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What is the IRA? e Inflation Reduction Act is essentially a clean energy and health care bill, plus some tax reform to pay for the new spending. It makes a major investment in clean energy technologies, with the hope of lowering energy costs and carbon emissions over the long term. On the health care side, it has provisions to reduce the cost of prescription drugs for people on Medicare. It also extends subsidies to prevent significant price increases for low- and middle-income households who buy health insurance through the federal marketplace (HealthCare.gov). How will it reduce inflation? It probably won't. e I doesn't do much for prices in the short term. Like many laws passed by Congress, its name is misleading since reducing inflation is not the point of the bill. at said, the health care provisions should reduce out-of-pocket expenses for many people in the next few years. And much of the bill is aimed at developing clean energy alternatives so that in the long term, households and businesses won't be as vulnerable to fluctuations in the global price of oil, which is currently a big part of what's driving overall inflation now. But the I does nothing to reduce the costs of things like gas, food, and housing in the next few months. (at said, it's not clear that reducing inflation should be the job of Congress. Most economists think the Federal Reserve has more effective tools to fight inflation.) Is it going to worsen inflation? Probably not. e main way Congress can trigger inflation is by increasing the deficit – spending more than the government makes in taxes – when the economy is already running hot. Over the next decade, the I actually reduces the deficit because it raises more in taxes than it spends. But the amount of deficit reduction is relatively small. Analysts with the Penn Wharton Budget Model say the I's impact on inflation will be "too small to be detectable," with "no meaningful effect on inflation in the near term." Basically, if Congress wanted to laser-focus on reducing inflation, it would have increased taxes without increasing spending. Instead, it did both. How will it affect taxes, then? e I's tax increases are aimed at a small number of large, publicly traded corporations making over $1 billion annually. ere is a new corporate minimum tax that could indirectly affect shareholders, workers, and consumers, but there are no new taxes that directly affect households, sole proprietorships, or partnerships. e bill is also expected to raise revenue through increased funding for IRS enforcement. Some people are concerned this may mean more audits, but the administration has ordered the IRS to put all new resources toward businesses and households making more than $400,000 per year (whose audit rates have fallen by 86% over the last decade). What does the bill do on clean energy? e I provides a smorgasbord of tax credits for developing, deploying, and adopting all kinds of clean energy technologies. ese include incentives for: • Consumers, to buy electric vehicles and install heat pumps, rooop solar panels, and energy-efficient appliances • Electricity companies to install more solar and wind generation and baery storage • Domestic manufacturing, to produce the components and minerals necessary for these technologies • Companies working on R&D of all kinds of experimental technologies, like biofuels, geothermal, hydrogen, and nuclear fusion ese investments could kick-start many new industries related to clean energy technologies. e idea is that the tax credits can help these sectors get off the ground and mature to a point where they no longer need ongoing support. e I is also the largest single step the U.S. government has ever taken to reduce carbon emissions. IF it works, it could slow the heat waves, droughts, and wildfires and keep Montana livable and productive for a long time. What does the IRA mean for the oil, gas, and coal industries? e I represents a significant shi in clean energy policy in the country. Policy proposals for climate change focused on sticks – making it more expensive to use fossil fuels. at approach hasn't been very successful in U.S. politics so far. Instead, the I focuses on carrots. Mostly, it doesn't penalize oil, gas, or coal – it's about making clean energy cheaper and more abundant. e I has some provisions aimed at expanding oil and gas production. It requires the federal government to approve specific drilling permits currently under consideration and to auction federal lands for oil and gas leasing ahead of auctions for renewable energy projects. It also invests in carbon capture and storage technologies, which could make it easier for coal and gas plants to meet future regulatory requirements. e two provisions that could directly hurt oil and gas are an increase in royalty rates and a new fee for methane emissions. But when considering the net effect of these provisions, energy sector models predict that domestic oil and gas production will increase due to the I. Over the long term, many fossil fuel industries are still likely to decline. is transition might be hard for many rural communities. But solar and wind production also needs workers and tends to be located in rural areas. A recent study found that a clean energy boom could create new jobs in the same types of places where fossil fuel industries are concentrated now. 19 farm406

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