The Inflation Reduction Act: standing at a double-cross roads

It’s time to wish the Inflation Reduction Act (IRA) a happy birthday. A year ago, President Biden signed the oddly named act into law—a name that even Biden has trouble relating to what the law is accomplishing. As described by the president at a recent fundraiser in New Mexico:

“It has nothing to do with inflation. It has to do with... the single-largest investment in climate change anywhere in the world, anywhere. No one has ever, ever spent that. And it’s beginning to take hold.”

The federal investment of $370 billion and what it is accomplishing is a message that Biden will be taking on the road between now and next November.

The IRA is one of a trinity of climate-related legislation passed by the 117^th Congress. The two other pieces are the bipartisan infrastructure bill and the CHIPS and Science Act. Unlike its companions, the IRA was exclusively the work of the Democrats. Ironically, at least to this point, the states benefitting most from the legislation are ruby red in color.

A study by the Financial Times found that “more than 80 percent of investment in large-scale clean energy and semiconductor manufacturing pledged since last year’s passage of the Inflation Reduction Act and the CHIPS and Science Act is destined for Republican congressional districts.”

According to POLITICO, “Republican parts of the country often look more attractive. Of the 200 project locations announced through July, more than 60 percent are in GOP-held districts.

Figure 1. Location of ITA projects

There are substantive—as opposed to political—reasons why the red South has scored the lion’s share of funds. Jason Grumet, CEO of the American Clean Power Association, explains, “the Southeast, Upper Midwest, where you have significant amounts of manufacturing capacity, much of which has been idled and left the country.” It is not to say, however, that politics doesn’t play into the decision-making—of both the Biden administration and the companies looking to build out their manufacturing capabilities.

President Biden and the Democrats will be running on their accomplishments in 2024. In terms of the wholly Democratic IRA, those successes are already considerable. According to Evergreen Action, a leading climate advocacy group, the list of accomplishments includes 170,606 new jobs created and the leveraging of $278 billion in new non-governmental investments.

A major motivator for all three trinity acts was to make America more secure. The threats to be protected from included reliance on other nations—most notably China—for semiconductors and a whole host of other things, including batteries for a rapidly growing domestic electric vehicle sector and power backup systems, photovoltaic panels, and steel, the list goes on. The lesson of the pandemic and the Ukraine war is that the lack of domestic manufacturing makes you vulnerable to others—who may not act as reasonably as you might hope.

Although the trinity legislation was passed during the Biden administration, the sentiment for reshoring critical industries and building out the nation’s manufacturing sectors was a priority of the Trump administration. As reported by the New York Times: “From tax cuts to relaxed regulations to tariffs, each of President Trump’s economic initiatives is based on a promise: to set off a wave of investment and bring back jobs that the president says the United States has lost to foreign countries.”

Former President Trump said it himself:

“We have the greatest companies anywhere in the world. They’re all coming back now...to the United States.”

As with much the former president has to say, his success wasn’t as great as he thought. But the fact remains that reshoring and building out domestic manufacturing capacity are among the very few things the two administrations agree on. The IRA, infrastructure, and CHIPS legislation should be viewed as a continuation of the previous administration’s efforts to do what benefits the nation.

Biden has consistently mentioned in his roadshow presentations that many—if not most—people probably don’t understand the peculiarly named act’s relationship to combatting climate change and expanding the domestic economy. A Washington Post and University of Maryland survey in July found that more than half of U.S. voters are unaware of the IRA clean energy tax credits.

Biden is making it his and his administration’s business to educate the public—encouraging them to take advantage of the considerable tax incentives and outright grants to improve their home’s energy efficiency and value—whether through more insulation or installing heat pumps and rooftop solar arrays. The more people, states, and companies taking advantage of the incentives available in all of the trinity are a way to protect the environment and grow the economy.

President Biden has also been chiding Republicans for taking the credit for IRA projects in their states and districts—but in a kinda’ friendly political way. Biden has been around politics most of his adult life, and he knows there’s little honor among thieves. I also believe that Biden remains enough of an altruist that embracing the incentives and investments is a net plus for society. So, what the hell, can’t we share some credit?

What the hell is right? It’s one thing for a bit of friendly political poaching; it’s another to sit there and continue denying that combatting climate change is good for the environment and the economy—and worse, complain about subsidies to encourage a domestic manufacturing sector that can also sell its wares throughout the world.

Even if climate change were a hoax—the benefits of a cleaner environment and all of the investment monies to create manufacturing capacity and JOBS are not. Don’t blame solar for coal’s financial problems or lost jobs because the market is moving on to clean energy alternatives. Technology innovation is critical to any country’s growth. Public policies that help to develop and leverage new technologies need to innovate along with them.

One of the most f**k*d up arguments against new billion-dollar battery manufacturing plants making the rounds recently is that the IRA is transferring wealth to the Chinese Communist Party. In April, E&E News and others were reporting that the chair of the House Ways and Means Committee, Jason Smith (R-MO), was saying that the Democrats “push[ed] through these corporate welfare subsidies that cost more than three times as much as they told us it would while paying big dividends to big business and China.”

At one level, I can understand how Smith might have that understanding. Using data provided by the national business group E2, POLITICO found that “40 percent of the new manufacturing announcements made since the IRA was enacted were led by companies based outside the U.S. or by companies outside the U.S. in partnership with a U.S. company.”

A China connection—albeit a weak one—was present in six of the projects. The connections are things like licensing technology that would be used by a domestic manufacturer, not partnerships with the Chinese Communist Party or the offshoring profits back to Beijing. Just ask the Republican supervisor for Green Charter Township, Michigan.

Gotion, Inc., is investing $2.36 billion to construct a battery component manufacturing plant. The rumor going around the township is that language in the company’s incorporation papers that states it is carrying out its commercial activities for the benefit of the Chinese Communist Party (CCP). Long story short, IT DOESN’T!

According to Chuck Thelen, the vice president of North American manufacturing at Gotion: “The rumors… about us bringing communism to North America are just flat-out fear-mongering and really have nothing based in reality,” Gotion is a North American company with no CCP involvement. Read the incorporation papers.

From its investigations, POLITICO concludes that Gotion’s experience “mark[s] a recurring theme of distrust that undergirds some of the manufacturing announcements that are flowing to red districts.”

Ford’s new BlueOvalBattery Park will cost $3.5 billion and create 2,500 jobs. It, too, is getting pushback from residents and elected officials over the belief the Biden administration and the Chinese Communist Party are in cahoots.

Call me a cockeyed optimist, but isn’t part of a congressman’s job to speak truth to their constituents and encourage economic development, allowing them to live the American dream—or at least to pay their bills each month? Evidently, John Moolenaar (R-MI), who represents the Gotion district, didn’t get the memo. According to Moolenaar:

“Gotion North America is a subsidiary of a company that pledges allegiance to the CCP, and I don’t think they should be receiving taxpayer money to build in Michigan.”

My advice to the congressman is “suspect, but verify.” Unless, of course, you’re not interested in the truth.

Lest anyone think that Moolenar’s words have no impact, citizens who once favored the project are now opposing it. One of his constituents now claims that “they’re pushing down our throats. Why aren’t we giving our tax money to an American company?” Green Charter Township board meetings according to reports have “devolved into shouting over concerns of China’s influence and claims by some of xenophobia.”

Politically opposing the project is that person’s right. However, I would venture that the loss of thousands of jobs and millions in state and local taxes might give others some pause.

As it turns out, the misinformation floating around also leads to death threats being lodged against the Republican supervisor of Green Charter Township, Jim Chapman. Chapin, who supports the Gotion project, says he had expected pushback. He’s now facing a recall effort. We live in angry times. Hopefully, the effort won’t involve violence.

My feeling on all of this is simple. You can’t take it with one hand and then complain about profligate federal spending or how Democrats are the devil’s spawn and commie sympathizers. Can’t we keep the culture wars out of it for a change?

Elected leaders are obligated to speak and defend the truth. The misinformation floating around trinity projects mirrors that surrounding utility-scale wind and solar projects in the same red states. The source of most of the alternative truths is Republicans like Smith and the oil, gas, and coal industries who want to continue subsidizing fossil fuels while sabotaging clean energy projects through lies and innuendo.

All I can say is happy birthday, IRA!