Inflation Reduction Act tax breaks costlier than expected

71 percent of Americans haven't heard much or anything about the Inflation Reduction Act a year after it was passed, according to a Washington Post-University of Maryland poll. Yahoo Finance Senior Columnist Rick Newman breaks down how the bill's tax breaks are looking more expensive than expected. Newman explains how "now it looks like instead of about $400 billion in deficit spending, it's looking more like $1.2 trillion or three times the original estimate."

Video Transcript

RACHELLE AKUFFO: Well, according to a new Washington Post-University of Maryland poll, about 70% of Americans say they've heard little or nothing about the Inflation Reduction Act since it passed. Well, here with an update for us is Yahoo Finance's senior columnist Rick Newman here. So Rick, doesn't do-- doesn't really bode well for, the PR side of this if people aren't really hearing much about it.

RICK NEWMAN: And nonetheless, this is shaping up to be probably the most consequential action of Joe Biden's presidency so far. So in the year since Congress passed this law and President signed it, one of the big things that has happened is that the uptake on a lot of the clean energy provisions in this law, which is the biggest part of it, are turning out to be way higher than anybody expected at the time.

So to give you some budget numbers on this when this passed, the best guess was that over about 10 years, this would add about $400 billion to the national debt, and that would mostly be in the form of tax incentives, which means the government would be getting less federal tax revenue because people would be getting tax breaks.

So now it looks like instead of about $400 billion in deficit spending, it's looking more like $1.2 trillion or 3 times the original estimate, Rachelle. And you can look at this in one of two ways. Either you can say this was a sham and Congress put one over on people by passing a bill that's going to end up costing way more than expected, or you could say the bill is turning out to be a huge success because it's incentivizing even more investment in green energy.

And by some estimates, three to four times as much investment in Green energy, which will speed the pace of decarbonization and get us to some of these decarbonization goals so-called net zero and, you know, lower carbon emissions sooner than expected. So the Biden administration is going to be talking a lot about this, this week and next because we're at the one-year anniversary, and you're going to hear them taking that second perspective, which is this law is turning out to be even more successful because it's really on the verge of transforming the energy sector here in the United States.

RACHELLE AKUFFO: And so then for the average American voter looking at this and wondering, how does this actually affect me and my personal economy? What do you think should be the big takeaways as Biden is making this tour and touting some of the progress over the past year?

RICK NEWMAN: Look, I blame nobody for being confused about what's in this law, what it's supposed to do. For one thing, it's completely misnamed. It was called the Inflation Reduction Act, even though basically all budget analysts said this is going to have no effect on inflation. So why did they call it the Inflation Reduction Act? I mean, it was yet another, you know, cynical ploy by insiders in Washington D.C.

And the idea was, well, inflation was very high when they signed this in-- when they passed and signed this in August of 22 and there were many reasons to think inflation would be coming down over the next year or two, which is exactly what happened. So by naming this the Inflation Reduction Act, Democrats figured, well, when inflation actually comes down-- which it has-- we're going to be able to say, look, back in 2022, we passed the Inflation Reduction Act, which means we get credit for bringing inflation down. That's nonsense.

President Biden also says that over time, this will lower energy costs for Americans. But that's a bit dubious too because at the moment, we still are consuming a lot of oil, natural gas, and gasoline, and those prices have been going up. So what Biden is trying to do is get us off of fossil fuels and carbon energy, but it's going to take a long time. We're going to have fossil fuels for a long time.

And meanwhile, guess what is the number one energy price that most Americans pay attention to? It's not how much does solar heating cost or wind energy cost, it's how much does a gallon of gasoline cost. And that just happens to be the most visible energy price in the country, and that is what people are going to judge Biden's failure or success on. So again, I don't blame people for being confused about what's in this big mishmash of a bill, but it is looking like this is going to be extremely consequential over the next 10, 20, and even 30 years.

RACHELLE AKUFFO: I know. You'll be keeping track of all of that for us, especially in the run up to the election. A big thank you there to our very own, Rick Newman. Thanks so much.

RICK NEWMAN: See you, Rachelle.