Excessive taxes, spending, and government regulation have once again gripped America thanks to the policies of Biden, Harris, and the progressives. The predictable result is higher prices for everything and a repeat of the Carter Misery Index from which President Reagan rescued us beginning in 1981.
According to the Bureau of Labor Statistics, and as confirmed by Americans for Tax Reform, since January 2021:
- Gasoline prices have increased by 45% and other energy prices by 24.5%
- The price of bacon has increased by 8.4% and seafood prices by more than 6%
- The price of fresh milk has increased by 7.5% and fresh fruits by 8.4%
- Prices for major appliances are up 14% and furniture and bedding have increased 8.5%
- Airfares have increased by nearly 25%
The root of inflation is too much money chasing too few goods, as our economist friend Milton Friedman frequently observed. The New York Times warns that inflation also results in long-lasting damage if wages don’t keep up.
Driving this inflation is the largest federal budget since World War 2. President Biden proposes not only new infrastructure expenditures but rapidly expended direct payments to families in child tax credits and for elder care as well as other “cradle to grave” welfare support.
Biden claims all this new spending will ease inflation. We’re wondering what economics principle he is citing to make this outrageous conclusion. If simply spending more money cures these recent price hikes, why not spend more? Why not another $60 trillion instead of only $6? Preposterous. We’re currently suffering these record-setting price jumps precisely due to the $6 trillion we have already juiced into the economy. The last thing the economy needs is more liquidity.
The president is also proposing large tax increases, including increases in the corporate tax rate from 21% to 28%, returning the U.S. to the competitive disadvantage of the Obama/Biden years. And that’s just a peek at the “soak the rich” tax mantra Biden is proposing. A recent article in the Wall Street Journal by tax experts Aharon Friedman and Stephen Miran (“The Inflation Tax on Capital”) chronicled the folly of such a notion:
While soaking the rich might sound attractive, the president’s proposal is more like drowning them. On paper, the president’s proposal would raise the nominal capital-gains rate from the current 20% to 39.6… [but] capital-gains taxes on corporate shareholders are already a double-tax since income is taxed at the corporate level before being remitted to shareholders. The total federal, state and local income taxes paid by corporate income would be as much as 75% under the Biden proposal.
All these factors point to more pressures on prices for the long term. Even Federal Reserve Chairman Jerome Powell, heretofore confident that inflation could be constrained, is now sensitive to inflationary pressures, as he stated in his recent testimony to the Senate Banking Committee. As well he should be, as consumer prices increased in June at the fastest rate in over 13 years.
It’s time for the Biden team to rein in their fiscal policies that are feeding this inflation and will severely undercut our economic recovery from the pandemic. That is the message reverberating loud and clear in the economic data over the past several months. Biden would do well to heed that warning and resist the foolishness of driving even more spending into this overheated economy.
Lew Uhler is founder and chairman of the National Tax Limitation Committee and the National Tax Limitation Foundation (NTLF). Uhler was a contemporary and collaborator with Ronald Reagan and Milton Friedman in California and across the country.
Peter Ferrara served as a member of the White House Office of Policy Development under President Reagan, Associate Deputy Attorney General of the United States under President George H.W. Bush, and the Dunn Liberty Fellow in Economics at the King’s College New York.
Joe Yocca is NTLF’s National Policy Director. A long-time political and policy consultant, Joe served in the California State Senate as chief of staff to the Republican leadership for decades and directed statewide, legislative and congressional campaigns throughout his career.