Reconciliation is a fiscal wreck for the states

In a deal announced on July 27, 2022, Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Joe Manchin (D-W.Va.) revived parts of the Build Back Better Act (BBBA). Despite claims that the legislation represents a “compromise,” it would increase taxes during a recession and dramatically expand the size, scope, and power of the federal government. Like its predecessor, the grossly misnamed Inflation Reduction Act of 2022 (IRA) will only make things worse for the American people and continue to erode critical constitutional barriers between states and the federal government. 

The IRA includes dozens of provisions that would make states implement progressive policies through restrictive grants, including tying federal funding to “environmental justice” initiatives like “climate mitigation” aid for “underserved forest landowners” and $1.5 billion in “competitive grants” to states “for tree planting and related activities.” It sets aside $700 million for states to “acquire land and interests in land” with a focus on applicants “that offer significant natural carbon sequestration benefits or provide benefits to underserved populations.”  

There is also money for state agencies to aid and monitor “whole-house energy saving retrofits,” the primary aim of which is “to achieve maximum greenhouse gas emissions reductions” in addition to reducing household energy costs. Viewed in the context of the growing trend of cities forcing residents to abandon the use of natural gas, states should be wary of requirements for “green” energy alternatives regardless of the end cost to consumers, which may run afoul of existing state laws that constrain the ability of local governments to ban the use of natural gas. 

If this legislation is enacted, states would become forced participants in the Biden administration’s efforts to implement key features of the radical Green New Deal. At no point does the legislation explain how tree planting, buying land for carbon sequestration, or stopping residential and commercial properties from using natural gas will reduce energy or food prices. 

It will only be after federal agencies promulgate rules and regulations with these tentacles attached that it will be possible to determine the long-term financial burden of this legislation. State and local taxpayers will be left holding the bag when federal aid for the IRA programs run out, bearing the costs of policies that are not widely supported across the country.   

The Schumer-Manchin “inflation reduction” bill comes as the American people continue to suffer from unaffordable prices at the gas pump and the grocery store and states remain awash with cash from the federal government’s spending binges. The current state of the economy should provide a warning for anyone demanding more spending. The $4.5 trillion allocated to supposedly provide relief from the COVID-19 pandemic between 2020 and 2021 has not only led to inflation, but also a recession. Even former President Jimmy Carter, to whom President Biden has most often been compared, did not raise taxes during his inherited recession. Instead, he cut them by $18.7 billion at the end of 1978.   

More government spending that will leave states on the hook for parts of the Green New Deal down the road will not reduce inflation or alleviate the impact of the recession. Spending $369 billion on climate virtue signaling is a slap in the face to the millions of Americans who are struggling to put food on their table, gas in their cars, and paying the energy bills to cool their homes in the sweltering days of summer or keep warm this coming winter.  

Like the original BBBA, the Schumer-Manchin proposal seeks to co-opt the states into becoming unwilling pawns in a plan that will reduce innovation, bankrupt the American people, and raise taxes on millions of Americans, including those making under $400,000, all under the guise of “economic relief.”   

Instead of reducing costs, the IRA will add to the already soaring prices Americans are experiencing in every aspect of their lives. With hundreds of billions of dollars in new taxes and spending, the implementation of dangerous drug price controls that will reduce the availability of new life-saving medicines in the future, unprecedented increase in the Internal Revenue Service budget, and intrusion on state sovereignty, the Inflation Reduction Act is a disastrous bill masquerading as economic relief. Congress should pull the plug on this latest effort to pervert America’s system of federalism and bury for good any efforts to enact any part of the Build Back Better Act.   

Ryan Lanier is state government affairs associate at CAGW.