So-Called Inflation Reduction Act Would Make Stagflation Worse

The Heritage Foundation Header

KEY TAKEAWAYS

  • Sen. Joe Manchin, D-W. Va., has signed off on a massive tax and spending bill that only would push prices for working families even higher. 
  • Unfortunately, the “Inflation Reduction Act” doubles down on the same irresponsible fiscal policy that has caused inflation.
  • Americans are already hurting.  To turn the tide on stagflation, Congress must first stop the spending.

After more than a year of expressing his concerns about the impact of inflation, Sen. Joe Manchin, D-W. Va., has signed off on a massive tax and spending bill that only would push prices for working families even higher. 

The deal, which Manchin made with Senate Majority Leader Chuck Schumer, D.-N.Y., was reached only hours before the Department of Commerce announced that the economy shrank for the second quarter in a row, which most economists consider a recession.

With inflation hitting 9.1% in June, this is a stagflationary economy. Inflation-adjusted wages for the average American worker have fallen by nearly $3,400 since President Joe Biden took office. 

Inflation happens when too much money is chasing too few goods and services.  The government’s policies over the last two years have been a perfect recipe for the highest inflation in four decades: trillions of dollars in government spending financed by the Federal Reserve’s printing presses coupled with lockdowns, new regulations, a war on energy, and anti-work programs that drove down supply. 

Biden’s $1.9 trillion American Rescue Plan Act, a stimulus spending bill in March 2021, proved to be the match that lit the inflationary fire. 

Biden and his big-spending allies in Congress are now back for more. 

The so-called Inflation Reduction Act of 2022, in reality, only would add to the inflationary pain families are already feeling thanks to hundreds of billions in new government spending and job- destroying tax hikes

The legislation’s proponents will argue that over the next decade the bill’s higher taxes would offset the new spending and reduce budget deficits and thus inflationary pressures on net over the 2022 to 2031 budget window.

It is true that the recent massive deficits financed by the Federal Reserve and driven by excessive government spending have resulted in crippling inflation. 

Unfortunately, the “Inflation Reduction Act” doubles down on the same irresponsible fiscal policy that has caused inflation:  All of the new government spending is upfront, while the deficit-reducing revenues are backloaded. 

The result would be higher short-term deficits and higher inflation.  So, it is fitting that Section 1 of the bill, the misleading title, will be struck down by a point of order as extraneous for violating the reconciliation budget process’s Byrd Rule. The same point of order cut the title of the 2017 Tax Cuts and Jobs Act because every provision in a budget reconciliation bill must be directly related to changing fiscal outcomes.

In 2010, Manchin said, “I don’t think during a time of recession you mess with any of the taxes, or increase any taxes.”

That’s common sense. Higher taxes drive up consumer prices, depress wages, and stifle needed investment, hitting families when it hurts the most.

But the legislation Manchin now supports reportedly would increase taxes by more than $450 billion over the next decade—climbing to three-quarters of a trillion dollars when the drug price controls that work like business taxes are counted.

Businesses would face a complicated new alternative minimum tax based on different accounting methods than are normally used for calculating taxes.  This would increase the tax burdens on employers even if they are following the tax laws already on the books.

The reality is that corporations—as in the buildings and logos often associated with them—can’t pay taxes. Only the workers inside corporations, the savers and investors who own their stock, and the customers who consume their goods and services can bear the burden of the higher tax. 

Those ordinary Americans would be the ones who take home smaller paychecks, have smaller savings and retirement accounts, and who pay more for the products they buy. A National Bureau of Economic Research study, published in April 2020, found that the price increases after a corporate tax hike “are larger for lower-price items and products purchased by low-income households.”

The proposal also includes a new $78.9 billion slush fund for the Internal Revenue Service, allowing the agency that has dubious history of political corruption to add thousands of new agents with little accountability.

It would impose price controls on prescription drugs that would result in reduced access for patients in need.  Obamacare subsidies would be expanded “temporarily,” sending billions of taxpayer dollars to insurance companies. 

The “Inflation Reduction Act” would even advance the radical Green New Deal agenda, spending an astonishing $369 billion in the name of “decarbonizing all sectors of the economy.” Biden’s anti-fossil fuel policies have already cost us dearly, driving up prices. 

However, these subsidies would have a far greater impact than this on-paper price tag implies. These $369 billion would be used to manipulate the market into shifting trillions of dollars of investment out of good productive uses and into these politically motivated green dead ends.

All of this on the heels of the Senate passing another massive $280 billion corporate welfare bill—paid for with more inflation, falling real incomes, and a further declining economy.

Americans are already hurting. To turn the tide on stagflation, Congress must first stop the spending.

By Matthew D. Dickerson

Read Original Article on Heritage.org

The Heritage Foundation
The Heritage Foundationhttps://www.heritage.org/
The Heritage Foundation formulates and promotes public policies based on free enterprise, limited government, individual freedom, traditional values, and strong national defense.

Columns

Lefty Activist Judges are Obstructing Trump’s Presidency

Activist judge’s ruling to block President Donald Trump from being able to execute his Constitutional Article 2 Powers pose a real “Constitutional crisis”.

France’s Next Quarterly Nuclear Drills Might Become Prestige-Building Exercises With Poland

Europe wonders what form Macron’s plans to extend his nuclear umbrella over the continent could take, considering risks entailed after Moscow’s negative reaction.

RFK Jr. Nukes HHS ‘Research’ Grants Designed to Stamp Out ‘Vaccine Hesitancy’

RFK Jr. must be waiting to get data firmly on his side before yanking COVID shots off the market and delivering pharmaceutical criminals to the DOJ.

An Actual Deep State Coup is Exposed in a CIA Email

Journalist John Solomon of “Just the News” on Real America’s Voice dropped a BOMBSHELL news report that appears to be old news revisited.

The new economics of compassionatlism

The aftermath of the Covid 19 pandemic has seen a global turn to stagflation, in which the cost of good and services increases regardless of economic growth.

News

FBI Director Responds to ‘Alarming Rise’ in Recent Swatting Incidents

FBI Dir. Kash Patel said federal law enforcement bureau is investigating “swatting” incidents that have targeted certain media figures in recent days.

Trump Admin Asks Supreme Court to Unblock Birthright Citizenship Order

Trump admin asked Supreme Court to roll back multiple preliminary injunctions courts have issued against his EO to restrict birthright citizenship.

NIH Wants to Cap Funding for Indirect Research Costs—What Are They?

NIH is the world’s largest funder of medical research, granting billions to colleges and universities yearly. Trump admin seeks to cap paid overhead costs.

Border Apprehensions of Illegal Immigrants Hit Lowest in History, CBP Says

Number of illegal immigrants apprehended by authorities declined 94% year-over-year under Trump, according to latest figures released by CBP.

98 Protesters Arrested After Occupying Trump Tower to Demand Release of Pro-Palestinian Activist

Police arrested protesters occupying lobby of Trump Tower in NYC, staging demonstration supporting Palestine and against arrest of Mahmoud Khalil.

Judge Rules Against Trump in Labor Case With Implications for DOGE

U.S. District Judge Sparkle Sooknanan ordered President Donald Trump...

After Deadly Crashes, Long-Overdue Aviation Updates Accelerate

The Trump administration is moving to bolster air travel...

RFK Jr. Warns Against Vaccinating Chickens for Bird Flu

HHS Sec. RFK, Jr. advised against providing vaccines to poultry amid a bird flu outbreak, as leaky vaccines can turn flocks into mutation factories.
spot_img

Related Articles

Popular Categories

MAGA Business Central