US Inflation Reduction Act

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His Divine Shadow
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US Inflation Reduction Act

Post by His Divine Shadow »

So the Build Back Better proposal came back as the Inflation Reduction Act a while ago and boy howdy it seems to be a good one for the US so far:


And it seems have really caught the EU unawares. As the situation looks now, the US is throwing so much money around that it's sucking up all the investment from around the world. Given the response so far the US has a couple of good decades ahead of it as all the investment will to go the US and their reshoring efforts are also looking to pay off to boot.

Meanwhile the EU is wandering around with it's pants around it's ankles and falling over and crying about schwarze null and debt while it's foreign and energy policy is dead in the water. We're scaring away both industry and investors from europe because we can't even make sure they can power their factories, let alone get raw materials. And now any company can get billions simply by going to the US where they also get cheap energy, they get none of that by going to the EU... But hey at least we're keeping a tight grip on the purse...

I just read this warning from a bunch of european countries against trying to match the US on EU level with similar bills. Oh no that's too much state involvement in the sacred free market, and too much money too, think of the debtchildren.

https://www.euractiv.com/section/econom ... aid-rules/
Eleven European Union countries urged “great caution” in relaxing the bloc’s state aid rules in a bid to support Europe’s green industry in a global race, saying that risked damaging competition inside the bloc, a document showed.

The document dated 10 February was sent to the bloc’s executive European Commission and signed by Denmark, Finland, Ireland, Poland, Sweden, the Netherlands, Hungary, Latvia, the Czech Republic, Slovakia and Belgium.

The Commission proposed easing EU restrictions on state aid for investments in renewable energy or decarbonising industry, partly in response to the US Inflation Reduction Act. The signatories, however, worry about unduly benefiting those with the deepest pockets in the 27-nation bloc.

“State aid for the mass production and commercial activities can lead to significant negative effects including the fragmentation of internal market, harmful subsidy races and weakening of regional development,” read the joint position paper, which was seen by Reuters.

“These harms can be greater than the positive effects. We, the co-signing member states, urge the Commission to exercise great caution.”

The European Commission confirmed the receipt of the letter and said it was looking to adopt new rules “in the coming weeks, taking into account the feedback received”.

The 11 countries urged the Commission to consider whether other policies could better achieve the goal of promoting green investment, as well as analysing the risks thoroughly before making any “fundamental changes”.

“EU state aid rules should be designed taking into account the value added at the level of EU as a whole. EU state aid rules should protect the level playing field on the EU internal market,” it said.

The EU’s competition chief Margrethe Vestager said this month that France and Germany – the bloc’s two biggest economies – accounted for almost 80% of the state aid approved since the Commission first eased previous limits to help economies weather the COVID-19 pandemic.

The 27 national EU leaders discussed the matter last week in Brussels, hoping to be able to settle their differences on subsidies before their next summit due March 23-24.

Speaking separately at a gathering of EU finance ministers in Brussels on Tuesday, Germany’s Christian Lindner said: “The German government is not interested in more spending and expanding subsidies… I can assure all member states that Germany will keep a fair, level playing field.”

“I invite them to consider with us how to foster competitiveness without spending more and more money – we cannot fight with the United States, which is able to and can afford to pay more subsides.”

The European Commission initially also proposed creating a special sovereignty fund meant to help poorer EU countries dole out more state aid. That is not, however, expected to take shape this year, if at all.
Yeah that's great, the US is looking to take home the entire cake and leaving us with nothing and we're unable to muster up a EU level response to signal to give confidence to investors. Unfortunately it seems we got "true believers" at the helm in the EU, they really believe in all that stuff like free trade, free markets and laissez faire, they really bought that fairy tale nonsense that even kids would question. Like it'd all sort itself out if only they keep their hands off the wheel and ease of all the pedals :wtf:

Sigh.

It's funny how it always seems to go the same way isn't it? Roll back time a couple of years and we (euros in general) were shitting on the americans for their reshoring goals which started with Trump, but got moving with Biden. We where saying the US was gonna fall behind because they are a bunch of backwards looking cavemen that only care about fossil fuels. Now the glorious green EU (with China) was gonna lead the world into the green revolution and america was gonna get left behind.

Then covid showed everyone the dangers of long global logistical chains and letting bean counters run everything (JIT)...

Then russia invades and pokes a hole in the EUs energy and foreign policy (which wasn't looking great before either) which also undermined our ability to accomplish our own green revolution....

Then with a few pen strokes the americans manage to leapfrog us all and the whole playing field has changed and they seem to be in the lead and poised for decades of good growth and reshoring while the EU is looking are more lost decades, all in the name of austerity, tight budgets and schwarze null style economics. It's like we think it's still the 1990s.
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Re: US Inflation Reduction Act

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One problem here in the US is that there are a LOT of Americans who hate and loathe the "inflation reduction act" because it was created by Biden/Democrats/Not-Their-Team and given a chance would tear it all down. It might for the moment look like a great thing but the US is quite capable of snatching defeat from the jaws of victory.

A second problem is that the Russian invasion of Ukraine is a genuine war in Europe, it has had global effects on both energy and food, and that sort of thing makes investors uneasy.

Given a change in ruling political party in the US and/or an end to the war in Ukraine I could see things shifting around quite a bit.

Although the US re-shoring certain industries will probably continue. I hope it does, because having a single choke-point for vital items is back for everyone (except whomever holds the chokepoint).
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Re: US Inflation Reduction Act

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Broomstick wrote: 2023-02-26 04:56pm One problem here in the US is that there are a LOT of Americans who hate and loathe the "inflation reduction act" because it was created by Biden/Democrats/Not-Their-Team and given a chance would tear it all down. It might for the moment look like a great thing but the US is quite capable of snatching defeat from the jaws of victory.
Unless Trump takes credit for it as 'his idea they stole, but we can do it better!'
(They could still screw it up, but at least it wouldn't be an outright tear down)
Broomstick wrote: 2023-02-26 04:56pm A second problem is that the Russian invasion of Ukraine is a genuine war in Europe, it has had global effects on both energy and food, and that sort of thing makes investors uneasy.
They probably feel better investing in the US/North America then they do in Europe while the war is going on. Especially since unaffected US industry has a rather proven track record for helping with post-war rebuilding.
Broomstick wrote: 2023-02-26 04:56pm Given a change in ruling political party in the US and/or an end to the war in Ukraine I could see things shifting around quite a bit.

Although the US re-shoring certain industries will probably continue. I hope it does, because having a single choke-point for vital items is back for everyone (except whomever holds the chokepoint).
Can't really counter point that :D
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Re: US Inflation Reduction Act

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Can the IRA really be sabotaged that easily though even if trump gets back in? It took a lot to pass and it will probably have time yet to generate a lot of money for people and corporations so I would imagine it's gonna be quite difficult to get rid of.
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Re: US Inflation Reduction Act

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https://www.forbes.com/sites/joshuacohe ... aa84886290

Well based on this opinion piece, the IRA should be safe even from a trump presidency. But we shouldn't be too sure a trump presidency will even happen since bidenomics seem to be working so far.
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Re: US Inflation Reduction Act

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His Divine Shadow wrote: 2023-02-27 12:08am Can the IRA really be sabotaged that easily though even if trump gets back in? It took a lot to pass and it will probably have time yet to generate a lot of money for people and corporations so I would imagine it's gonna be quite difficult to get rid of.
If there's another four years of a Democrat in the White House it will probably be there for good, rather like the "Obamacare" health care (Affordable Care Act, actually) which, despite Republican grumblings and proposals to get rid of it, is now so firmly entrenched removal is extremely unlikely (though the Republicans did manage to damage it). Or Social Security and Medicare which, despite a crazy cabal in the Republican party who keep trying to find/propose ways to get rid of them, aren't going anywhere.

If Trump gets in again, or some other crazy person, and the Republicans get the House and Senate, then yes, there is a real possibility the IRA gets gutted.

The linked article deals mainly with the IRA in relation to drug prices. I think it makes a solid argument about that, but drug price negotiation is only one part of the a very large and broad piece of legislation. The tax provisions could definitely see changes with a change of controlling party in the US Federal government, and the Far Right really wants to kill any "green energy" part and go back to burning oil and coal and nothing else.
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Re: US Inflation Reduction Act

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His Divine Shadow wrote: 2023-02-27 12:08amCan the IRA really be sabotaged that easily though even if trump gets back in? It took a lot to pass and it will probably have time yet to generate a lot of money for people and corporations so I would imagine it's gonna be quite difficult to get rid of.
Okay, mildly off-topic here but wow does that read differently when you're British...
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Re: US Inflation Reduction Act

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Don't believe they need the White House to kill this, with the constant gerrymandering and election suits up before SCOTUS Congress could be back under Republican control in 2 yrs allowing them to rewrite the bill and gut or defund every bit of green legislation because hoax/woke if it's not oil or corporate tax cuts we must kill it.
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Re: US Inflation Reduction Act

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Zaune wrote: 2023-02-27 04:08am
His Divine Shadow wrote: 2023-02-27 12:08amCan the IRA really be sabotaged that easily though even if trump gets back in? It took a lot to pass and it will probably have time yet to generate a lot of money for people and corporations so I would imagine it's gonna be quite difficult to get rid of.
Okay, mildly off-topic here but wow does that read differently when you're British...
Especially as the New IRA are suspected of being behind the recent shooting of the off-duty cop John Caldwell (who barely survived) in Northern Ireland.
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Re: US Inflation Reduction Act

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If anyone thinks that the R's wont just sue in a R court in Texas to stop this then I got a bridge to sell you in Brooklynn
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Re: US Inflation Reduction Act

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This article found it's way into my FB feed and IMO it echoes what I was trying to say with this thread:
https://building-a-ruin.ghost.io/dark-b ... th-europe/
What got me in this meeting was just how little Europeans understood the United States and what had happened to American liberals, in particular, since 2008. Quite bluntly, between the IRA bashing that is really an avatar for internal squabbles, never once did it come up that the EU has a serious image problem in the United States. And that image problem is not with the traditional Republican opponents of the EU but with a newly energized left-liberal arm of the Democratic Party that sees the EU as a neoliberal obstacle to radical action and a dinosaur that still believes history is over.
Been seeing the EU like that for a long time now and it feels the waking up from the 1990s is slow and difficult. I guess Russian invasion at least shook a lot of people out of their end of history comas. Too bad they didn't wake in time to stop it.
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Re: US Inflation Reduction Act

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His Divine Shadow wrote: 2023-03-22 05:36am This article found it's way into my FB feed and IMO it echoes what I was trying to say with this thread:
https://building-a-ruin.ghost.io/dark-b ... th-europe/
What got me in this meeting was just how little Europeans understood the United States and what had happened to American liberals, in particular, since 2008. Quite bluntly, between the IRA bashing that is really an avatar for internal squabbles, never once did it come up that the EU has a serious image problem in the United States. And that image problem is not with the traditional Republican opponents of the EU but with a newly energized left-liberal arm of the Democratic Party that sees the EU as a neoliberal obstacle to radical action and a dinosaur that still believes history is over.
Been seeing the EU like that for a long time now and it feels the waking up from the 1990s is slow and difficult. I guess Russian invasion at least shook a lot of people out of their end of history comas. Too bad they didn't wake in time to stop it.
This is a interesting article.

I suggest you read "Trade Wars are class wars" by Matthew C.Klein and Michael Pettis.

It basically argues that:

1) Perpetual net exporters like Germany and China maintain their current account surpluses through policies/mechanisms which suppress domestic consumption, increasing domestic savings and exporting their surpluses and savings to other countries.
2) Perpetual importers like the US and deficit countries in the EU absorb these savings of the exporters which suppresses domestic savings and production. The relatively cheap money lead to various financial bubbles like the housing booms.
3) The economic elites in these nations favour this arrangement. The elites in the net exporting countries accumulate massive amounts of assets. The elites in new importing countries have financialised economies (see the UK and USA). For the USA, being the reverse currency of the world, it has immense financial power which aids it's foreign policy objectives.
4) The losers are the working class in both nations.
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Re: US Inflation Reduction Act

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It's done pretty good for the US. For that reason, I expect the red hat near-humans to deliberately fuck it up on purpose.
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