Bidenomics Was More Successful Than People Think

Joe Biden's climate-focused legislation, the Inflation Reduction Act (IRA), was not solely aimed at addressing environmental concerns. It also sought to stimulate economic growth by creating factories and generating high-paying jobs across the country. The conventional wisdom following the election suggested that the IRA was a failure, as it was believed to have driven Democrats away from certain communities.

However, this narrative is incomplete and misguided. The legislation did, in fact, contribute to Democratic victories, and significant aspects of it remain in place, driving the clean economy and reducing pollution. The cornerstone of the IRA was a substantial tax credit for clean-energy manufacturing. By Election Day, the policy, along with other Biden-era initiatives, had attracted $185 billion in private investment towards the construction of solar panel, battery, and electric vehicle factories.

The administration anticipated that visible new factories in communities would garner support for the party responsible. While early studies on the political impact of the IRA had limitations and found limited rewards, a new working paper by the author and colleague Denis Lomov provides a more accurate assessment. By comparing House districts with and without announced clean-energy factories, the authors discovered that the IRA's manufacturing credits lifted Kamala Harris's vote share by approximately 1.5 percentage points, amounting to a 2.5 million vote swing across 234 districts.

This impact could have altered the outcome in key battleground states like Michigan, where every district had at least one factory announced. Without the manufacturing build-up, Harris would have likely lost the state by three times her actual margin. Contrary to popular belief, Republican legislators did not outright repeal the IRA's key components.

Instead, they sought to weaken some provisions, such as grant programs for disadvantaged communities and consumer tax credits for rooftop solar and electric vehicles. However, over 70% of announced clean-manufacturing investments targeted Republican districts, and some Republican senators even worked to prevent the repeal of clean-energy tax credits.

The notion that Trump effectively eliminated the IRA's impact is misleading. The real story is the political feedback loop created by the IRA's success in generating new factories and jobs, leading to increased support for the policy among its beneficiaries and Republican legislators.