Democrats’ Inflation Reduction Act (IRA) could cost roughly $1.2 trillion in green energy subsidies, more than four times an initial government forecast of outlays, Bloomberg reported Thursday, citing analysts from Goldman Sachs.
The Congressional Budget Office (CBO) initially forecast that the law, a cornerstone of President Joe Biden’s efforts to decarbonize the U.S. economy, would cost the government $370 billion to boost investments in green technology, according to Bloomberg. Goldman Sachs’ findings mirror those of analytics firm Benchmark Mineral Intelligence, which reported in February that the estimated cost of battery manufacturing tax breaks would be roughly $136 billion over the next 10 years, more than four times the $30.6 billion estimated by the CBO.
“Early analysis of the IRA relied on unrealistic expectations to keep cost estimates down,” Heritage Foundation economist E.J. Antoni told the Daily Caller News Foundation in a statement. “As time has progressed and those rosy forecasts are pushed outside the realm of possibility, the real cost is becoming increasingly clear.”
Goldman analysts estimate that private companies, spurred by government benefits, will invest an additional $3 trillion, Bloomberg reported. Biden specifically called out “every single” Republican for siding with “special interests” over the American people in opposing the bill, in remarks made after he signed it into law in August.
The IRA offers a variety of tax credits and subsidies to wind, solar and battery production and encourages U.S.-based mining by linking battery subsidies to a requirement that at least 40% of all minerals are mined domestically or from certain allies. The bill also expanded a federal loan program to support research and development of advanced batteries to be used in vehicles.
The massive climate bill would have an effect on inflation that was “statistically indistinguishable from zero,” according to a preliminary estimate made by the University of Pennsylvania Penn Wharton Budget Model made in July. President Joe Biden last August touted a letter signed by 120 economists, including some Nobel prize winners, which alleged that the bill would put “downward pressure” on inflation, based on a CBO estimate that the bill would cut government spending by $300 billion over 10 years, the Associated Press reported contemporaneously.
Then-House Minority Leader Kevin McCarthy argued at the time that the bill would spend “half-a-trillion of your money,” building on “trillions in wasteful spending that caused runaway inflation” in an August debate on the bill.
“Passing this bill today means more expensive bills for Americans tomorrow. And anyone who says otherwise isn’t telling the truth,” McCarthy said. “Your pocketbook is their plan to fund more inflationary spending.”
The White House did not immediately respond to a DCNF request for comment.
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