Implications of Possible Inflation Reduction Act Repeal

     I don’t know whether Congressional Republicans will be able to repeal the IRA, but the executive branch will no doubt do what it can to prevent and disrupt the act’s implementation. I found a few analyses that purport to predict the effects of repealing the act. They should probably be taken with a grain of salt. However, the negative effects are rather undeniable. Of course, they must be offset by the effects of spending the money elsewhere.

     The notion of partially completed projects being abandoned due to the loss of government funding does not bode well for the economy since businesses would likely have to incur significant losses. I expect a more piecemeal approach, with some shaving of funding here and there doled out by Congressional vote. However, the current administration seems averse to some rules and willing to cross lines, and Congress may agree to reverse funding by repealing the act if it comes to that.

     Silvio Marcacci, in a November 2024 article for Forbes, argued that the IRA:

“…kickstarted an American manufacturing renaissance, attracting more than $500 billion in new private investment between August 2022 and August 2024 – more than half of total nationwide private investment growth over that time – and creating more than 334,000 jobs across our country.”

He also argued that repealing the IRA would  

“…cede tens of billions in investment opportunities to major economic competitors like China, Korea, and Mexico.”

He notes that according to Johns Hopkins University’s Net-Zero Industrial Policy Lab, $66 billion in new investment opportunities would be ceded to other countries that directly compete economically with the U.S. while costing America up to $50 billion in lost exports. According to that report:

“This would severely damage U.S. ability to develop and scale next generation technologies, effectively stymying the best hope for the U.S. to gain a competitive footing with China. Without these investments and tax credits, U.S. industry will be hobbled just as it is getting going, ceding the ground to others.”

He notes that an IRA repeal will hit on both the supply and demand sides of these newer technologies like EVs, renewable energy, hydrogen, CCS, and more. Companies say it would cost businesses and force layoffs. Some states would be hit harder than others and the majority of them are red states as IRA funding apparently is planning to go considerably more to red districts than blue ones.

“These have always been fundamentally bipartisan goals. “Republicans have always pushed for tax incentives to incentivize business growth, domestic manufacturing and job creation — and the data shows these IRA tax incentives are working,” wrote former Republican Federal Energy Regulatory Commission Chairman Neil Chatterjee.”

Marcacci points to an analysis by Energy Innovation, which produced a report about the effects of IRA repeal. The report notes, regarding the tax credits in the IRA:

“These credits were established under the Inflation Reduction Act (IRA), which has since generated $600 billion in private investment across roughly 750 domestic clean-energy projects, creating more than 406,000 new American jobs.

“We find that repealing existing federal clean energy tax credits and funding programs would increase annual cumulative household energy costs by nearly $32 billion from 2025-2035, with annual consumer energy bills increasing by more than $6 billion across all American households in 2030, growing to more than $9 billion in 2035. It would cost our economy nearly 790,000 jobs in 2030 as new investment in American energy falters and GDP drops by more than $160 billion.”

     Another analysis by Semafor expanded on Energy Innovation’s analysis. They noted the states that stand to lose the most are California, Texas, Florida, Pennsylvania, and Georgia. 

Four out of five are red states according to federal elections. Semafor noted that Congress is likely not considering a full IRA repeal:

“Analysts do not expect a full repeal: Even Mike Johnson, the Republican Speaker of the House of Representatives, has characterized his strategy of pulling back on the IRA as “between a scalpel and a sledgehammer.” But it could be drastically limited by reducing staffing to key posts at the Treasury and Energy departments responsible for setting tax-credit guidelines and doling out financial support.”

 

 

   

 

References:

 

Repealing Federal Energy Tax Credits Would Cost American Jobs and Increase Household Energy Bills. Energy Innovation. March 2025. Microsoft Word - National IRA Rollback Update March 2025_FINAL.3.19.25.docx

Inflation Reduction Act Repeal Would Hand Billions to America’s Economic Competitors. Silvio Marcacci. Forbes. November 19, 2025. Inflation Reduction Act Repeal Would Hand Billions To America’s Economic Competitors

Repealing the Inflation Reduction Act could wipe $160 billion off US GDP. Mizy Clifton. Semafor. March 20, 2025. Repealing the Inflation Reduction Act could wipe $160 billion off US GDP | Semafor