The Inflation Reduction Act’s Uncertain Future

James West, The Midas Letter

Trump’s stance on renewable energy and climate change is clear: Climate change is a hoax and any barriers to growth at any cost of the US oil and gas industry will be eliminated.

But one has to wonder, with the recent nuptials of bros Trump and Musk now consecrated in victory, how does that jive with the electric car business of the First Laddie?

One might assume that, among the victims of Trump’s newly sharpened axe, would be the Inflation Reduction Act of 2022 – Joe Biden’s signature accomplishment in the clean energy sector.

Within the Act are numerous projects that are funded by the Energy Infrastructure Reinvestment Program, which has $5 billion earmarked for clean energy projects that re-vitalize existing energy facilities that have passed out of service, with a total zero percent loan guarantee program of $250 billion available.

Matthew Daly, in a comment to PBS stated, “Basically everything that President Biden has tried to do, President Trump is going to try to undo. And you mentioned the Inflation Reduction Act, which is a terribly named law, but it’s a very wide reaching law that basically tries to spend hundreds of billions of dollars to promote clean energy and has a lot of tax credits in there.”

Never a nation to dilly dally when the federal government is handing out free money, numerous projects have already been approved and are underway. Most of these are in Republican jurisdictions, so there will be significant internal resistance should Trump wish to unilaterally cancel the Act.

Trump is more likely to dismantle pieces of the Act that benefit Democratic sponsored projects while leaving the Republican beneficiaries unscathed. You might think there is no way to do that legislatively, but Trump has demonstrated a persistent ability to rewrite the rulebook when it comes to targeting his enemies.

The Economic Case for Preservation

The IRA has spurred significant investment and job growth in the clean energy sector, with over $500 billion in planned investments and a growth rate twice that of the overall US employment market ¹. Repealing the law would undermine private investments and halt ongoing development, ultimately costing taxpayers billions of dollars.

Harry Godfrey, head of Advanced Energy United’s federal investment and manufacturing working group, notes that the IRA’s tax incentives align with Trump’s goals of energy independence and onshoring manufacturing.

Arguments Against Repeal

Bipartisan Support: 18 House Republicans have expressed opposition to repealing the IRA’s clean energy and manufacturing tax credits, citing the law’s benefits in their districts ¹.
Economic Interests: The IRA has driven economic growth in states with significant Republican representation, making a full repeal politically challenging
Global Competition: The US needs to maintain its competitive edge in the clean energy sector to counter China’s dominance

Arguments For Repeal

Trump’s Campaign Promises: Trump has pledged to repeal the IRA and halt offshore wind development ;
Ideological Opposition: Some Republicans may seek to dismantle the law due to ideological differences ;
Alternative Priorities: The GOP may redirect funds allocated to clean energy toward other priorities, such as tax cuts ¹.

The Way Forward

While the IRA faces uncertainty, experts like Gina McCarthy, former national climate advisor, remain optimistic: “The shift to clean energy is unstoppable… Our coalition is bigger, more bipartisan, better organized, and fully prepared to deliver climate solutions”.

So its pretty clear that, despite Trump’s idealogical opposition to anything to do with clean energy, he may find more immediate gratification for his revenge porn fantasies tea-bagging on the foreheads of less popular policies. We will have to wait and see what happens on January 6th….if he even makes it to that date.

James West, The Midas Letter

Trump’s stance on renewable energy and climate change is clear: Climate change is a hoax and any barriers to growth at any cost of the US oil and gas industry will be eliminated.

But one has to wonder, with the recent nuptials of bros Trump and Musk now consecrated in victory, how does that jive with the electric car business of the First Laddie?

One might assume that, among the victims of Trump’s newly sharpened axe, would be the Inflation Reduction Act of 2022 – Joe Biden’s signature accomplishment in the clean energy sector.

The Economic Case for Preservation

Arguments Against Repeal

Bipartisan Support: 18 House Republicans have expressed opposition to repealing the IRA’s clean energy and manufacturing tax credits, citing the law’s benefits in their districts ¹.
Economic Interests: The IRA has driven economic growth in states with significant Republican representation, making a full repeal politically challenging
Global Competition: The US needs to maintain its competitive edge in the clean energy sector to counter China’s dominance

Arguments For Repeal

Trump’s Campaign Promises: Trump has pledged to repeal the IRA and halt offshore wind development ;
Ideological Opposition: Some Republicans may seek to dismantle the law due to ideological differences ;
Alternative Priorities: The GOP may redirect funds allocated to clean energy toward other priorities, such as tax cuts ¹.

The Way Forward

“What if you held a bond auction and nobody showed up?” That’s the perennial question plaguing a Treasury Secretary.

Yesterday’s $16 billion auction of 20-year Treasurys didn’t go as well as Bessent would have liked.

High yield: 4.706%

Bid-to-cover: 2.41 (below the 10-auction average of 2.71)

Demand is softening at the exact moment the government needs to roll over debt at record levels.

With Japanese yields soaring, the returns on the carry trade are lower. Carry trades are likely getting unwound, pushing Japanese bond yields even higher.

The unwinding of the carry trade also helps explain why many individual stocks listed on the New York Stock Exchange have crashed by 40-50% from their recent highs. Investors are selling the target assets of the trade in order to pay back their yen-based loans before their profits get squeezed.

On November 10, Coinbase announced a new platform that lets users buy crypto tokens before they list on the exchange.

The company calls it: “a more sustainable and transparent way for projects to distribute tokens.”

In other words, we’re moving into ICO 2.0. But this time there will be more rules.

We’ve lived through the greatest borrowing binge in modern history, and yet the national mood feels poorer, more brittle, less confident.

There’s a familiar pattern here: the higher the noise, the more critical it becomes to tune it out. The markets will surge and swoon, the political class will posture, and commentators will insist that this time is different.

Our biggest concern, meanwhile, is that with a collapsing stock market, economic anxiety will reach fever highs. And with it the political divide in the country will become even more performative, expressive and violent.

Civil society cannot sustain a credit crisis.

The real work — the only work that actually matters — happens at the level of your own finances, your own decisions, your own family. No administration, blue or red, can insulate you from a balance sheet that doesn’t balance.