OPINION
PAUL KRUGMAN
Aug. 8,
2022
https://www.nytimes.com/2022/08/08/opinion/climate-inflation-bill.html
Credit...Jose
Luis Gonzalez/Reuters
Paul
Krugman
By Paul
Krugman
Opinion
Columnist
They really
did it. The Inflation Reduction Act, which is mainly a climate change bill with
a side helping of health reform, passed the Senate on Sunday; by all accounts
it will easily pass the House, so it’s about to become law.
This is a
very big deal. The act isn’t, by itself, enough to avert climate disaster. But
it’s a huge step in the right direction, and sets the stage for more action in
the years ahead. It will catalyze progress in green technology; its economic
benefits will make passing additional legislation easier; it gives the United
States the credibility it needs to lead a global effort to limit greenhouse gas
emissions.
There are,
of course, cynics eager to denigrate the achievement. Some on the left rushed
to dismiss the bill as a giveaway to the fossil fuel industry posing as
environmental action. More important, Republicans — who unanimously opposed the
legislation — are shouting the usual things they shout: Big spending!
Inflation!
But actual
experts on energy and the environment are giddy over what has been
accomplished, and serious economists aren’t worried about the effect on
inflation.
Start with
the environmental side. Many people I talk to assume that President Biden’s
environmental agenda, as contained in his original Build Back Better proposal,
must have been greatly watered down in the legislation we actually got. After
all, didn’t Democrats have to make big concessions to win over Senator Joe
Manchin? Aren’t there important giveaways to fossil fuel interests, like aid
for a controversial natural gas pipeline?
However,
energy analysts believe that any adverse climate effect from these concessions
will be swamped by the gains from tax credits for clean energy. The REPEAT
Project, compiled by Princeton’s ZERO Lab, has produced a side-by-side
comparison of emissions cuts under the Inflation Reduction Act and the earlier
House version of Build Back Better. By 2035 the I.R.A., they estimate, will
have delivered more than 90 percent of the emissions reductions that B.B.B.
would have achieved. After all that legislative drama, Biden’s climate policy
has emerged essentially intact.
How was
this possible? Right at the beginning, the Biden administration decided that
its climate policy would be all carrots, no sticks — that it would provide
incentives to do the right thing, not penalties for doing the wrong thing. This
strategy, it was hoped, would prove politically feasible in a way that, say, a
carbon tax wouldn’t. And this hope has been vindicated.
Furthermore,
it’s a strategy that seems likely to pay political dividends in the future. One
new study, by E. Mark Curtis and Ioana Marinescu, finds that “the growth of
renewable energy leads to the creation of relatively high paying jobs, which
are more often than not located in areas that stand to lose from a decline in
fossil fuel extraction jobs.”
So what did
the Biden administration lose? Unfortunately, much of the social spending
B.B.B. originally included — child tax credits, universal pre-K and more — was
cut. That’s tragic, although enhanced health insurance subsidies — which have
helped bring America’s uninsured rate to a record low — have been extended. But
Democrats delivered on their climate promises, more or less in full.
What about
the critique from the right? Aside from the pathetic attempt to portray the
I.R.A. as a big tax hike on the middle class, Republicans like Mitt Romney are
trying to lump this legislation in with last year’s American Rescue Plan, which
they claim caused inflation to spike.
Never mind
whether this claim is true. The key thing is to do the math. The Inflation
Reduction Act calls for spending less than $500 billion over a decade, compared
with the American Rescue Plan’s $1.9 trillion in a single year — and will
actually reduce the deficit. That’s why independent analysts find that it will
have little effect on inflation.
But if the
spending isn’t very large, how can it have such a big impact? The answer is
that right now we’re sitting on a sort of cusp. Renewable energy technology has
made revolutionary progress, and renewables are already cheaper in many areas
than fossil fuels. A moderate push from public policy is all that it will take
to transition to a much greener economy. And the Inflation Reduction Act will
provide that push.
Given all
this, however, why did every single Republican senator vote against the I.R.A.?
They aren’t all ignorant and innumerate; I’m pretty sure that Romney, for
example, knows that he’s talking nonsense.
Nor can we
easily invoke differences in ideology. The I.R.A.’s climate push mostly relies
on tax credits — and Republicans have themselves used tax credits to achieve
social goals, like the (much abused) Opportunity Zone credits in Donald Trump’s
2017 tax cut.
Almost
surely, what we’re really looking at is the politics of spite. Every Republican
in the Senate was willing to kill our best chance at avoiding climate disaster,
simply to deny the Biden administration a win.
The good
news is that the legislation passed in spite of their spite. And the world is a
more hopeful place than it was just a few weeks ago.
Paul
Krugman has been an Opinion columnist since 2000 and is also a distinguished
professor at the City University of New York Graduate Center. He won the 2008
Nobel Memorial Prize in Economic Sciences for his work on international trade
and economic geography. @PaulKrugman
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