The Biden administration belongs to the ages, but a new report from the Cato Institute reveals how just one of the former president’s signature laws did lasting damage to America’s society and economy.

In “The Budgetary Cost of the Inflation Reduction Act’s Energy Subsidies,” Travis Fisher and Joshua Loucks provide a sobering analysis of the actual price we are paying for the questionably titled Inflation Reduction Act.

The act was signed by President Joe Biden in August 2022 and marketed to the American public as a serious effort to combat inflation. However, Biden’s subsequent descriptions of this legislation undermined the notion that the Inflation Reduction Act had anything to do with reducing inflation. Instead, Biden chided Congress by saying lawmakers “should have named it what it was” — the “most significant climate change law ever.”

Cato further clarifies that the bill is a massive, multi-trillion-dollar subsidy scheme to decarbonize the U.S. economy. Fisher and Loucks explain that the act’s price tag could reach $4.7 trillion by 2050.

That’s not a typo; it’s a warning.

When Congress pushed this bill through via budget reconciliation, the Congressional Budget Office and Joint Committee on Taxation estimated the total for the bill’s energy subsidies at $370 billion over 10 years. Goldman Sachs later increased that estimate to $1.2 trillion by 2032. Fisher and Loucks go deeper and project $936 billion to $1.97 trillion from 2025 to 2034, escalating to $2.04 trillion to $4.7 trillion by 2050.

“On the energy side, it was a subsidy bill. Just this suite of massive subsidies through the tax code; styled as tax credits,” explains Fisher in a recent episode of the Cato Daily Podcast. “But these are actually direct pay; they’re transfer payments. And what they do is just shovel massive amounts of money toward preferred technologies.”

The authors explain that many of the law’s IRA subsidies — such as the Production Tax Credit, Investment Tax Credit, and the Section 45(X) advanced manufacturing credit for critical minerals — are effectively uncapped. The bill offers a blank check for select industries, and taxpayers are on the hook.

The Inflation Reduction Act’s significant drivers are clear. In 2023, the Production Tax Credit offered $27.50 per megawatt-hour for so-called clean energy produced, the Investment Tax Credit subsidizes 30% of upfront costs for projects like solar or batteries, and Section 45X indefinitely supports the production of 50 “critical minerals” (such as lithium) needed for the energy transition.

These subsidies will only phase out when power sector emissions decline to 25% of 2022 levels. However, the Energy Information Administration predicts we will not achieve those reductions by 2050, as electric vehicle use, electrification initiatives, artificial intelligence and new data centers all create increasing demand for electricity. Further spending is also guaranteed, as IRS regulations allow existing plants to “repower” — upgrade or rebuild sufficiently — to requalify as new facilities, thereby restarting the flow of tax credits for another ten years.

Real-world data already show the damage. In 2023, the residential clean energy credit cost taxpayers $6.3 billion — more than 13 times the Congressional Budget Office’s initial $459 million estimate. The energy-efficient home credit hit $2.1 billion in 2023, nearly eight times the initial $273 million estimate. Significant overruns like these aren’t just a matter of poor forecasting.

Fisher and Loucks call for a full repeal of these subsidies, arguing that they are an unjustifiable burden on taxpayers. If that’s not possible, “Congress should limit taxpayer liability by capping the dollar value of subsidies, putting an expiration date on the subsidies regardless of emissions levels, or both,” the authors suggest. They also recommend that the Congressional Budget Office and Joint Committee on Taxation publish transparent cost estimates for the entire bill and that the Trump administration roll back expansive IRS guidance documents that drive even more spending.

The Inflation Reduction Act’s green intentions do not justify its profligate spending. Taxpayers deserve accountability, not open-ended corporate welfare masquerading as climate action.

Even with the constant updates from Elon Musk’s DOGE uncovering billions in wasteful federal government spending, Fisher’s and Loucks’ estimates of the potential costs of the IRA should prompt the most jaded taxpayers to sit up and take notice. As Fisher correctly notes, the Inflation Reduction Act threatens to kill American industry and entrepreneurship by transitioning us into a nation of rent seekers. Congress needs to repeal the act’s handouts and put a stop to the decline.

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