The conservative case for keeping the Inflation Reduction Act

In February 2023, Rep. Andrew Ogles (R-Tenn.) and 20 of his Republican colleagues introduced a straightforward piece of legislation. The bill declared, “Public Law 117–169 (commonly referred to as the Inflation Reduction Act of 2022) is repealed.”

It’s easy to understand why these members felt this way. Six months earlier, in August 2022, President Joe Biden and the Democratic Congress had jammed through the Inflation Reduction Act (IRA) on a party-line vote. The bill was hatched by Democratic leadership working within its own caucus, and there was little attempt to attract the other party.

Republicans were upset with the process, annoyed by a slew of tax increases and concerned that the spending in the bill was much higher than the government estimates — something that has been borne out over time. And there was skepticism, if not ridicule, about the bill’s title, since many outside analysts believed that it would actually increase inflation, especially in the short term.

But now here we are, a year later, and the question is: what to do? What should be the conservative approach to the IRA? Does it still make sense to advocate for full, or even partial, repeal of the energy provisions?

For both policy and political reasons, the answer is a resounding no.

Let’s look at the policy. Assuming that one believes there is a government role in dealing with the environmental impacts (in economists’ lingo, the “externalities”) of energy production and encouraging a transition to lower carbon energy, some government action is inevitable. We can have top-down regulatory approaches, micromanaging by bureaucratic fiat and picking specific projects and businesses. Or we could have a market-based approach where the government provides a broad incentive framework and businesses can seize opportunities that meet their strategic plans.

For the most part, the IRA adopted a market approach, relying on a series of tax credits along with easing access to capital. These incentives are something that Republicans have often supported in the past. Many tax credits — such as for carbon capture, hydrogen and nuclear power — had been introduced by Republicans, enacted in previous bills and enjoyed significant bipartisan support. Simply because they were packaged together does not mean that the original rationale for them is no longer valid.

Moreover, government support through tax credits is preferable to funneling dollars through the appropriations process. Tax credits require equity formation and capital expenditures, while government grants pick winners and losers, are susceptible to political intervention and bias, and often don’t require productive results.

Second, it is a cornerstone of conservatism that policy should be predictable and durable. Markets work most efficiently when there are clear rules upon which participants can rely. Regardless of one’s view of the original credits, they have been enacted into law with generally a 10-year timeframe. Businesses are doing exactly what we would expect — assessing the marketplace, analyzing the financial returns and making significant investments, sometimes worth billions of dollars. We shouldn’t change the rules in the middle of the game. It is detrimental to economic growth and unfair to employees and shareholders.

Third, one goal of the IRA is to build up America’s energy security. Growing a domestic workforce, on-shoring manufacturing capacity, using American-made and American-sourced components and reducing foreign dependencies are all policies that conservatives have supported in the past — and should continue to promote in the future.

That leads to politics. While the IRA received its support from Democrats, the economic benefits are flowing disproportionally to areas represented by Republicans. Studies show that more than 60 percent of the project locations are in red states, and nine of the top 10 states benefiting from new jobs are red or purple states.

So does that mean that there aren’t problems with the IRA? Of course not. In many cases, the administration’s implementation has conflicted with the purposes of the bill. For instance, rather than stimulating domestic industry and production of critical minerals or lower carbon fuels, some of the guidance may even stifle domestic industrial growth and utilization.

Conservatives should continue to voice objections and seek to change the implementation. They should ensure that the Biden administration does not impose improper limits that serve a political agenda, that the credits are as technologically neutral as possible and that certain industries aren’t demonized or treated unfairly.

Furthermore, conservatives should continue to emphasize that these proposals were designed to jump-start the industry and to encourage technology development and innovation, but not to serve as a never-ending set of subsidies that will get renewed over and over again. Conservatives should also continue advocating for removal of burdensome regulations and more efficient permitting.

The Inflation Reduction Act grew out of a partisan process and contained numerous problematic provisions. Conservatives had a right to be upset. But at this time, for both policy and politics, they should focus on refining and improving the energy provisions, not on pulling them up by their roots. That’s the conservative way.

Jeffrey Kupfer, the president of ConservAmerica, is a former acting deputy secretary of the Department of Energy.