The Basics of IRA Subsidies and Why It’s Stupid to Kill Them

Republicans are doing what they said they’d do. They are moving bills through Congress to kill policies supporting electric vehicles, solar power, and wind power (while also massacring social services and limits on pollution). They are planning to give the richest Americans massive tax cuts — because their lives somehow aren’t too easy yet, and because this will theoretically make them more productive (spoiler alert: there will be a massive letdown there, but more for MAGA voters to be angry about). The priorities for Republicans at the national level remain the same as they have for decades: 1) lower taxes on the super rich, 2) take away public services for non-billionaires, 3) tilt the scales as heavily in favor of fossil fuel industries as possible.

Even if we completely ignore the massive problems of global heating and pollution, there are huge reasons why such policies have become more and more idiotic.

First of all, technological trends have been very clear — EVs and solar power are going to keep getting more and more competitive and take more and more of the market. Now you may say, “Great, so no need for subsidies!” The issue is: there are going to be winners and losers in this, and every other major economic region is supporting their EV and solar industries because they want their companies and their people to be the biggest winners of this transition. The Inflation Reduction Act (IRA) incentives were bringing EV factories, EV battery factories, EV battery mineral mines and refineries, solar cell and solar panel factories, and various other economic engines to the USA. Killing the IRA will kill many of those projects.

Furthermore, beyond the US market, there are smaller (and bigger) markets around the world that are going to buy more and more of these products from industry leaders — from global industry leaders. Killing the IRA incentives that were re-shoring production jobs and stimulating the growth of these important new industries is going to limit the economic growth and success of American companies, and the US as a whole.

We are also going to have less and less good technology compared to other regions. We’re already seeing this to a significant degree in the EV sector. China and Europe have far more — and better — EV options than the US. If we get held even further behind, oy, that is going to sting more and more.

How can you be a world leader when you are a laggard in the hottest, most important industries of the future? How can you attract the best people and businesses to the US when you have flip-flopping policies that kill incentives for these critical industries just a few years after enacting them?

If a company can cost effectively make battery-grade lithium, batteries, EVs, and solar panels in the US and make a profit selling them, they are going to do that. If their business plan is sabotaged by an anti-progress administration full of goons and corrupt cronies, are they even going to consider coming back here after shutting down shop, construction jobs, or even early-stage plans?

The US is becoming a hostile business environment. (And we aren’t even talking about the potential for being sued or targeted by politicians for having DEI policies.) More and more, companies are going to decide the risk of trying to do business or lead in new industries in the US is too high and the reward is too low, and just ignore this market more and more. Americans will be the poorer for it.

But, hey, then there’s more reason to complain and blow up the system, eh? That’s the scam that just keeps on giving. Too bad we’re too politically illiterate to figure it out and stop the cycle of abuse.

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