Politics trumps Economics

Senate Democrats have agreed on the contents of a spending bill labelled the “Inflation Reduction Act”.  

FIRST LIE: The bill will reduce inflation.  

According to the Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania's Wharton School, the bill would have no real impact on inflation:  i.e., "statistically indistinguishable from zero."

The bill would, however, increase government spending – which, if the new spending exceeds tax income, causes inflation.  

Inflation means your take-home pay will buy less.  Whether due to increased taxes or inflation, the result is reduced wealth – less money for you and a lower level of prosperity for your family.

SECOND LIE:  

President Biden has stated on a number of occasions that Americans earning less than $400,000 per year would not experience any tax increase during his presidency, and he repeated that statement just days ago:  

"This bill will not raise taxes on anyone making less than $400,000 a year."

Despite that, taxes will go up for lower-class and middle-class families.  Those making $100,000 or less are projected to see a tax increase.  The total tax revenue taken from wage-earners in that income bracket will go up by almost $6 billion.

Louisiana Senator Bill Cassidy put the bill’s impact this way:  "The only way the Inflation Reduction Act will decrease inflation is by raising taxes on middle-income and lower-income families so that they don’t have money to spend."

But Idaho Senator Mike Crapo made the bill's impact clear:  "The mislabeled ‘Inflation Reduction Act’ will do nothing to bring the economy out of stagnation and recession, but it will raise billions of dollars in taxes on Americans making less than $400,000.”  Referring to analyses by the Penn Wharton School mentioned earlier, the Tax Foundation, and Congress’ own Joint Committee on Taxation, he stated  “The more this bill is analyzed by impartial experts, the more we can see Democrats are trying to sell the American people a bill of goods.  Non-partisan analysts are confirming this bill raises taxes on the middle class and produces no meaningful deficit reduction when gimmicks are removed and the full cost is accounted for.  It’s no wonder this bill is being rushed through the Senate at record pace."

A big component of the bill is a minimum 15% tax on corporations valued at $1 billion or more.  That change alone will reduce the country’s Gross Domestic Product (GDP) by 0.1%, and will reduce employment by an estimated 27,000 jobs.  Saving money by cutting jobs necessarily implies lower wages as well.

Texas Senator John Cornyn said it well:  "Raising taxes on job creators, crushing energy producers with new regulations, and stifling innovators looking for new cures will only make this recession worse, not better."

Wyoming Senator John Barrasso concurred:  "With inflation at a 41-year high and a looming recession, Democrats want higher taxes, more government spending, and to attack American energy."

● ● ●