The Inflation Reduction Act Should Be Just The Beginning

CJ Polychroniou

Without more direct intervention on the part of the public sector in combatting the climate crisis, what IRA will produce is a green capitalist industry with profit-making as the overriding concern.

The Schumer-Manchin reconciliation bill known as the Inflation Reduction Act (IRA), which is expected to become law after it cleared the Senate on a party line vote and key House Democrats have already signaled that they will vote for it when it moves to the lower chamber of Congress, aims to boost the economy and fight the climate crisis. It will also extend the Affordable Care Act subsidies through 2024, lower a handful of prescription drug prices (for those who are on Medicare), boost IRS enforcement, and require large corporations to pay at least 15 percent of their total profits in taxes.

This reconciliation bill is a slim-down version of the Build Back Better Act. It’s a compromise, and therefore hardly adequate to address the needs of American working-class people and confront the climate challenge. In fact, to call IRA a “historic piece of legislation” is an overstatement. But it is a step in the right direction, especially for a country where corporations and big business run roughshod over the common good.

First, forget inflation, in spite of the title that the bill carries. IRA would have no impact on inflation in 2022 and negligible effect in 2023, according to a report from the Congressional Budget Office.

A major piece of the bill focuses on healthcare. There are some positive aspects in it, but, again, hardly enough to make anything beyond a moderate impact on the well-being of average Americans. It extends Affordable Care Act subsidies for the next three years, lowers somewhat healthcare cost for low-income families, and permits Medicare for the first time in its history to negotiate prices for some prescription drugs. Prescription drugs cost much more in the U.S. (in some instances by as much as over 400%, as in the case of Humira, which is used to treat many inflammatory conditions in adults) than in other developed countries, and the U.S. remains the only country in the developed world without a universal healthcare system.

As Bernie Sanders charged, “this bill does nothing to address the systemic dysfunctionality of the American health care system.”

IRA also seeks to address tax fairness and reduce inequality. It claims that it will create a more equitable United States by compelling corporations with more than $1 billion in profits to pay a 15 percent minimum tax. Conservative democratic senator Kyrsten Sinema, who always sides with the rich and the corporations, first forced the removal of the carried interest tax provision from the bill and then delivered a gift to private equity firms by protecting them from the minimum tax aimed at large corporations.

Forcing corporations making more than $1 billion in profits pay a minimum corporate tax rate of 15 percent can hardly be considered a major step forward in addressing the issue of inequality. However, the corporate minimum tax in the Inflation Reduction Act has quite different rules from the global minimum tax. It is possible, but not likely, that corporations could end up facing both taxes, and that would indeed be a useful start towards tackling extreme inequality.

Energy and climate are what the Inflation Reduction Act is mostly all about. IRA would raise approximately $739 billion over 10 years and spend $433 billion on new investments over a decade, resulting in an overall deficit reduction of roughly $300 billion. The big winners from this deal are indeed energy and climate as IRA pledges $369 billion towards energy security and clean energy. The climate and environmental measures included in the bill are expected to reduce carbon emissions by 40 percent below 2005 levels by 2030.

So, let’s take a brief look at the energy and climate provisions included in the act. Read more

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Let’s Acknowledge Inflation Reduction Act’s Significance — And Its Inadequacy

Robert Pollin

The Schumer-Manchin reconciliation bill, called the Inflation Reduction Act (IRA), is a massive piece of legislation that aims to boost the economy and fight the climate crisis. It passed the Senate on Sunday, and is expected to quickly pass the House. On the economic front, the bill will reduce the deficit, close critical tax loopholes exploited by big corporations, and create millions of new jobs over a decade through the implementation of numerous energy and climate measures. The IRA is the most important climate bill in U.S. history. Nonetheless, it is also a bill full of defects, and parts of it will actually make the climate crisis worse, says Robert Pollin, one of the world’s leading progressive economists, in this exclusive interview for Truthout. Pollin is distinguished professor of economics and codirector of the Political Economy Research Institute at the University of Massachusetts-Amherst. He is the author of numerous books, including Climate Crisis and the Global Green New Deal: The Political Economy of Saving the Planet(coauthored with Noam Chomsky), as well as of scores of green economy transition programs for U.S. states (including California, Maine, New York, Ohio, Pennsylvania and West Virginia) and different countries.

C.J. Polychroniou: The IRA is far less ambitious than what was originally envisioned in the Build Back Better Act, but still regarded as a step in the right direction. If it becomes law, it will address some outstanding concerns about climate, health care and corporate taxes. The agreement would raise approximately $739 billion over 10 years and spend $433 billion over a decade, which means it will reduce the deficit. However, the big winners from this deal will be climate and energy as the IRA pledges $369 billion toward energy security and clean energy. The bill’s supporters in Congress state that the climate and environmental measures included in the bill will reduce carbon emissions by 40 percent below 2005 levels by 2030. So, let’s start with the climate details in the act. First, is the sum of $369 billion spent over a decade big enough to address an existential threat like global warming? In fact, will the climate and energy provisions incorporated into the bill, which include the requirement that the Interior Department offers at least 2 million acres a year for offshore oil and gas leases, even achieve the designated emissions-reduction target by 2030?

Robert Pollin: The Inflation Reduction Act is the most significant piece of climate legislation ever enacted by the U.S. government. It is also, in itself, not close to sufficient, to move the U.S., much less the global economy, onto a viable climate stabilization path. We need to be 100 percent clear on both points. This is the only way that we can, at once, take maximum advantage of the major resources the IRA will provide to fight the climate emergency while also recognizing the huge areas where the bill accomplishes little to nothing as well as where it actually contributes to worsening the crisis.

First, on the positive side, it is a big deal for the federal government to provide roughly $400 billion over 10 years to fight climate change. To put this into perspective, this is exactly $400 billion more than what had been on the table only three weeks ago. This level of federal support will also encourage at least another $600 billion in private spending. The public funds will leverage private investment through, among other specific programs, tax credits for clean energy investments, consumer rebates for electric vehicle and heat pump purchases, loan guarantees that lower risks to banks for clean energy investments, and a national Green Bank underwritten by the federal government. This would bring total public plus private clean energy spending from the IRA to roughly $1 trillion over 10 years, or about $100 billion per year.

This is a huge sum of money, but also not nearly enough. Keep in mind that $100 billion equals about 0.4 percent of current overall economic activity, i.e., GDP. By my own estimates and those by others, for the U.S. to reach the emission reduction targets set out by the Intergovernmental Panel on Climate Change (IPCC) — i.e., a 50 percent CO2 emissions cut by 2030 and zero emissions by 2050 — will require about $400 billion in today’s economy and an average of $600 billion per year between now and 2050. So the total amount of public and private clean energy spending generated by the IRA would deliver, at best, about 25 percent of the necessary funding level. Again, 25 percent is way better than 0 percent. But it is also way worse than 100 percent.

I want to emphasize that this is a best-case scenario. The main reason is because of what Sen. Joe Manchin extracted from his fellow Democrats in exchange for his endorsement. Manchin agreed to support the IRA only if, in return, his fellow Democrats would support the construction of the 300-mile Mountain Valley natural gas pipeline that would run through West Virginia as well as Virginia.

The pipeline will likely create major environmental damage, including the contamination of rural streams and land erosion. But still worse is the obvious fact that building a new natural gas pipeline only makes economic sense if we are still burning natural gas to produce energy for the next 50 years or so. This is despite the fact that burning natural gas — along with burning oil and coal — to produce energy is, by far, the main cause of climate change. Support for the Mountain Valley pipeline in West Virginia is, unfortunately, fully consistent with the point you mentioned, that the IRA mandates the expansion of oil and gas exploration leases on federal land and water.

How can we possibly reconcile a supposedly transformative piece of climate legislation with building new natural gas pipelines? The only conceivable way to get there is to also support massive-scale deployment of carbon capture technology as a major component of the overall U.S. emissions-reduction program. Carbon capture technologies aim to remove emitted carbon from the atmosphere and transport it, usually through pipelines, to subsurface geological formations, where it would be stored permanently. To date, the general class of carbon capture technologies have not been proven to work at a commercial scale, despite decades of efforts to accomplish this. After all, carbon capture would be the savior for oil, coal and natural gas industries if the technology could be made to work commercially at scale. A major problem with most carbon capture technologies is the prospect for carbon leakages that result through flawed transportation and storage systems. These dangers will only increase to the extent that carbon capture does end up becoming commercialized and operates under an incentive structure in which maintaining safety standards cuts into corporate profits.

Matters become still worse to the extent that the IRA channels big-time funding into carbon capture, as could easily happen. Several of the major programs within the overall bill do not have fully specified mandates, including the Greenhouse Gas Reduction Fund, the Clean Energy Investment and Production Tax Credits, and the Clean Energy Loan Guarantees. When push comes to shove — and, in particular, with oil companies and the likes of Senator Manchin doing the pushing and shoving — big chunks of funding through these programs are likely to be channeled into carbon capture. This would then mean less money for solar and wind — where the money needs to go. Read more

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21st-Century US Foreign Policy Is Shaped By Fears Of China’s Rise, Chomsky Says

Noam Chomsky

Is the increasing influence of China in international affairs a threat to world order? The United States thinks so, and so does Britain, its closest ally. Indeed, the U.S.-China rivalry is likely to dominate world affairs in the 21st century. In this geostrategic game, certain states outside the western security community, such as India, are expected to play a key role in the new stage of imperialism under way. The U.S. is a declining power and can no longer dictate unilaterally; however, as Noam Chomsky underscores in this exclusive interview for Truthout, the decline of the U.S. is “mostly from internal blows.” As an imperial power, the U.S. poses a threat to world peace as well as to its own citizens. There is even a radical plan to dismantle whatever is left of U.S. democracy in the event that Trump returns to the White House in 2024. Other Republican winnable dictators could also enforce the plan. What’s next for U.S. imperial power, and its impact on the world stage?

Chomsky is institute professor emeritus in the department of linguistics and philosophy at MIT and laureate professor of linguistics and Agnese Nelms Haury Chair in the Program in Environment and Social Justice at the University of Arizona. One of the world’s most-cited scholars and a public intellectual regarded by millions of people as a national and international treasure, Chomsky has published more than 150 books in linguistics, political and social thought, political economy, media studies, U.S. foreign policy and world affairs. His latest books are The Secrets of Words (with Andrea Moro; MIT Press, 2022); The Withdrawal: Iraq, Libya, Afghanistan, and the Fragility of U.S. Power (with Vijay Prashad; The New Press, 2022); and The Precipice: Neoliberalism, the Pandemic and the Urgent Need for Social Change (with C.J. Polychroniou; Haymarket Books, 2021).

C.J. Polychroniou: Noam, western powers are responding to China’s rise as a dominant economic and military power with ever-increasing calls in favor of bellicose diplomacy. U.S. General Mark Milley, chairman of the Joint Chiefs of Staff, said during a recent trip to the Indo-Pacific that China has become more aggressive in the region and the Biden administration has described it as a “pacing threat.” Rishi Sunak, currently the leading candidate to replace outgoing prime minister Boris Johnson, said China is the U.K.’s “biggest threat.” Sunak has promised to ban Confucius Institutes, learning centers funded and run by an organization affiliated with the Chinese government, from the U.K. if he becomes the next prime minister. Why is the west so frightened of a prospering China and what does it say about imperialism in the 21st century?

Noam Chomsky: It may be useful to take a brief but broader look, first at the record of the fears, then at the geostrategic circumstances of their current manifestations. We are speaking here of the West in a narrow sense, specifically the Anglo-American “special relationship,” which since 1945 has been the United States with Britain a junior partner, sometimes reluctant, sometimes eager to serve the master, strikingly in the Blair years.

The fears are far-reaching. In the case of Russia, they go back to 1917. Secretary of State Robert Lansing warned President Wilson that the Bolsheviks were appealing “to the proletariat of all countries, to the ignorant and mentally deficient, who by their numbers are urged to become masters… a very real danger in view of the present social unrest throughout the world.”

Lansing’s concerns were reiterated in different circumstances by Secretary of State John Foster Dulles 40 years later, when he lamented that the U.S. is “hopelessly far behind the Soviets in developing controls over the minds and emotions of unsophisticated peoples.” The basic problem, he elaborated, is the Communist “ability to get control of mass movements . . . something we have no capacity to duplicate…. The poor people are the ones they appeal to and they have always wanted to plunder the rich.”

These are recurrent fears of the privileged, in one form or another, throughout history.

Scholarship substantially agrees with Lansing’s concerns. The acknowledged dean of Cold War scholarship, John Lewis Gaddis, traces the Cold War back to 1917, with the Bolshevik challenge “to the very survival of the capitalist order… a profound and potentially far-reaching intervention by the new Soviet government in the internal affairs, not just of the West, but of virtually every country in the world.” The Bolshevik intervention was what Lansing recognized: working people around the world might take note and react, the feared domino effect, a dominant theme in planning. Gaddis goes on to argue that the Western (including U.S.) invasion of Russia was a justified act of self-defense against this intolerable challenge to what is right and just, what is now termed “the rule-based international order” (in which the U.S. sets the rules).

Gaddis was appealing to a concept that the U.S. War Department in 1945 called “logical illogicality,” referring to the postwar plans for the U.S. to take control of most of the world and surround Russia with military force, while denying the adversary any comparable rights. The superficial observer might regard that as illogical, but it has a deeper logic, the War Department recognized — a logic called “imperialism” by the unkind.

The same doctrines of logical illogicality reign today as the U.S. defends itself from Eurasian threats. At the Western border of Eurasia, the U.S. defends itself by expanding to the Russian border the aggressive military alliance it runs, NATO. At the Eastern border, the U.S. defends itself by establishing a ring of “sentinel states” to “encircle” China, armed with high precision weapons aimed at China, backed with huge naval military exercises (RIMPAC) aimed not very subtly at China. All of this is part of the more extensive efforts at encirclements, jointly with “subimperialist” Australia, which we have discussed earlier, borrowing Clinton Fernandes’s term and analysis. One effect might be to increase the incentive for China to attack Taiwan in order to break out of the encirclement and have open access to the oceans.

Needless to say, there are no reciprocal rights. Logical illogicality.

Always the actions are in “self-defense.” If there was a violent power in history that wasn’t acting in “self-defense,” it would be helpful to be reminded of it.

Fear of China is more visceral, drawing from the deep racist currents that have poisoned American society since its origins. In the 19th century, Chinese people were kidnapped and brought to work as virtual slaves to build railroads as the nation expanded to its “natural borders”; the slur that was applied to them (“coolie”) was an import from Britain, where Chinese workers also served as virtual slave laborers generating Britain’s wealth. Chinese people who tried to settle were subjected to vicious racist attacks. Chinese laborers were banned entry for 10 years in the 1882 Chinese Exclusion Act, and Chinese were banned entirely in the racist 1924 immigration act, aimed primarily at Italians and Jews (sending many to gas chambers when entry to the U.S. was denied). Read more

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We Can’t Avoid Climate Breakdown Without Reducing Growth, Leading Economist Says

Herman Daly – Photo: Youtube.com

The current economic system is at the heart of the climate breakdown, argues Herman Daly, a leading expert in the field of ecological economics who for many decades has been at the forefront of the struggle to redirect economics toward environmental sustainability. For his contributions to economics and the environment, Daly has received numerous prestigious awards, including Sweden’s Honorary Right Livelihood Award, the Heineken Prize for Environmental Science awarded by the Royal Netherlands Academy for Arts and Sciences, the Leontief Prize for contributions to economic thought, and the Medal of the Presidency of the Italian Republic. In this exclusive interview for Truthout, Daly — who is now professor emeritus at the University of Maryland School of Public Policy and who once served as a senior economist at the World Bank — explains why the current economic system is destroying the environment and outlines the policy steps that the world must take in order to achieve a sustainable future.

C.J. Polychroniou: You have been arguing for many years now that the present economic system, formed around the principles of neoclassical economics, ignores planetary limits and, as such, it is destroying the fabric of the ecology on Earth and posing an existential threat to humanity. However, it is only rather recently that this message has been making inroads into the wider public due to the increasing awareness of the link between fossil fuels and the climate crisis. Can you briefly describe the way the current economic system impacts on the global ecosystem and is responsible for the climate crisis?

Herman Daly: Today’s economy impacts our environment in the same way that a size 12 foot impacts a size 10 shoe — it stretches the shoe out of shape while painfully squeezing the foot. The ecological-economic term for this is “overshoot,” consisting of excessive takeover of land capable of supporting the capture of the current flow of solar energy by photosynthesis, and excessive drawdown of fossil fuels (the stored stock of the solar energy of Paleolithic summers), as well as other mineral deposits. It is these physical resources that human labor transforms into the psychic experience of the enjoyment of life, and into physical waste. The rate of transformation is excessive if it exceeds the rate of regeneration of renewable resources, the absorptive capacity of the environment for wastes, or the rate of improvement of resource-saving technologies.

Our current excessive rate of transformation of resources into wastes, the “metabolic throughput,” is driven by the excessive scale of population times the excessive scale of per capita resource consumption, relative to the finite and entropically constrained biosphere in which we live. Climate change is only one symptom of overshoot, although the major one. Other symptoms of overshoot include biodiversity loss, disruption of the biosphere with novel substances (tetraethyl lead, endocrine disruptors, radioactive materials, etc.) with which the biosphere has had no evolutionary experience, plus increasing inequality and poverty, sometimes resulting in violence.

In spite of all the evidence about the catastrophic effects of burning fossil fuels on the climate, the world systematically continues to emit carbon emissions into the atmosphere. Why is it so hard to come up with a reasonable policy that limits significantly the use of fossil fuels?

Because fossil fuels concentrate so much energy in such a small and convenient form compared to alternatives. Also, fossil fuels are collected from underground, and unlike the energy alternatives of wood or fodder for draft animals, do not compete with agricultural land surface for human food. Given the enormous stocks of fossil fuels, we were able for many years to live off of past accumulated “capital” rather than current solar “income.” This enabled the excessive scale of the human economy, the overshoot that is now coming to a forced end thanks to the combined costs of depletion and pollution that we could ignore in the empty world before we filled it with goods, “bads” and people.

We could and should transition to renewable resources, but that will require a reduction in the scale of the human economy to a smaller level that could be maintained more or less in a steady state. Renewable resources become nonrenewable if exploited beyond sustainable yield. Growthist values would have to be replaced by an ethic of sufficiency, sharing and qualitative development rather than quantitative growth. The fossil fuel industry strenuously resists this change in an effort to hold on to their enormous resource rents and monopoly profits. Transition to renewable energy should be encouraged, but there is a lot of unfounded optimism that renewables will be cheap and plentiful enough to replace fossil fuels without a reduction in the scale of the economy, or even in its rate of growth. The need to reduce the human scale is primary. Short of that, we can and should increase allocative efficiency by internalizing external costs, and improve distributive fairness by redistribution. But unless we also reduce the scale of the macroeconomy to a sustainable level, we will just be making the best of an ever-worsening situation, given that growth itself has become uneconomic.

The scale of the economy is the product of population times per capita resource consumption. A lot of ideological ink is wasted arguing over whether it is population increase or per capita consumption increase that is responsible for excessive scale. That is a bit like arguing whether it is length or width that most determines the area of a rectangle. In my lifetime, world population has quadrupled (from 2 to 8 billion), while [highly variable and unequal] per capita consumption has grown even more, perhaps nine-fold depending on how measured. Neither factor can be neglected. Read more

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