China Daily

Harvey Zodin*

With the last-minute passage of President Joe Biden’s proposed “Inflation Reduction Act,” Democrats are clamoring about how the United States can save the planet from environmental Armageddon through this imperfect compromise. The devil is always lurking in the details, so scratching the surface reveals a whole different picture.

Earlier in his legal career, he practiced the truth of Washington’s advertising law with the Federal Trade Commission (the U.S. version of the consumer protection agency), then managed a team at the ABC television network. their truth. The legal standard then in force, as it is today, was the Lanham Act of 1946 and its subsequent amendments.

The red line in the Lanham Act that separates admissible and unadmissible legally enforceable claims is whether the claim is “false, misleading, or deceptive.” The IRA is definitely a reasonable start, but its many provisions are full of elements that violate one or more of these prohibitions.

Even the IRA title is false, misleading and deceptive. Most experts agree that the legislation will have little to no impact on U.S. inflation, and the general consensus is that cuts, if any, won’t be felt for years. Democrats know they could easily lose control of both the House and Senate in November’s midterm elections. This is their desperate effort to put lipstick on the pigs to convince voters that happy days with low inflation are around the corner again.

But there is very bad political news for Biden and his Democrats. A national Predictive Morning Consult poll conducted Aug. 12-14 showed 57 percent of voters believed the IRA would either have no effect on inflation or would increase it. it was done. And only 48% of Democrats said the IRA would help keep inflation under control, compared with just 15% of independents, where voting is most important to keep Democrats in control of Congress. 6% of respondents said yes.

The IRA seeks to reduce health care costs, strengthen the US Treasury, and spread the tax burden more fairly. The bottom one is mostly about the environment, but I still find it lacking.

For example, we appreciate the IRA’s provision for electric vehicles (EVs), which should help convert gasoline and diesel vehicles to electric vehicles. A White House brief, “By the Numbers,” published Aug. 15, claims the IRA will provide “a tax credit of up to $7,500 for new electric vehicles.” It is deceptive and misleading.

In fact, this provision does not mean the rapid introduction of green vehicles to limit the environmental impact. It is to cut China off from global supply chains while preventing competition from China.

Similar widely used and highly valued tax credits existed before 2020, but with fewer strings. It has helped millions of Americans transition from cars powered solely by fossil fuels to electric-based EVs or hybrids.

The IRA has been widely praised for using ‘carrots’ instead of ‘sticks’. That’s also not true, especially when it comes to China. To be eligible for the IRA tax credit in lieu of expired credit, U.S. EV buyers must earn below a certain level and EVs cannot exceed certain price limits. must be assembled in North America. And EVs built after 2024 cannot be powered by batteries containing important minerals, which the law ironically defines as “extracted, processed, or recycled by foreign affiliates.” This basically means China, as China controls 80% of the world’s lithium refining required to power EV batteries.

Currently, 70% of the 72 EV models sold in the US are not eligible for the IRA consumer tax credit. No one will after 2024. The IRA’s requirements are based on the hope that more funding will fill the void left by friendly nations’ elimination of China’s lithium. While this is technically possible, it is unlikely in practice as it would take three to five years to build an onshore processing unit and strike a contract at a cost comparable to non-Chinese sources. It’s a new Cold War mentality.

Some experts believe that simple IRA requirements are so onerous that EVs will not be eligible to benefit until the law expires in 2032.

In an ideal world, the logical answer would not be to reinvent the wheel, but instead for the US to remove Donald Trump-era tariffs on EVs and other Chinese goods and for China to retaliate. currently imposes a 25% tariff on about $250 billion worth of Chinese imports, including EVs, and a 7.5% tariff on about $112 billion worth of Chinese imports. In contrast, China imposes roughly equivalent tariffs on U.S. goods. It is estimated that the elimination of tariffs on Chinese goods alone could cut US inflation by 1%.

China has many EV companies, and of the 6.8 million EVs produced globally last year, 3.5 million were sold in China, compared to just 631,000 in the United States. Given a level playing field, there is no reason why the United States and other countries cannot compete with China.

Additionally, the US has literally put carts in front of horses with a shortage of about 125,000 EV charging stations, many of which are damaged or out of service. One survey conducted in San Francisco Bay found that he had one out of four of his chargers broken. If a typical EV can’t travel well over 300km on a single charge, who could be stranded?In contrast, China has over 2 million charging stations. form the world’s largest network.

Otto von Bismarck, Germany’s first Chancellor, famously said, “Politics is the art of what is possible and achievable, the art of the next best.” The IRA is a perfect example of an imperfect compromise. But Bismarck’s less-remembered words, “If you like laws and sausages, you shouldn’t see either being made,” especially at a time when the U.S. system is under extreme stress. It describes the IRA more precisely.

*The author is a Senior Fellow of the Center for China and Globalization.

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