So-Called Inflation Reduction Act Would Make Stagflation Worse

Contact Your Elected Officials
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.

CHARLIE KIRK, YOU WEREN’T PROVED WRONG

"I want to be remembered for courage for my faith,” Kirk had said in a podcast merely two months ago. May his courage spur us to be bolder in our faith.

Trump’s Proposal For NATO To Stop Buying Russian Oil & Start Tariffing China Is Unrealistic

Trump proposed on social media that NATO stop buying Russian oil and start tariffing China 50-100% as part of his plan for ending the Ukrainian Conflict.

The Choices We Make

Death and disagreement are inevitable. Love and hate are choices. We will all die. Before we do, what choices will we make?

Elon Musk Speaks at Unite the Kingdom Rally

Tommy Robinson held rally, with Elon Musk appearing virtually, calling attention to leftist politicians who allow foreign immigrants to invade England.

Doxed Democrats Are Getting Fired Left and Left

Not a misprint because a title of “left and...

ABC Suspends Jimmy Kimmel: 5 Things to Know

ABC suspended Jimmy Kimmel indefinitely over remarks about Charlie Kirk’s assassination, following an FCC warning its head would act against the network.

Judge Rules Pro-Palestinian Activist Mahmoud Khalil Should Be Deported

A U.S. judge ordered pro-Palestinian activist and Columbia graduate Mahmoud Khalil deported after finding he omitted information on his green card application.

Charlie Kirk’s Widow, Erika, Named New CEO of Turning Point USA

Turning Point USA announced it named Erika Kirk as new CEO and board chair of Turning Point USA, which late husband, Charlie Kirk, co-founded.

Shares of Intel Increase 30 Percent on $5 Billion Nvidia Investment

Shares of Intel increased by about 30 percent at the opening bell after Nvidia announced a $5 billion investment in the struggling chipmaker on Sept. 18.

Trump, Starmer Seal Record $340 Billion ‘Tech Prosperity Deal’

President Trump and British PM Keir Starmer announced a new partnership worth $340 billion in technology, nuclear power, and private equity.

Rubio Says US Visa Revocations Underway After Charlie Kirk Death Celebrations

SoS Marco Rubio said foreign nationals who made celebratory comments over Charlie Kirk’s assassination will have their U.S. visas revoked.

Trump Supports Designating Antifa a Terrorist Organization

President Trump said he would support designating the antifa movement a terrorist organization in the wake of Charlie Kirk’s assassination last week.

US Conducts Strike on Another Drug Boat From Venezuela: Trump

Three people were killed in a U.S. strike on a Venezuelan drug boat, President Donald Trump announced on Sept. 15.
spot_img

Related Articles

Popular Categories

MAGA Business Central