Travis Fisher
In January 2023, I was debating the energy provisions in the Inflation Reduction Act (IRA) on X (formerly Twitter). A prominent advocate and professor at Princeton University, Jesse Jenkins, contended the IRA was “very much designed for political durability.” I had my doubts.
Jenkins was so confident in the IRA’s staying power that he staked a bottle of Scotch on the claim that no IRA subsidies would be legislatively repealed in 2025. He also wagered “the fate of US climate mitigation efforts,” although I think he was joking about that part.
The bet wouldn’t be resolved until July 2025, when the One Big Beautiful Bill Act (OBBBA) repealed many of the energy subsidies in the IRA. I’m obviously happy to see the much-needed reform, win the bet, and have the shiny trophy in my office. To Jesse’s credit, the tweet is still up, and he made good on the Lagavulin 16. He’s an honorable and honest man. The world would be a better place with more people like him who are willing to make predictions, bet on them, and honor the results. We can all learn from Jesse (and the likes of Julian Simon and Paul Ehrlich).
But the real policy story isn’t about Scotch or wagers—it’s about why the IRA was never durable and the lessons we can apply to federal energy policy in the future.
Easy Come, Easy Go
Budget reconciliation is a fast-track legislative process that enables the majority party to send a spending and revenue bill to the president’s desk with simple majorities in the House and Senate. Notably, reconciliation is a key tool for one-party bills that couldn’t receive the 60 Senate votes required to end a filibuster. If a party has the “trifecta”—control of the presidency, the House, and the Senate—they can pass legislation on the thinnest of margins. That was the case for the IRA’s passage in 2022 and for the OBBBA’s passage this year.
Although the budget reconciliation process is a tempting way to deliver quick wins on partisan priorities, such speed comes with a tradeoff. Reconciliation bakes fragility into the process, especially when a political trifecta flips quickly (as it did in the past few years). Hence, any partisan budget measures are sure to suffer policy whiplash unless the party behind them stays in power for long periods. In this context, the bet was less about policy and more about the political makeup of the presidency, House, and Senate.
The IRA strategy seemed to involve a “foot in door” technique in which subsidies would begin with a trickle and then build to a deluge (think tens or hundreds of billions of dollars per year, with no expiration date). IRA proponents assumed the money would start flowing, companies would invest, highly visible jobs would sprout, and strong political support would follow. That turned out to be incorrect. The subsidy harvesters did become a vocal constituency, but they were no match for the new opponents whose top priority became the elimination of the IRA.
Energy Policy Should Be Durable
If we take the IRA repeal as a lesson, political durability doesn’t seem to come from spending. The history of long-lasting energy and environmental laws suggests that political staying power comes from building a large coalition. The Federal Power Act, the Clean Air Act, the Department of Energy Organization Act, and the Energy Policy Acts of 1992 and 2005 (love them or hate them) were much closer to the bipartisan ideal than either the IRA or OBBBA. Perhaps that’s why they’ve lasted for decades.
The practical problem with flimsy policy, especially when it comes to the energy industry, is that large, capital-intensive projects like power plants are extremely difficult to plan if the rules change from year to year. Step into the shoes of a private company that is looking to invest in a billion-dollar asset that takes multiple years to place in service and, if the rules allow, will remain in operation for decades. How much risk premium does political uncertainty add to that decision? And how much more are consumers paying for things like electricity because of it?
Energy policy should be built on bedrock principles. As a Cato scholar, I support individual liberty, free markets, limited government, and peace. If the government must intervene (and there seems to be no escaping intervention in energy), it should only impose technology-neutral policies based on widely shared and clear goals. It should allow freely functioning markets and take care that they don’t become chessboards for central planners. In no case should policymakers try to build an energy sector on a foundation that shifts from year to year or from one presidential administration to the next.
Conclusion
An old saying comes to mind: “If you want to go fast, go alone; if you want to go far, go together.” I’ll savor the Lagavulin, but I’ll cherish the lesson more: in energy policy, speed without a guiding principle or wide agreement doesn’t get you very far. I commend Jenkins for honoring the wager, and I look forward to the energy policy debates to come. The bad news is that neither political party is putting down the quick-and-dirty tools like budget reconciliation or executive orders. But here’s a silver lining—this bottle of Lagavulin is proof that, sometimes, the free-market reformers win.