“I wish I hadn’t called it that,” said Joe Biden of the Inflation Reduction Act. Why? Well, he admitted, because it was mainly about other things. But if he was honest he’d admit that it did nothing to reduce inflation, instead adding to the problem. The Manhattan Institute’s Stephen Miran explains:

First, in contrast with its name, the IRA hasn’t done much to reduce inflation. Even President Biden agrees, now that political attention is focused elsewhere. “It has nothing to do with inflation,” Biden told donors recently, conceding what critics said all along. “It has to do with the $368 billion, the single-largest investment in climate change anywhere in the world.”

Economists know that policy should “lean against the wind” of the economic cycle, adding fiscal and monetary support when the economy is weak and has too little inflation, and removing that support when the economy is strong and experiencing high inflation. In that sense, with inflation recently running as hot as 9 percent, this was the worst possible timing over the last four decades for new fiscal money; if the IRA really aimed to reduce inflation, it would have removed fiscal money from the economy, not injected more. …

Second, not only did the IRA boost demand in an already-overheated economy; it also further distorted the supply side, worsening inflationary pressures. The original Congressional Budget Office estimate for the size of the IRA’s environmental tax credits came in at just under $300 billion, but recently revised estimates from the Joint Committee on Taxation put that number over twice the original score. This newer estimate would wipe out all the net expected deficit reduction over the entire budget window.

He talks about distorting the market for everything from construction to electric vehicles, all while “the Treasury has had to begin issuing shocking volumes of Treasury bonds.” That raises interest rates, which then affect the aforementioned projects and products. In the meantime, American industrial policy is likewise distorted by chasing after things that wouldn’t otherwise be priorities.

As for the IRA: its first façade was that it aimed at inflation. Its second façade was that it aimed at climate change. But does it actually address climate change?

Scientists agree that climate change is affected by the global stock of greenhouse gases, not the local stock. It doesn’t matter whether carbon emissions occur in Boise or Beijing, Des Moines or Delhi; the climate effect is the same. While the investments from the IRA might reduce U.S. emissions over time, it avails nothing if those emissions are immediately replaced by emissions from other countries.

And indeed, that’s exactly what’s been happening. U.S. emissions have been in decline since the mid-2000s, in large part due to increased natural gas usage, and European emissions have been in decline since the early 1980s. Any additional climate space created by reductions in Western emissions has immediately been offset by growing emissions from the rest of the world, particularly China, whose emissions have tripled in the last two decades.

“What, then, can we conclude about the Inflation Reduction Act?” Miran asks.

It made substantial contributions to the biggest inflation crisis in four decades via procyclical fiscal stimulus; it directed economic activity toward unviable sectors of the economy that can’t survive without government support; it made credit for non-subsidized sectors significantly more expensive, depriving them of needed funding; and despite its intent to cut the deficit in the back half of its ten-year window, as cost estimates for the subsidies increase, it appears that it will on net add to the government debt, costing the government valuable fiscal space to deal with future crises and deepening our ruinous debt path.

And all for nothing.

Read the whole thing here.