On Wednesday, U.S President Joe Biden marked the first anniversary of his signature Inflation Reduction Act by promoting the groundbreaking clean-energy law as a robust economic force, targeting a public that largely remains unaware of its specifics.
The comprehensive law offers billions of dollars in tax credits to aid consumers in purchasing electric vehicles and companies in generating renewable energy. Biden’s goal is to steer the mighty U.S. power sector towards decarbonization. Simultaneously, the law assists seniors in affording prescription drugs, expands certain aspects of Obamacare, and raises taxes on affluent Americans and corporations.
During a White House ceremony, Biden announced that the legislation has already generated 170,000 clean energy jobs and experts anticipate it will create around 1.5 million jobs over the next decade, resulting in a significant reduction in the nation’s carbon emissions.
Biden pointed out that the legislation has shifted the production of crucial components from China to the United States, stating, “We are building here and sending over there.”
One year after its passage, the law, often referred to as the Inflation Reduction Act , has garnered mixed reviews, a common fate for major U.S. legislation. Meanwhile, a considerable number of Americans, even among those who support Biden, possess limited knowledge about it, as indicated by Reuters opinion polls.
INVESTORS, US COMPANIES LOVE IT
According to Wall Street analysts, the legislation has exhibited early indicators of its economic impact, and they forecast that it will ultimately result in billions of dollars in fresh investments and the creation of numerous jobs.
While experts expect the most significant impacts to materialize in 2024 and 2025, the period following its enactment has seen the introduction of more than 270 new clean energy projects, along with investments totaling around $132 billion, as detailed in a report from Bank of America analysts.
Roughly half of these investment funds are channeled into electric vehicles and batteries, while the remainder supports renewable energy sectors such as solar, wind, and nuclear power. These investments are projected to generate over 86,000 jobs, including 50,000 positions tied to electric vehicles.
In a recent report, Moody’s indicated that the legislation likely contributes to growth in gross domestic product (GDP), productivity, and innovation.
“Over the past year, signs have emerged that the legislation is fostering an upsurge in clean energy manufacturing and associated industries, including semiconductors. It is also influencing companies’ investment choices, spanning sectors like automotive, utilities, and oil and gas,” stated Moody’s.
Conversely, countries in Asia and Europe continue to grapple with addressing the protectionist economic policies embedded within the law.
DEFICIT REDUCTION MISSES MARK
Biden and Democrats promised the IRA bill would cut the U.S. budget deficit by $300 billion over 10 years by enforcing a 15% minimum corporate tax on wealthy companies, hiring more auditors to scrutinize the tax returns of rich Americans and allowing the federal government to negotiate drug prices with pharmaceutical companies.
But the tax credits have been massively popular with companies, boosting job growth, environmental benefits and the price tag. Meanwhile, Republicans used this year’s budget standoff to peel back some of Biden’s efforts to boost tax collections from wealthy Americans. And pharmaceutical companies have sued the administration over its drug negotiating plans.
That has upended financial projections, with analysts predicting budget deficits in the range of $700 billion to $1.1 trillion over 10 years.