Losing the War Against Inflation in Washington
The anger that Washington lacks solutions to combat inflation was evident yesterday on the stock market. According to the headline on Zero Hedge, this was the 27th consecutive month that inflation increased from the previous month. According to many on Wall Street, there seems to be no end in sight to these soaring costs. And to make matters worse, this President doesn’t appear to know anything.
When it comes to price stability, Joe Biden has made a lot of promises but delivered nothing since taking office. Particularly poor have been his economic policies. His oil conflict was very damaging. I simply need to highlight actions like stopping the Keystone XL Pipeline,postponing and rescinding all leases on federal land, particularly the Russian Oil Embargo. The cost of oil and gas for American consumers grew as a direct result of each of those activities. The most important element in this inflation is energy.
Four key pieces of economic legislation that Joe Biden oversaw as president were approved by Congress and passed into law. Let’s quickly review each of them, paying close attention to how they affect inflation.
The American Rescue Plan, which became law in March 2021 and is regarded by the majority of economists as the largest direct social welfare programme since Lyndon Johnson’s Great Society in the 1960s, was the first primary economic Act. The majority of us received $1,400 checks because of this act. When I opened the mail and saw it, I was astounded.
Regardless of how well-intentioned you believe this behaviour was, there is little doubt that it contributed significantly to the higher inflation rate.It cost $1.9 trillion and was a component of the previously mentioned $5 trillion increase in the money supply. This unnecessary money printing, in my opinion, is the main contributor to the current inflation.
The following two landmark pieces of economic law will be discussed together since they are so similar. Both have relatively distant objectives. And although they may be admirable, I think you’ll agree that they won’t have much of an effect on the economy right now.
The Chips and Science Act is the first of these acts. It speaks to the volume of semiconductor chips now made in other countries. This Act will provide funding for science and technology research and development. The Infrastructure Investments and Jobs Act is the second of these acts. This Act will provide funding for the reconstruction of American roadways, railways, water systems, and other infrastructure. Another long-term initiative that will take years to develop is the Act.
Therefore, I give the Infrastructure and Jobs Act and the Chips and Science Act virtually neutral scores. They may be moderately helpful moving ahead, depending on how effectively they are implemented. They do, however, boost federal spending at a time when doing so is challenging.
Regardless of how you cut it, these two actions won’t help reduce today’s inflation.
The Inflation Reduction Act, the last piece of economic legislation from the Biden administration, is now at our fingertips. This bill, which was just passed, would seem to be the solution to all of our issues. That title’s creator understood how to push our buttons.
If there was ever a piece of law that, regrettably, did not live up to its name, this is it. The Act is divided into five sections: two for health insurance; one for the environment; and two for revenue collection.
Regarding the two parts of health insurance, current inflation is not caused by rising medical expenses. Yes, the cost of medical care is growing. However, the total cost of healthcare would be less than one-tenth of the expense of food and energy. Again, there may be a very small advantage to medical subsidies in the long run. There is nothing that will actually help to reduce today’s inflation.
The Inflation Reduction Act’s next clause relates to the environment. Furthermore, this provides all the necessary subsidies for green energy that you would anticipate.
The duty to minimise carbon emissions, on the other hand, is the clause that every oil and gas corporation despises. The final version of this section of the Act has not yet been made public. But in terms of the sanctions imposed on the development of conventional fossil fuels, this Act’s provision that will increase the cost of basic energy might contribute to inflation.
Finally, the Act offers two options for increasing taxes, or increasing revenue, as they like to say in Washington.
It first increases IRS money. As you’ve read, more money is available to recruit the additional 80k+ new IRS agents.
The second component is an increase in corporation taxation.
I fail to see how one of them is a successful strategy for combating inflation. It might reduce economic activity as companies and people choose tax avoidance over starting new firms.
Therefore, if I were to evaluate these three key elements of Biden’s economic legislation, I would say that they fell well short of expectations. They are not simply very unsuccessful at combating inflation. It’s that they make no effort at all. The normal Biden fare of pet projects, green subsidies, the updated Obamacare, and the necessary number of pork projects to appease the local constituencies are all present once you get beyond the titles.
And don’t assume that nobody is noticing this.
Wall Street is becoming more and more irate. The belief that this president is clueless when it comes to managing the economy in general and combating inflation in particular is spreading.
