Biden’s Inflation Reduction Act Won’t Benefit Workers

Aug 21, 2023

It’s been a year since President Joe Biden signed the Inflation Reduction Act (IRA) into law. While inflation is down compared with a year ago, many economists say that has little to do with the IRA. And many workers would question just how much inflation is down, considering how rapidly prices of gasoline, car insurance and rents still seem to be going up.

In fact, the IRA has little to do with reducing inflation. It’s a lot like when the politicians passed what they called “welfare reform”, which was really an attack, and called it the “Personal Responsibility and Work Opportunity Act,” or when President Obama signed into law what was called the “Affordable Care Act.”

What the IRA really is about is a huge federal handout to big corporations supposedly aimed at “encouraging investment in green energy.” Officially, the bill provides for 400 billion dollars in federal spending. Of that, 216 billion will go to tax breaks, grants, and loans to corporations to build plants for producing electric vehicles (EVs) and EV batteries.

It also includes 43 billion dollars in credits to individuals, including $7,500 toward the purchase of a new EV. These credits, however, come with protectionist language that says the vehicle must be “American made.” Biden, Senator Joe Manchin, and other supporters of the bill sold it as a way to cut into China’s lead in producing EVs. China currently accounts for 80% of the production of EV batteries.

But the IRA’s protectionist language does not just exclude purchasers of Chinese EVs, it also excludes those who would purchase most vehicles made in Europe, Japan, and South Korea. Seventy percent of EVs currently sold in the U.S. wouldn’t qualify, such as cars made by South Korea’s Hyundai. Hyundai currently produces the second highest number of EVs sold in the U.S., with Tesla being number one. Many European EVs contain batteries produced in China.

Some economists predict the IRA will, in fact, lead to higher inflation. Others, including economists from Goldman Sachs, the Brookings Institute, and even the White House Office of Management and Budget predict the real cost of the IRA might be closer to 1 trillion dollars.

Regardless of what happens with inflation, these handouts to the corporations will add to the federal budget deficit and increase the amount of interest to be paid on government debt. It will be the working class, which pays a disproportionate share of the taxes in this country, that will pay the bill for these generous gifts to the corporations. More than likely, in addition, most workers won’t earn enough to even buy the electric vehicles they produce!

No wonder the bosses’ politicians felt the need to try to slide this bill under a fake name, in the hope they could fool workers into believing it’s in our interests. Don’t believe the hype!