In 2022, President Joe Biden signed the Inflation Reduction Act (IRA) into law, aiming to reduce inflation through greater investment in the clean energy and reductions in fossil fuel use. However, a closer examination reveals that these efforts, far from addressing the root causes of inflation, may be exacerbating the situation and laying the groundwork for prolonged economic turbulence.
One of the primary measures of Biden’s plan involved the use of the nation’s oil reserves as a tool to stabilize gas prices. Yet, the strategy has proven shortsighted. In 2022, rising fuel costs were triggered by his administration’s shut down of fossil fuel drilling along with a higher reliance on unrefined oil imported from countries like Venezuela. The Strategic Petroleum Reserve (SPR) is kept for national emergencies, but to reduce headline inflation prices, the Biden administration authorized the largest-ever sale of oil from the SPR. While this move temporarily relieved pressure on gas prices, it left the U.S. with historically low reserves, leaving the nation vulnerable to future oil shocks. Oil analysts warned that a reduction in oil also reduces US negotiating leverage with OPEC countries.
Furthermore, Biden’s ambitious spending initiatives, ostensibly aimed at combating climate change, are exacerbating the inflationary pressures. A significant portion of the budget is allocated towards renewable energy and clean infrastructure projects, pushing federal spending to unprecedented levels. This spending spree, coupled with proposed tax hikes in 2024, threatens to increase the national debt by $22 billion in the next decade.
Despite claims of success, recent data paints a grim picture of the economy under Biden’s watch. While inflation has declined from its peak of 9 percent two years ago, households continue to grapple with the skyrocketing cost of living. Housing prices, a critical indicator of economic health, have surged by 30% since Biden assumed office, placing homeownership further out of reach for many Americans.
In essence, rather than offering substantive solutions to inflation, the IRA represents a series of short-term fixes that only serve to exacerbate long-term economic vulnerabilities. By depleting crucial reserves, ramping up government spending, and imposing more taxes, the IRA continues to run the risk of increasing rather than decreasing US inflation.