As the oldest president in American history, Joe Biden must have known he could avoid the inevitable effects of his own policies by retiring and riding off into the Delaware sunshine. And so he shall.
He will be a former president with a reliable pension and powerful friends, so Biden can write a book, swim in the pool, and spend his senior years in comfort. But for the rest of us, there is no escaping the problems that Biden’s policies have helped to trigger.
A big problem launched during the Biden years is the misleadingly named “Inflation Reduction Act.” The Treasury Department says the IRA, passed in 2022, “enhanced or created more than 20 tax incentives for clean energy and manufacturing.” Those may be admirable goals, but they have nothing to do with the fact that the dollar isn’t worth as much as it used to be. And make no mistake: after the IRA came a deluge of devaluation.
Biden’s response was to admit that the IRA wasn’t given a proper title. “I wish I hadn’t called it that because it has less to do with inflation than it has to do with providing alternatives that generate economic growth,” he told reporters.
A useful title for the bill would involve what it actually does: the “devaluation of currency.” This takes a longer-term view than the ever-fluctuating prices of consumer goods. But when a currency is devalued, it removes incentives to save.
For example, a person with $100,000 in an IRA expects to be able to cover several years of retirement with that money. However, if the value of the currency plunges while the person waits to turn old enough to actually access the money, the $100,000 may only be enough to buy a loaf of bread. If that. In Weimar Germany, BBC writes, “a loaf of bread, which cost 250 marks in January 1923, had risen to 200,000 million marks in November 1923.” In such a devaluation, the $100,000 in the IRA would, of course, remain $100,000. It would be vastly devalued.
When President Biden talks about “alternatives,” he seems to mean “alternative energy,” since the IRA focuses so much on funding “green” sources of power. It includes $369 billion in new spending, some of that as subsidies for wind and solar projects. It also increased tax credits for the purchase of electric vehicles, and it boosted taxes on natural gas.
This is the wrong approach.
For one thing, government programs take years to get going. “The Commerce Department has been painfully slow in getting the grants out and hasn’t yet given a dollar of the money to companies like Intel,” Rep. Ro Khanna, a supporter of federal intervention, admits in the Wall Street Journal. “The company’s recent layoffs are an adjustment to declines in revenue, from $79 billion in 2021 to $54 billion in 2023.”
Another problem is that federal spending projects are ineffective. “In 2021, the Biden administration committed $7.5 billion to an ambitious nationwide program of electric-vehicle charging stations,” journalist David Frum writes in The Atlantic. “To date, seven stations have been built, for a total of 38 charging points. (By contrast, the private sector in the U.S. had installed more than 64,000 stations by the end of 2023, with some 175,000 charging points.)” Let the market work.
Finally, if the goal of the IRA is reducing carbon dioxide emissions, it is a waste of money. “Unlike most other nations on the planet, the U.S. has substantially reduced its carbon emissions over the past 15 years,” economist Bjorn Lomborg wrote in 2022. “This is largely owing to the fracking revolution that replaced a lot of America’s coal with natural gas, which is cheaper and cleaner.” In an ironic twist, the IRA imposes new taxes on natural gas.
The IRA monkeyed with contemporary prices, of course. It has the more dangerous effect of devaluing the dollar in the long-term, because the federal government has no plan to pay back the money it borrowed to spend through the IRA.
The Clean Capitalist Leadership Council provides several recommendations that could be plugged in to replace the IRA. “Open markets (power, energy and other sectors) to competition, free trade, rule of law, simplified permitting, inclusive economic rights and democratic self-regulation,” are all approaches that it recommends. Also, “eliminate conventional subsidies for profitable enterprise” such as Intel is (or is supposed to be).
Even without Joe Biden on the ticket, there is no need to wait until November to drive change. Lawmakers should repeal the IRA today, and finally take a step to bolster, rather than reduce, the value of the dollar.
