The budget battle brewing in Congress could see the US become a dead-beat debtor if the warring factions can’t come to some arrangement on raising the nation’s debt ceiling. In a proposed tit-for-tat deal, House Speaker McCarthy (R-CA) and members of the Freedom Caucus are looking to claw back the Inflation Reduction Act’s (IRA) climate-related provisions, e.g., tax credits and incentive payments to homeowners to install heat pumps and other energy-saving improvements. In return for the proposed cuts, House Republicans will support raising the debt ceiling.
Predictably Democrats on and off Capitol Hill oppose the Speaker’s swaps proposal. For reasons I’ll explain shortly, there are Republicans on and off the Hill who are also staunchly opposed to the conservative’s proposed hacking of the IRA.
As with most things in Capital City, the debate it’s mostly about money. In this case it’s about money flowing mainly into red state coffers from IRA programs. It will be interesting to see how red state governors respond to the deep cuts their most conservative congressional colleagues are proposing to make. Should those cuts be enacted into law, the House Freedom Caucus (HFC) and Speaker McCarthy will literally be taking money out of the pockets of red-state voters and their governments.
However, before getting into that discussion, it’s essential to understand the context in which the budget and debt ceiling battle is being fought and all that’s at stake. What’s at risk is greater than the IRA’s climate-related provisions, although those portions are the focus of this discussion.
As explained by the Brookings Institute, “the debt limit caps the total amount of allowable outstanding US federal debt.” Should the cap not be raised, the government will be unable to pay its bills — our bills. Technically the nation hit its $31.4 trillion debt limit in mid-January.
The Treasury Department has undertaken “extraordinary” steps to put off the inevitable as far into the future as possible. According to Secretary Yellen, that future is only weeks away. Her most recent estimate of when the bucks will stop is as early as June 1st.
The need for raising the government’s borrowing authority isn’t about new programs and policies. It’s about paying for already incurred obligations like social security, Medicare, and interest on the debt. Interest on the $31.4 trillion balance is a big deal.
Net interest payments on the national debt rose from $352 billion in 2021 to $475 billion in 2022. Relative to the size of the economy, interest costs were 1.9 percent of gross domestic product (GDP), the highest level in 21 years. (Figure 1)
Based on Congressional Budget Office (CBO) estimates, the Peterson Foundation calculates the federal government spent about $1.3 billion per day on interest payments in 2022; by 2033, the daily payments would rise to $3.9 billion. Interest payments alone will go from 1.9 percent of GDP in 2022 to 3.6 percent in 2033.
The US has never defaulted on its debts, although it has come close on more than one occasion. According to the Washington Post, the 2011 battle between Republicans and President Obama “resulted in months of political brinkmanship, generated panic globally, and yielded a decade of significant caps on domestic spending.”
The major battle over the debt ceiling is currently between the Republican House and the White House. President Biden has indicated that he wants a clean bill that raises the debt ceiling without contingencies until after the 2024 elections.
House Speaker Kevin McCarthy and a cabal of the most conservative members of the Republican House caucus view the occasion of a possible default as an opportunity to cut federal spending by substantial amounts. The spending cuts they’re proposing would gut most of the climate-related program and tax credit provisions of the IRA.
The House Republican bill (H.R. 2811) goes by the name the Limit, Save, Grow Act (LSGA). According to the Washington Post,
the House measure would roll back federal spending to levels adopted in 2022, potentially a roughly $131 billion cut, while capping the growth of agencies’ future budgets at 1 percent. Republicans already had promised to target reductions in health care, education, science, research, and labor programs.
Senator Sheldon Whitehouse (D-RI) has scheduled a hearing on the LSGA entitled The Default on America Act: Blackmail, Brinkmanship, and Billion-aire Backroom Deals. The titles of the proposed act and the Senate hearing fairly bracket the current battle on Capitol Hill between Republicans on the right and Democrats on the left.
The Republican-only LSGA passed by a 217–215 vote. No Democrat voted in favor, and four Republicans voted against it. It appears, however, that some House Republicans voted in favor of the bill only as a gesture. The slim five-vote Republican House majority means Speaker McCarthy may have a great deal of trouble getting his caucus to “yes” when the final votes come to pass.
Representative Brian Fitzpatrick (R-PA) claims he voted for the bill only to get President Biden engaged in negotiations that would lead to a final bill. Speaking for himself and others, Fitzpatrick had this to say:
“If there was a 1 percent chance of any of these provisions ever becoming law, a lot of us would have treated that very differently.”
Where the Senate is in all of this is on the sidelines. Although the most conservative members of the Senate, e.g., Scott (R-FL) and Johnson (R-WI) are indicating agreement with what McCarthy has going over at his house, while Senate Minority Leader McConnell (R-KY) is his ever silent, inscrutable, sphinxlike self.
Without an agreement, the government shuts down as early as June 2nd. No one in either chamber actually believes that the Limit, Save, Grow Act has any chance of becoming law. However, it is not to say that a government shutdown isn’t in the offing. At least one Republican representative, Ralph Norman (R-SC), is willing to use the threat of a shutdown to leverage the conservative position.
The stakes are high, and the threat of a shutdown already has Wall Street nervous. Should Congress and President Biden not come to a timely conclusion on raising the nation’s borrowing authority, it would slam the nation into a deep recession.
Energy and the environment are at the heart of the debate. The LSGA incorporates “the energy package the GOP passed in March.” Their proposals heavily support oil, gas, and mineral exploration and extraction on and off public lands.
Speaker McCarthy swore he would broker no amendments to the LSGA. It turned out otherwise. Iowa House Republicans succeeded in amending “the House bill to reverse cuts to certain biofuel tax credits.”
McCarthy and the Republican House caucus are going to become increasingly conflicted over the climate-related provisions in the IRA, as well as in the CHIPS and Science Act and the bipartisan infrastructure bill. Why? For the simple reason that their states and districts are profiting from the programs.
According to POLITICO,
“In the five months since the Inflation Reduction Act became law, companies have announced tens of billions of dollars in renewable energy, battery, and electric vehicle projects that will benefit from incentives in…Biden’s signature law, aimed at expanding domestic manufacturing in clean energy and reducing dependence on Chinese imports.”
Roughly two-thirds of major projects are in districts whose Republican lawmakers opposed the Inflation Reduction Act. One of the furthest right members of the House and rising power in the Republican caucus, Marjorie Taylor Greene (R-GA) heralded the South Korean solar panel manufacturer QCells as a fantastic company — just after it announced a $2.5 billion expansion of the plant in her district.
Qcells announced its partnership with Virginia-based Summit Ridge Energy in early April to assemble more than 2.5 million solar panels. The project will be the largest community solar project in U.S. history.
The community solar project will bring 1.2 gigawatts of energy to power an estimated 140,000 homes and businesses.
Other examples of what Biden’s “socialist-woke” climate agenda is doing for largely Republican-controlled states include —
In South Charleston, West Virginia, GreenPower Motor Co. has said its electric school bus facility benefited from the infrastructure law’s clean school bus program. It has highlighted how its buses can also get tax credits worth up to $40,000 from the Inflation Reduction Act. (E&E Daily)
In Clarksville, Tenn., for instance, which is part of Representative Mark Green’s district, Texas-based Microvast Holdings plans to expand an existing facility with a new plant for battery components. In October, the Department of Energy picked the plant for a $200 million award under an infrastructure law program to boost battery materials processing and manufacturing. (E&E Daily)
South Carolina Representative Nancy Mace raised with Speaker McCarthy her concerns that the LSGA language threatens the Palmetto State’s bud-ding solar industry. According to Mace, “Solar is huge — not only in the Low country but across the entire state of South Carolina, it’s huge [the LSGA] would adversely affect solar.” In the midst of the budget battle SPI Energy announced it “intends to invest $65.9 million in Sumter County manufacturing facility that will create 300 new jobs.”
Although Mace voted in favor of the Republican-only bill, it’s well within reason to think she did so as a gesture rather than out of conviction. What of Jen Kiggins (R-VA)? She, too, voted with the slim LSGA majority, despite the possibility it would strip tax incentives that go to Dominion Energy, which is building a $9.8 billion offshore wind project in her district.
As of January 2023, the clean energy projects landing in red and blue districts are shown in Figure 2 (Image source: POLITICO[i]).
When asked to reconcile their conflicting positions between support and protection of clean energy projects in their districts that are largely the result of the IRA and Democratic initiatives, they rationalize their positions. Greene credits the Trump administration.
Other House Republicans follow along with the type of rationalization offered by Representative Garret Graves (R-LA). According to Graves,
“Just because you vote against a bill doesn’t mean the entire bill is a bad bill.”
Graves goes on to say, “I go out there and advocate for our district to try and get transportation funds, to try and get energy funds. That’s my job. I am not embarrassed about it. I don’t think it’s inconsistent with my vote.”
The League of Conservation Voters (LCV) has a different opinion of things. LCV’s vice president for political affairs, Craig Auster, believes,
“It’s the height of hypocrisy for [Republicans] to be blasting the president and all he’s done to address climate change and build a clean energy economy that is directly benefiting people in their districts.”
Although hypocritical, there’s nothing surprising about Republican opposing the IRA — indeed of the climate policies of the Biden administration — while welcoming the factories and jobs that are fruits of federal investment. Truth be told, the Democrats would act the same were the shoe on their foot.
Politics is politics, after all, and as we’ve seen, hypocrisy and politics kind of go together. So, the answer to the question raised in the title is both — hypocritical and good politics.
But this story shouldn’t end here.
The red states being rewarded by largely Democratic policies and programs are targets of great opportunity for the climate activist community. They make the decades-old claim that combatting climate change is good for the economy and the environment real.
Rather than castigating Republican politicians for their hypocrisy, the community should embrace them as examples of knowing the value of a good thing when they see it. I urge activists to campaign positively in red states on the issues of climate change rather than against Republican candidates — using the factories built because of the IRA, infrastructure, and CHIPS acts as a backdrop.
It’s unrealistic to think the transition to a low-carbon economy can come about without Republican and Democratic support. On-again, off-again federal policies have caused the nation to lose valuable time combating climate change. If the cycle is to be broken, then the support base must be broader.
The simple truth is that to decarbonize; the nation needs to depoliticize climate change. Money matters — more than scientific facts and sometimes even more than party loyalty.
The message should be simple.
You’ve seen the investments and jobs created by largely Democratic actors. Think of how much greater the economic and environmental benefits of investing in clean energy technologies could be if both Republicans and Democrats joined forces.
Lead image courtesy of Unsplash
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[i] Note: This data does not include projects where the precise location was unavailable. Source: American Clean Power Association, GovTrack.us, media reports and company announcements Kelsey Tamborrino/POLITICO
