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The so-called Inflation Reduction Act has at its heart the most foolish trade-off imaginable.

The so-called Inflation Reduction Act will be one of the greatest misallocations of federal resources in American history. The bill has many moving parts, but here’s a simple way to sum up its macroeconomic impact: It would transfer about a quarter of a trillion dollars from America’s pharmaceutical industry, which saves and extends lives, to the climate-change industrial complex, which makes energy more expensive.

The former industry has produced the majority of the world’s 40 most recent wonder drugs. Covid-19 vaccines and treatments alone probably saved hundreds of thousands of lives and restored trillions in economic activity. The industry has provided life-saving and pain-reducing treatments, contributing to reductions in death rates from cancer and heart disease by half over the past 50 years. The pharmaceutical industry spends roughly $100 billion a year in research and development—on the race for the next generation of cures and treatments for Lou Gehrig’s disease, cancer, Alzheimer’s, Parkinson’s, epilepsy and other diseases.

The price controls in the Inflation Reduction Act would inhibit innovation and cut American lives short. Drug innovation is estimated by various academic studies to contribute 35% to 73% of the gain in U.S. life expectancy over the past 30 years. One of us (Mr. Philipson) has calculated that the bill’s price controls would slow R&D spending and the introduction of new life-saving drugs with a cost in lost years of life 30 times the toll from Covid-19 to date. Using conventional government measures of the dollar value of a human life, this could mean tens of trillions of dollars of economic losses—to say nothing of increased suffering of those with chronic diseases. And because drugs are one of the least expensive way to treat diseases, slowing drug development through price controls would likely raise healthcare costs over time.

Now consider the green-energy industry. Over the past 40 years more than $200 billion of taxpayer dollars have poured into green energy—mostly subsidies for wind and solar power through direct payments, loan guarantees and renewable energy mandates. The feds have been awful at picking winners—think Solyndra—and this bill would spend another $380 billion.

What have we received in return for all this money? Wind and solar account for less than 7% of America’s total energy production—and it’s an expensive 7% for the taxpayer. A University of Texas at Austin study found that subsidies per megawatt-hour of electricity amount to roughly 50 cents for coal, $1 to $2 for oil and natural gas, $15 to $57 for wind and $43 to $320 for solar.

The bill also proposes a corporate minimum tax because Democrats object to big companies’ paying zero taxes. The pharmaceutical industry over the past decade has paid tens of billions in taxes. Many wind and solar companies receive more in subsidies than they pay in taxes.

In short, Congress is about to make a near half-trillion-dollar bet on the wrong horse. The bill will make America poorer and less competitive, and it will cost lives.

Mr. Moore is a co-founder of the Committee to Unleash Prosperity and a senior fellow at the Heritage Foundation. Mr. Philipson served on President Trump’s Council of Economic Advisers and is a professor of public policy studies at the University of Chicago.

Source: wsj.com, Stephen Moore and Tomas J. Philipson

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