During a House Oversight Committee hearing before the congressional recess, Rep. Eric Burlison (R-MO) questioned experts about the effect of enacting the Inflation Reduction Act on the U.S. economy.
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00:00Thank you. I now recognize myself for five minutes of questions. Mr. Lieberman, when the IRA was originally sold, it was sold to the American people as a legislative vehicle for reducing inflation and for stimulating the economy and creating lots of jobs, lots of new clean energy jobs. But what is the actual result of the legislation been?
00:27Well, there are a lot of jobs right now. I think we're going through the sugar high phase of the Inflation Reduction Act. Sure, you can create a lot of jobs if you throw a lot of money at just about anything, especially lots of federal dollars.
00:44The question is, do these alternative energy sources have any lasting power? The American people are not pounding the table demanding higher utility bills and more expensive transportation.
00:55And so these alternatives need to become cost competitive to have any real future.
01:01And I just don't see that happening with most of the alternative being subsidized right now.
01:07And I would say there's a long history with this and it doesn't bode very well. Congress is not nearly as good as it thinks it is in figuring out what the next big thing in energy is.
01:18It's been trying this since the oil shocks of the of the 1970s, but there's been a lot of boondoggles on the way along the way, not really much in the way of alternative energy success stories that we can point to.
01:32One example I could mention from when I was a staffer 10 years ago, when the next big thing was cellulosic biofuels.
01:38I don't know if you remember cellulosic, but there were all sorts of tax credits and other incentives adding up to dollars per gallon, very similar to what you see for other things in the Inflation Reduction Act.
01:49The facilities were built and it turned into a boondoggle, including a lot of communities that felt cheated because the permanent jobs never materialized.
01:58I fear that if we come back in five years, we'll be talking about a number of clean energy ghost towns as a result of the Inflation Reduction Act.
02:06Yeah. In 1850, the the economist Frederick Bastiat wrote, I think, about this scenario back then and recognized that you you could make the argument that you're creating a lot of jobs by going down the street and breaking windows.
02:21Right. Because somebody has to be employed to replace those windows.
02:25But there's a fallacy with that because of the destructive nature and the wealth that's destroyed in that process.
02:32Would you agree that this holds true with the IRA today?
02:36Yeah. When when you're creating jobs only because of subsidies, that means that money and jobs has to be siphoned away from the rest of the economy.
02:44So they're always there's always two sides of the jobs ledger when government subsidies are involved.
02:49And we're talking about, you know, potentially a trillion dollars.
02:52Plus, if at the end of the day, you have more expensive energy that also suppresses economic activity and jobs.
03:00Thank you, Dr. McBride, your organization, the Tax Foundation, it's not partisan, correct?
03:07There's no it's a nonpartisan organization.
03:10That is correct.
03:11So in 2023, you coauthored a piece published by the Tax Foundation, which included several key findings, which I think are relevant to today's debates.
03:21You stated in that piece that the IRA doesn't reduce deficits and may substantially increase deficits.
03:28The energy credits drive out the cut out of drive the out of control costs of the IRA and the energy credits are a boon for wealthy individuals with a preference for climate oriented luxury goods, including expensive EVs and solar panels.
03:43So my question is this.
03:45Do those findings that you wrote originally, do they still hold true today?
03:50Yes, absolutely.
03:52As far as we can tell, we lack good estimates from the committees that do this and from the agencies, the CBO and JCT.
04:03I went through the latest estimates we have from JCT and other groups, outside groups, indicating the cost of the IRA credits is something like three to four times what they originally were estimated at.
04:19So that was the you know, that's one side of this bill.
04:22The other side is the the tax increases.
04:26One is the drug pricing measure that that's actually a result of a tax change, excise tax on on drug companies.
04:34The but the some of the others are the corporate alternative minimum tax and the stock buyback tax.
04:42So these are brand new taxes that were introduced as part of the IRA.
04:45We don't know how much those are raising. Honestly, we we have done a lot of research to try to build out our understanding of how much revenue is raised by those taxes.
04:57But they were originally estimated to raise on the order of three 300 billion between those two those two tax increases.
05:07If that if that is still the case today, which is questionable for many reasons, I can go into more detail, maybe much less than 300 billion that is raised there compared to the trillion dollars.
05:21That is the rough cost of the IRA credits.
05:24We can see that this is a big deficit increasing bill, completely contrary to the way it was sold originally.
05:31Thank you. My time is expired. I did have questions for Dr. Trish, but hopefully I'll someone will yield me time.
05:37And with that, I turn to ranking member Frost for his questions.
05:42Thank you very much.
05:44Thank you very much.
05:55OK, let me give a break today.
05:57Let me give you a break.