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A Looming Political Earthquake

The Inflation Reduction Act’s unprecedented climate spending — much of it uninvestigated — may soon lead to unprecedented scandals

By Mark P. Mills | City Journal | November 4, 2024

If it weren’t for the election season swamping news coverage, odds are more people would be talking about the revelation that, to quote a Bloomberg headline, “The World Bank Somehow Lost Track of at Least $24 Billion.” In fact, that may understate the reality: the World Bank’s “accounting gap” could be as big as $41 billion. The missing funds in question were for “climate finance” projects, “financed by taxpayer dollars from its member countries, the biggest being the US.”

According to the Oxfam report that was the source for the Bloomberg story, “There is no clear public record showing where this money went or how it was used, which makes any assessment of its impacts impossible.” It is possible that much, maybe even most, of the missing money went to the intended people and purposes. But only the hopelessly naïve would dismiss the probability of rampant waste, malfeasance, graft, and outright theft as explanations for that “gap.” Spending of such magnitude and velocity with sloppy oversight is an invitation to thieves.

But the oversight scandal at the World Bank is chump change compared with the U.S. Inflation Reduction Act (IRA) and its massive planned “climate finance” program. The misnamed IRA is, in the words of its advocates, the “largest climate policy in US history.” [emphasis added] The law’s ambitions dwarf those of the World Bank. By various estimates, the IRA will lead to some $3 trillion in direct spending on grants, subsidies, and the like, plus another $3 trillion in related spending induced by mandates and rules. For perspective, that’s far more than the cost of Obamacare, and even more than the $4 trillion the U.S. spent (inflation adjusted) to fight World War II.

It makes zero difference which side you’re on regarding the urgency of climate change: the associated policies and spending are almost entirely about trying to create an “energy transition.” Nor does it matter what you think about whether such a transition is sensible (it isn’t): the sheer immensity of IRA spending represents a “whole of government” opportunity for waste, abuse, and fraud on an unprecedented scale.

If the likelihood for waste and abuse doesn’t strike you as obvious, consider a few well-documented features of federal spending in general. A March 2024 Government Accountability Office (GAO) report on overall federal government spending in FY2023 found that “more than $175 billion of errors were overpayments—for example, payments to deceased individuals or those no longer eligible for government programs,” and “$44.6 billion were unknown payments.” [emphasis added] The only “good news,” the GAO wrote, was that the “unknown” was $11 billion less than in the previous fiscal year, when Covid money was still being liberally ladled out. Again, only the naïve would conclude that waste, fraud, and abuse didn’t account for any of those “unknown” payments and “errors” in the normal course of our government’s $6 trillion annual budget.

Now along comes the IRA, another federal government gusher, with its overall $6 trillion directed at “climate finance,” with far fewer administrative and oversight guardrails than one normally finds in federal programs. What could go wrong?

Where are all the curious investigative journalists? Fortunately, a few still exist, notably James Varney at RealClearInvestigations, who has recently published a preliminary investigation: “Overnight Success: Biden’s Climate Splurge Gives Billions to Nonprofit Newbies.”

The purpose of Varney’s investigation wasn’t to question the efficacy of the underlying spending policies, their cost-effectiveness, or their capacity to achieve their stated goals. (For the record, we have good reasons to question both the policies’ efficacy and goals. For example, a new analysis from the National Bureau of Economic Research reveals that the “IRA spends $23,000 to $32,000 per incremental EV sold.”) Rather, Varney sought answers to simple questions that fall under the purview of investigative journalism: Who’s getting the money, and what is it being spent on? Let’s hope Varney will inspire more reporters to dig in, because the massive scale of this “whole of government” spending program cannot possibly be covered by one person.

By necessity, Varney focused on just one tiny corner: the White House’s $27 billion Greenhouse Gas Reduction Fund. As an EPA press release announced this past April: “Biden-Harris Administration Announces $20 Billion in Grants to Mobilize Private Capital and Deliver Clean Energy and Climate Solutions to Communities Across America.” Varney found that there isn’t “much public information” about many of the organizations receiving the funding, nor about what they’re doing or planning to do with the money.

Merely reading the EPA press release would raise some reasonable questions about the potential for waste and the relevance to “climate.” For instance, the EPA announcement says that one of the awards aims to “[d]edicate over $14 billion toward low-income and disadvantaged communities, including over $4 billion for rural communities as well as almost $1.5 billion for Tribal communities—ensuring that program benefits flow to the communities most in need and advance the President’s Justice40 Initiative.” Need it be said that poor communities consume far less energy than wealthier ones? Thus, changing behaviors or purchases among them would do nearly nothing to achieve the IRA’s stated climate goals. Regardless, one would want to know more about what, exactly, the grant-receiving organizations are doing or will do, and who runs them.

Varney reported that one award recipient obtained nonprofit status in 2023 and eight months later received a $940 million award. Another awardee received $2 billion just one month after obtaining nonprofit status and showing a prior reported income of $100 (not a typo). Varney doesn’t accuse any of these organizations of misdeeds; he merely sets out to establish some clarity on who got what, when, and where the money is going. However, when he contacted various recipients, he received either no responses or elliptical ones.

Again, setting aside the question of whether the spending will be useful, a reasonable person might object that we’re still in the early days and that it’s hard to spool up such an ambitious program. All true. But of course, the beginning is precisely the time when opportunities for waste and fraud get baked into a program. Varney reports: “The [$27 billion] awards were made by the Environmental Protection Agency, which is new to the world of major grantmaking. The agency acknowledges it has never handed out such gigantic sums of money, and its inspector general told Congress last month it marked a ‘fantastically complex’ and ‘unusual’ setup that his small staff would be hard-pressed to follow.”

Thus, we come back to obvious questions, such as: How is the grant-giving entity organized to evaluate and monitor funding recipients? How many of the groups were formed by political insiders? Regarding the latter, such arrangements can be perfectly benign, since insiders know where the money and opportunities reside. But the public has a right to know more. Certainly, one would hope Congress will put in place effective oversight. It is a huge amount of money. Again, from Varney’s reporting: “‘I can’t say enough about how complex this system will be,’ EPA Inspector General Sean O’Donnell testified to a House subcommittee in September. ‘It’s like they created an investment bank. It’s fantastically complex. I think it’s unusual.’”

Democrats have been eager to extol the IRA’s virtues. (The law was passed without a single Republican vote, only the second time something so consequential was so partisan. The other was Obamacare, which, it bears noting, didn’t create a “whole of government” lallapaloosa of multibillion-dollar grant-giving programs.) Given the stated claims and goals of the IRA, and the quantity of money already ladled out, one would expect to have seen far more news and press releases touting program successes. The IRA is, after all, the most expensive effort ever made to restructure an entire U.S. sector.

In the absence of further information, we can make a few reasonable suppositions: if the IRA is subject to typical levels of waste, abuse, and fraud for government largesse, then odds are that a major political tectonic shift is on the horizon. Perhaps more than any other single factor, the undoing of the climate-industrial complex could come from the volume of money being pushed into the economy to accelerate an impossible goal: the “energy transition.”

The popular expression “follow the money” comes from the iconic 1976 movie, All the President’s Men, which dramatized the Watergate investigation and the subsequent political earthquake. IRA spending dwarfs anything that precedes it. If serious investigative journalists do follow the money, it’s a good bet that we’ll see gargantuan scandals emerge.

Mark P. Mills is a City Journal contributing editor, the executive director of the National Center for Energy Analytics, and author of The Cloud Revolution.

November 5, 2024 Posted by aletho | Corruption, Deception | United States | Leave a comment