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Policy Pinpoint: Legislation and the Long Road Before Us

Looking for long-term investment flows

In Brief

The Inflation Reduction Act marks a new chapter in the story of American economic flourishing. 

But how that story unfolds remains unknown, and likely depends on the law's incentives. 

A look back to another ambitious suite of policies, on a smaller but still complex system, offers some frames. 

On July 27, 2022, senator Joe Manchin issued a statement into cyberspace attempting to make clean energy investment viable in the United States’ spiteful political climate. That statement grew into law over the next 16 days. Now investors and managers are looking at a menu of tax credits well into the next decade that make clean-energy infrastructure economically logical in that term. (It was already economically necessary in the long term.)
But comprehensive policies tend to exert effects both harder to see and harder to ignore than anything you can capture on a tax form To see the new law's hold on future business prospects, come back 15 years with me.
On April 22, 2007, I stood on tiptoe in a balcony to see New York City Mayor Mike Bloomberg, under a suspended blue whale in the American Museum of Natural History, announce changes to meet a changed climate. In those days, I plied my trade as an itinerant reporter for several publications. I’d gulped and blinked shortly after walking into the museum rotunda, hearing reporters from dailies and TV recap the briefing they’d gotten the day before from Bloomberg’s senior team. What did they think about incentives for green roofs? About plans to expand parks? They were fixating on drivers' fees.
I spotted Ray Kelly, Bloomberg’s police commissioner, in the crowd, and asked him why everyone wanted to talk only about traffic. Kelly didn’t duck the question. “We love traffic,” he said with a smile. “We think about it all day.”
At times of great consequence, people often focus on the changes they can picture.  So just as New York journos focused on plans to charge lone drivers in busy sections of Manhattan - plans that remain under negotiation today, by the way - so too do many pundits look first at credits for electric vehicle purchases.
But a deeper legacy from Bloomberg’s plan came in a recalibrated property market. One plan tenet stipulated that every New Yorker should live within ten minutes’ walk of a park. As government invested more in open space, buyers sought more greenery, and developers soon added balconies and park access to their amenity list. The multi-part plan condensed to several initiatives. One other resonant one committed to a bike-share system, now an economic engine and tourist attraction and mainspring of your columnist’s commute. It dealt in terms that made long-term projects economically rewarding.
Likewise, the Inflation Reduction Act makes several clean-energy strategies more feasible - even if their financial payoff lies down the road. It fiddles with tax collection to motivate the inventors, limited partners, hiring managers and implementers who define a fossil-free infrastructure. And while you can look to Canary Media or Utility Dive or NPR or the Washington Post or any number of outlets for a rundown of what the bill contains, you can also trust Clean Energy Finance Forum that it teems with reasons to invest in clean energy and related job creation now. And next year, and the next ten years.
My fellow reporters latched onto congestion pricing in 2007, which evoked an anvil punishing defenders of the old. More resonant changes came from clearing space for new investment. In the Inflation Reduction Act, that applies to provisions that stand up a national green-minded bank and that help states train contractors. Future patterns of investment also seem traceable in the way the bill requires apprenticeships, limits project size in environmental communities, sets millions for pilot programs in transmission reform and clean hydrogen production, and otherwise seeds a clean economy.
But accept that legislation rarely plays out as a list or schedule. I learned that covering the aftermath of PlaNYC, and admit getting bogged down in the congestion-pricing contortions. More often, laws alter the economic bloodflow in the public corpus, freeing developers and other investors to commit years to a new product. In New York, those were often condos. Now, they’ll be heat pumps and batteries with local minerals, carbon-free electric plants, and graduating classes.
And truly, they stand a better-than-even chance of controlling downtown Manhattan traffic. Maybe.