seems like a lot, it’s because it is a lot. The best estimates we have of any possible damage from global warming indicate that the cost of carbon might be as much $150 a ton. In other words, even if the legislation does what its supporters say it would do, we would be wildly overspending for what we would be getting.
But there is little reason to think that we will get anywhere near those reductions. Because we can’t turn wind and solar power on and off at will, they will always require a firm supply of backup generation. Right now, that backup is natural gas. While the legislation is a grab bag of giveaways to wind, solar, electric vehicles, etc., it does nothing, specifically, to reduce emissions from either electric generation or cars and trucks.
In short, the legislation does nothing for inflation, increases spending, increases taxes for pretty much everyone, reduces economic growth and, despite the propaganda, is probably not going to change the trajectory of our energy use.
• Michael McKenna, a columnist for The Washington Times, is the president of MWR Strategies. He was most recently a deputy assistant to the president and deputy director of the Office of Legislative Affairs at the White House.
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