When the federal Inflation Reduction Act passed, the Congressional Budget Office estimated the energy and climate provisions in it would cost taxpayers $391 billion and do little to reduce inflation.
A new analysis by Goldman Sachs estimates those provisions will actually cost $1.2 trillion, more than three times as much as originally estimated.
"It's a perfect example that anytime the federal government tries to fix a problem, the solution usually makes the problem far worse," said Tyler Lindholm, state director for Americans for Prosperity in Wyoming and a former state lawmaker.
Goldmans estimates, according to The Wall Street Journal, that the IRAs tax credits will cost, over the original estimate:
$379 billion more for electric vehicles
$156 billion more for green energy manufacturing
$82 billion more for renewable electricity production
$42 billion more for energy efficiency
$36 billion more for hydrogen
$34 billion more for biofuels
$31 billion more carbon capture
Dan Kish, senior fellow with the Institute of Energy Research, told Cowboy State Daily that government estimates are downplayed to make legislation easier to pass, despite the Congressional Budget Office (CBO) directed to act as an impartial, nonpartisan analysis organization.
"There's a lot of gaming that goes on", Kish said. "The IRA was criticized for being expensive to begin with, and that was after they massaged the numbers."
EV Tax Credits
One reason the costs are blowing through original estimates is that companies are taking advantage of tax credits that aren't capped, and the Biden administration is exhibiting a lot of flexibility for the conditions to meet those tax credits.
More vehicles will meet the laws self-sufficiency mineral and battery material conditions for consumer credits, which can be as high as $7,500 per vehicle purchase, and automobile manufacturers are lobbying Congress for the U.S. Treasury to be loose in its interpretation of those conditions, according to the Wall Street Journal.
Kish said this will mainly benefit wealthier Americans, as they are the ones buying electric vehicles, and the tax credits apply to leased EVs as well.
Companies also are expected to make billions from taxpayers, Kish said, including Tesla, which will get $1 billion in battery tax credits in 2023 and another $17.5 billion by 2026.
Increased Electricity Rates
Besides costing taxpayers more than original estimates, Kish said the law will also cost consumers more for energy. Adding more wind and solar to the grid increases costs, because managing a grid with more intermittent sources is expensive.
This is happening in Wyoming.
Rocky Mountain Power, which has been retiring coal plants and building out its wind and battery storage resources, filed a request with the Wyoming Public Service Commission last month to increase electricity rates by 20%.
"We're told that wind and solar are cheaper than the alternatives. Well, I didn't just fall off the turnip truck. It seems to me, if they're doing away with coal and replacing it with wind and solar, and prices are going up 20%, that means something isn't cheaper," Kish said.
The IRA passed without a single Republican voting in favor of the bill. Democrats in Congress, as well as the White House, criticized them for not supporting it.
If Republicans in Congress get their way, prices will go up and inflation will get worse, the White House tweeted in October.
Wyoming U.S. Sens. John Barraso and Cynthia Lummis, both Republicans, were among those who were critical of the legislation, arguing it would be costly and ineffective.
They were just seeing reality, and it wasnt hard to predict. Apparently, its hard on the East Coast to predict this type of inflationary standards, Lindholm said.
Lindholm told Cowboy State Daily that many people were predicting that, not only would the IRA not reduce inflation and possibly increase it by flooding the market with more printed money, the estimates were too low.
"And yet, here we are. Its frighteningly amazing just how out of touch these folks are. But this is pretty typical for Congress," Lindholm said. Ultimately, the proof is in the pudding.
According to USDebtClock.org, the national debt is reaching $31.7 trillion as of Monday. Lindholm said as the government continues printing money, inflation and the debt will continue to increase.
"This is going to fall on my children and your children and our children's children. That's who will have to take up the mantle of fiscal responsibility, because clearly, our generation has not cut out for it, or at least not in D.C.," Lindholm said.