From the Right: Will the Inflation Reduction Act reduce inflation?


From the Right

by Don Schmitz 

Opinion Columnist 

Political labeling is often creative, sometimes deceptive, and the Inflation Reduction Act (IRA) title appears to be both. The bill’s proponents declare that it will reduce inflation, but they’ve been astonishingly wrong on inflation to date. In July 2021 Biden asserted that the inflation pain was “temporary,” stated his policies would raise wages, and “take pressure off inflation.” Subsequently, the umer producer price index rose to a stunning 8.3 percent annually, the highest in 40 years. Nobody is pretending inflation is temporary anymore, and the Fed is raising interest rates to try and reign it in, which has thrown the economy into a two-quarter fall in gross domestic product, a classic recession. 

There’s more creative labeling from the Biden administration on that front too, stating that because there has been job growth, this recession really isn’t a recession. Of course, millions are returning to work post-pandemic, but that doesn’t change the fact that by every historical definition we are in a recession. Recession plus inflation, or stagflation, is very painful for the American family, who with inflation-adjusted averages have seen their income drop 3 percent in the last year. With midterms looming, polling consistently shows that inflation and the economy are by far what voters are most concerned about. Climate change doesn’t even register in the top 10 list. Polling predicts a bad election night for the Democrats, who by owning all three branches of the government, are being held accountable for the inflation woes. They need to demonstrate they are effective in addressing this problem, hence the IRA title. Their problem is that they lack credibility. They denied that real inflation was happening, then they blamed it on the Ukrainian war, which didn’t start until February 2022, almost a year into this inflationary cycle. It was their $1.9 trillion American Rescue Act in March 2021 that triggered this inflation. 

They blamed spiking gas prices on the war, yet gas averaged $2.58 when Biden took office, and had already jumped to $3.34 before the war (now at over $5.00). Energy costs are soaring, supercharging inflation. In his first day in office, Biden canceled pipelines, created onerous regulations, and has stated “We are going to get rid of fossil fuels.” He endorsed a carbon tax, a fracking ban, and said petroleum executives should be put in jail. Of course, energy prices have spiked — it was by design. Natural gas, crude oil, and coal meet 70 percent of our energy needs; if you go to war against its production, there will be consequences, namely increased energy costs creating inflation. This isn’t popular with voters, however, so Democrats are dancing and spinning before the election. Biden released vast quantities of our strategic oil reserve, which not only didn’t reduce gas prices, millions of barrels were shipped to Europe and China. Depleted, Biden wants to replenish the reserve at $90 a barrel, yet two years ago Democrats blocked restocking the reserve at $19 a barrel because it was “bailing out big oil.” Our government is urging OPEC countries to increase production, which is tough to reconcile with their climate agenda. 

Only 5.6 percent of our energy comes from wind and solar. I strongly support developing these energy sources, as I support dramatically expanding our nuclear energy production with modern, safe facilities. We need to dramatically reduce carbon emissions, but how we do that is a valid debate. The mislabeled IRA will increase corporate taxes $450 billion dollars, but corporations don’t just pay taxes, they pass the increased costs to consumers, which is of course, inflationary. A total of $369 billion will go towards decarbonization over the next decade, and should make a huge difference in our carbon footprint. Good, but please own it, and be truthful with a rightfully skeptical American public. With wind and energy prices for production plummeting, we just might make this transition work. It does beg the question, though: If renewables are now as cost-effective as fossil fuels, why does the government need to tax and spend to accomplish the transition? 

A valid argument is that we need to accelerate the transition to address climate change; however, we need to handle it adroitly. Consider our strategic interests in a dangerous world, plan how to transition our auto fleet from petroleum without spiking transportation costs, and cease rash policies which jar our economy and literally create world hunger. Sri Lanka adopted a national policy shift from petroleum fertilizers to “organic” farming, contributing to a complete collapse of their economy. Chaos and hunger now reign. Senator Manchin helped stop the 2 $trillion new green deal in 2019, and is to be applauded for negotiating a more reasonable bill. However, will the Inflation Reduction Act reduce inflation? No. The best we can hope for is that it won’t make inflation and the recession that much worse.