The Inflation Reduction Act, a Libertarian Nightmare

On Tuesday, President Joe Biden signed the Inflation Reduction Act into law. Scott Lincicome, director ...

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On Tuesday, President Joe Biden signed the Inflation Reduction Act into law. Scott Lincicome, director of general economics at the Cato Institute, joins Declan to help us better understand the legislation. What’s actually in the law? How questionable is the budget math?

Show Notes:

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  1. AHenry

    Good talk. I kept murmuring "China" to myself as I listened but Scott never addressed two big challenges with China - theft of IP and use of slave labor. Those have been problems for decades.

    Of course China can make a product cheaper if they steal another's hard-earned, expensive R&D and if they use slaves to build these products.

    So tariffs may not be the answer but how to we level the playing field?

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  2. GregS

    The formulation of "if climate change is so important, they should have done more to address it" is quite lazy and acts as if politics doesn't exist.
    Particularly when Scott starts talking about how a carbon tax would have been better.
    Does Scott think a more aggressive climate bill would have passed theough Congress
    Would a carbon tax?
    If climate is an existential crisis, should we refuse to accept incomplete solutions even if complete solutions are politically unachievable?
    If corporate taxes are bad, would a bill that reduces them from 15% to 10% be unacceptable becuse 0% is the better solution?

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    Ben Connelly

    I don’t watch baseball anymore, although I’d hazard that the team with claims to “national security exceptions” might really be the one in the home of American liberty, the town with a long tradition of opposing tyranny, going back to its opposition to protectionism in the tea industry! Of course, that team is owned by a guy who owns some foreign English soccer (ha) teams now so maybe we need a little Buy American there.

    But I have to admit the Texas Rangers have a claim given that they were at one time owned by the greatest president in my lifetime!

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    Ben Connelly

    The idea that they’re going to phase out Obamacare subsidies in 3 years is laughable. Talk about some CBO gaming right there. If they phased those out, all of a sudden tens of millions (or more) of Americans would find their monthly premiums go up by $50-$300. That’s going to go over well.

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  5. SMcD

    Great, informative podcast! learned a lot and love hearing Scott break it down and explain things in common language without political input. Also a Texas Rangers fan and feel the same as Scott with the mention of Nelly Cruz. Heartbreak that has scarred my baseball heart!

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    Anne W (Raw5254)

    My husband and I really enjoyed this. Our thoughts on everything: what a mess!

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    WKDawson

    I had a lot of trouble with this episode. I'm hardly an economics major who studies markets, but I'm certainly someone with a brain in his head.


    private investment & demand for green/clean energy is rapidly going forward:
    Perhaps this is because investors realize that there will be subsides in these areas and this is the direction the the market will ultimately go because it is finally starting to go that way.

    Supply side.

    The restrictions in the form of tariffs is not part of a bill on climate, it is part of legislation
    It is possible to remove the tariffs independently, isn't it?
    It is possible to modify regulations on where solar and wind are installed, isn't it? It simply takes having agencies and companies carry out serious discussion on what is reasonable.

    If really, solar panels would do irreparable harm somewhere, shouldn't there be some genuine discussion about whether it is a enough of a priority or not to build them there anyway? Red tape is also meant to protect thoughtless activities, though by itself, it often inflicts thoughtlessly unnecessary hurdles too. Maybe serious discussion would bring about more reasonable regulation, rather than just complaining.

    This sounds like it has to do our legislators spending all time doing jackassery for show in front of the cameras rather than doing their darn job. It has nothing to do with __this__ bill.

    Demand:
    You claim that government subsidies to corporations that produce green energy will crowd out investors.

    Government subsidies lower the risk of those corporations (if they are any good) to develop novel technologies on the proceeds of increasing energy efficiency, increasing higher conversion energies from solar collectors, findings ways to help such devices last for a longer lifetime, developing better energy storage that is cheaper but needs considerable research to get there.

    You look at what is here __right now__, the government would pay for what is in the blue sky of tomorrow. I don't see how any investors are actually "crowded out" by this. By restricting the investment to __only__ private investors, that __limits__ growth by the increased risks the company must take to build and develop advanced technologies.

    Government investment could lower the risk to both investors and achieve our goal over advanced technology. Would you argue this way with development of hypersonic missiles?

    I understand that procurement/bidding etc comes with its own enormous problems, but there seem to be grants that people __can__ apply for if they have a really good idea. Maybe it is not billions, but if it is so great an idea, and a larger company is so lethargic and lacking in innovate acumen that it hasn't the wits, surely there are avenues for such people. Am I wrong there?

    The crowding out of investments during the Obama stimulus was because the price of oil went down again because OPEC increased its production and that left more of the green energy companies vulnerable to the volatile energy market. It was also a ridiculously short plan of two years. Seriously, what can anyone develop and bring to market in two years given all the luck in the world? Maybe this works for a new Coke-a-Cola drink, but technology needs more like a decade to get there.

    I just don't see how any of this harms (crowds out) investors, or should scare them away. It changes the dynamics of the market, but if the aim is toward long term energy independence, and we are serious about it, I see nothing here.

    Strings attached:
    The regulations on where the stuff was made. Well, true, this defies our pre-covid tendency to offshore everything. If the industry doesn't exist in the US, there are no jobs except that of importers to building such technology. Making a mask only requires some retooling, making a battery requires building a specialized factory. It requires an infrastructure including people who will invest their lifetime to such projects. It is not just changing from making headbands to making masks.

    How does that really harm the US to encourage some free market development __on shore__. I agree that the draconian restrictions are bad, so maybe that is a serious weakness in the bill, but if there is no one with the technical capabilities to make that stuff here at all because we can buy it for cheaper somewhere else, that is not a solution either.

    The harder issue is that to build factories, it does need to be the case that people actually believe that there will be demand after the subsidies stop flowing. If the subsides are only for two years, no one with a brain in their head would bother. That was the problem with Obama's short sighted bill.

    Where I think maybe we can agree is that carbon tax may be something they left out.

    I also think you have a good point that consumer subsides might better be applied in general, rather than having restrictions on batteries that we don't make presently. Yet part of the goal is also to create some jobs in the US, so someone making a solar panel in Ohio would at least be good for that person in Ohio and may be a better job than he/she had before (waiter, bellboy, etc.).

    I do, however, get the point about protectionism, so the bill probably does have some weaknesses there, but I think most of the engineering departments in a lot of the universities in the US have almost as many foreigners as natives now. Probably more in fact. We are training people how to make stuff, but not here. This is also not good.

    I grant, congress usually does a good job of screwing things up, but "strategic defense" is not just merely having a plane or a tank or a battleship, and a budget for the military. Part of it is having a diversified supply chain, and a working population that is technically inclined such that their labor and resourcefulness can be rapidly deployed where needed, and it also is that people have more than just waiter, bellboy, and barista jobs to look forward to. ... not to the extent of rampant protectionism, but to the extent that we can move fast if we have to.

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  8. Natedela

    Did I miss it, or was there zero discussion of Medicare Part D reform?

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    Greg Williams

    Good discussion. I love listening to libertarians' views on government. But Scott is not nearly as far out there as most. He just makes good sense.

    Three guys, a republican, a democrat and a libertarian, are setting at the bar getting a good buzz on. How do you tell which is which? The republican is explaining religious freedom to the bartender. The democrat is explaining sexual freedom to the waitress. The libertarian is explaining economics to the jar of pickled pig's feet.

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  10. Terri C

    I LOVE the Dispatch podcast music pre and postlude but not this new speedy version. Please go back!

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