The IRA: Doomed to Abject Failure

A closer look at the Inflation Reduction Act and the hazard, fraud and legerdemain therein

(Source: Getty Images)

Bill Bonner, reckoning today from Poitou, France...

Yesterday, the TV news reported that President Biden signed what is officially called the Inflation Reduction Act.

The video showed him sitting at his desk, wielding his pen, while a group of political hacks watched with approval. Then, he stood up, put on a black mask, and the whole group applauded as if something important had been achieved.

But what?

During the Trump years, every word out of the White House was met with suspicion. The press corps lost no time in subjecting it to intense analysis, explaining why it was factually incorrect, misleading or an outright lie.

But since the election of Joseph Biden, journalists seem to have lost all sense of doubt. No longer do they question anything. Instead, they take presidential proclamations as though they came from the mouth of God Himself.

So, few reporters wanted to mention that the Inflation Reduction Act was a fraud.  Instead, they joined the hacks in applauding the legislation as another great milestone… like the entry into the Vietnam War or passage of the War on Poverty program, both in 1964, or the War on Drugs debacle of 1971.

Clapping Seals

A great thing was happening; it was “transformational”; it was a “game changer.”  They had no doubt about it. But how to describe it?  

CNN:

As the bill came closer to being signed into law, more media outlets began referring to it as a "climate and health" bill instead, citing nearly $369 billion going toward investments in "Energy Security and Climate Change."

And then, the New York Times expanded on the “investment” angle:

The bill, signed into law by President Biden on Tuesday, makes $369 billion in climate and energy investments — by far the largest such investment in American history. 

Calling it an ‘investment’ is a lie too, one that would make a stock promoter subject to a fine or even jail time, if the SEC were on the case. An investment is something a person makes willingly, in the hope of gain. The IRA is nothing of the sort. It takes money from at least 150 million unwilling citizens (they would never pony up the money if they had the choice) and dumps it into an assortment of giveaways and flimflams.   

If it were such a good “investment” an inquiring press might have asked, “why do the feds have to force people to make it?”

And in America, seeking investment capital is a heavily regulated activity. The SEC requires promoters to be very careful about what they say and to disclose anything and everything that might be relevant, particularly ‘risk factors.’

What would the promoters of the IRA do if they had to raise their funds honestly?  What would the Offering Memorandum say, if it had to pass scrutiny by the SEC?  Here, we take a shot at it:

The IRA - An Offering Memorandum

“The present investment was approved by a bare majority of the board of directors (Congress.) The others objected strongly. Many board members considered the investments “reckless,” “unproductive,” “wasteful,” “irresponsible” and many other negative adjectives that can be found in Webster’s Dictionary.

Even many of the directors who approved the investment believe that the capital funding for the project is “inadequate,” which may prevent a successful return on investment.  

Note also that the Offeror is already heavily in debt. Its debt measures approximately 8 times its annual (tax) revenues, or a total of $30 trillion, which is effectively unpayable under any realistic assumptions. The company, therefore, is effectively insolvent. It has also made “unfunded” commitments of a further $100 trillion, give or take a few trillion dollars.

The goal of the investment is to do something that has never been done before and which many scientists believe is impossible. Humans cannot, consciously, control the weather, they believe. Other scientists and reputable analysts believe that, while the climate may be theoretically subject to human influence, trying to change it by subsidizing electric car makers and punishing fossil fuel companies will not prove effective. If  they are right, the investments described in this offering will not succeed in lowering surface temperatures on planet earth, reducing deficits, or lowering consumer prices. The actual return on investment may be zero, or less.

In any case, the directors admit that they are totally incompetent to make decisions involving such large amounts of capital inasmuch as most are lawyers or life-long government employees and have had little real contact with climate science, thermodynamics, physics, mechanics, finance, engineering, business administration, accounting or any other skill or training that is likely to be essential to bring these investments to a successful conclusion.  

The board of directors further acknowledges that it has never made a successful ‘investment’ in its 200+ year history and that everything it deemed an “investment” produced either no positive return at all or a disaster of one sort or another. Prospective investors are invited to refer to the history books for further elucidation. From Prohibition to the War on Poverty to the War on Terror… every ‘investment’ in making the world a better place was a failure.

Investors are advised also that insiders – including Members of Congress, their spouses, lobbyists, rich political donors and others – may hold equity positions in the companies that will benefit from these investments.  Members of the board may already be angling for sinecures at outside companies that will receive money from the investments. Lobbyists most likely have already received millions of dollars in bonuses for steering this investment package through Congress. And lawyers are already drawing up plans for new vacation homes, confident that litigation will be forthcoming.

There are no plans to ever return investors’ capital.

Additional Risk Factors:

Investors should consider the following factors that could adversely affect the profit projections:

The weather may or may not cooperate. The model, used by climate activists to justify this spending program, may not be accurate. The people running the programs – at all levels – may be total incompetents. There are no generally agreed-upon metrics for determining success; even if the programs work as advertised, the returns to investors may be negligible or unmeasurable. The programs are unlikely to work as advertised. The program itself may be subject to a high degree of corruption. By the time the scheme is fully implemented, public attitudes may have rendered the whole thing out-of-style. (People may be more concerned with their living standards, or their survival, than with trying to reduce temperatures.)

Whatever the US does may be offset by what other nations do. Estimates and projections in this field have never been reliable and may change without notice. Changing market conditions could have negative impacts on investment returns. Suppliers, subcontractors, equipment manufacturers, conniving politicians, meddling ‘ecologists,’ imposter experts, counterfeit scientists and other third parties could also doom the investments to failure. The number of known unknowns is so large that something is sure to go wrong. The number of unknown unknowns is infinite… any one of which could erase any hope of a satisfactory outcome

Have we left anything out? Probably. Investors may assume that something in the above disclaimers and risk factors will doom the project to abject failure. If not, something else will.     

Regards,

Bill Bonner

Joel’s Note: Okay, okay… so nobody in the press room questioned Mr. President over the contents of the IRA. What’s another few hundred billion dollars of other people’s (read: your) money worth, anyway?

But hey, at least he followed the relevant covid protocols, just like millions of masked school children (who don’t have covid and are not at risk) are being forced to do across the country right now, right?

Just joking…

Greg Price @greg_price11

Joe Biden entered the room to sign the bill. Took off his mask. Coughed into his hand Signed the bill. Gave the pen to Manchin. Put his mask back on. Shook hands with everyone in the room.