Inflation Reduction Act? uhhhh…
This is the bill everyone is talking about, the one where Joe Manchin finally relented, Sinema negotiated and it will cost $433 Billion(down from $3.5 Trillion…). It is known as the Inflation Reduction Act. Biden and Schumer are doing their victory march. Republicans are bent over and taking it.
Can’t say I’m an expert on its contents, but I have a comment or two.
First of all, the Congressional Budget Office says the bill will not reduce inflation at all. Not one bit. I’m not really sure why I am citing the CBO, I only believe them when I agree with them, they tend to be capricious. But Phil Graham says it will increase inflation. Taxfoundation.org says the bill will increase inflation, especially in the first two years. More on this below.
Raising taxes might arguably work to decrease inflation if used solely for deficit reduction since it takes money away from people who would otherwise spend it. The problem is that the money goes to the government, which not only spends it like a drunken sailor but also borrows even more.
So claims of deficit reduction are hilarious (and note the Republicans aren’t doing any better on this).
Let’s face it, government spending really has nothing to do with revenue raised anymore. Whenever there is a shortfall in government spending, the Fed just prints more money. The problem with this is that we can no longer raise interest rates to slow down the economy because our national debt is so high that interest increases would force the government to borrow in the extreme, thus expanding the money supply, thus increasing inflation. That effect is great than the tightening effect of the higher interest rate.
Yes, you might know that the Fed has already raised the interest rate, and plans to do it again. I’ve written about this before. This will increase inflation, not reduce it. This will spiral.
Oh yes, and the last problem is that according to basic Friedman economics, you can not really tax corporations. Anything they pay in taxes is merely passed on in higher prices to the consumer – yes, you guessed it, a contributor to inflation.
Price Caps on Prescription Drugs
Price caps do not work, they have never worked. Socialist countries have tried it and failed.
The reasons are obvious. Manufacturers will not produce a product if it doesn’t generate a profit. If you put a cap on the price of insulin, you do not create cheaper insulin, you create a shortage of insulin. And what follows is invariably a black market of some kind where people can buy insulin at a much higher price, if they can afford it. The people who can’t or won’t go to the black market are put on waiting lists – basically, they go without.
Think of it as a tax. Ronald Reagan always said whatever you subsidize you get more of, whatever you tax you get less of. If you buck the market and lower the prices unnaturally, we will have less insulin.
Medicare is going to “negotiate” prices? Either they set price caps or it’s business as usual. Drug makers will sell what they have at the price market conditions allow. Or they won’t and we have a shortage.
Climate Change Measures
This is basic virtue signaling from the Democrats, its sole purpose is to win the vote of those people who believe that climate change is the most important issue ever.
These measures will not affect global temperatures in any significant way. No scientist anywhere can claim that it will. Remember this hugely expensive program is said to reduce emissions by 31% to 42% by 2030 in the U.S. – but the rest of the world does not have such a program. They can’t afford it.
None of the measures taken will translate to third world countries that produce the CO2 that they claim will destroy the Earth. It is a boatload of money spent foolishly.
And of course the best part of the climate measure is that it also puts money into coal, gas and oil, the very fuels the climate change advocates want to stop.
So Joe Biden and Chuck Schumer are happy, they think they have saved the world. I supposed the damage could be worse. But this is a useless waste of money. Now we have to wait for 2024 to over turn it.