The Biden administration is having a tough time getting its story straight on inflation. Just as Treasury Secretary Janet Yellen admitted that it was time to stop calling inflation “transitory,” Biden was bragging about lowering oil and gas prices significantly. But regardless of how they approach inflation from a PR standpoint, it’s becoming harder to conclude anything other than that Democrats’ policies are exacerbating the problem.
Perhaps Biden was thinking of this truly hilarious graph tweeted out by the Democratic Congressional Campaign Committee (DCCC) which shows that, over about two weeks, gas prices have fallen by a whopping two cents a gallon. Surely that makes up for the fact that gas prices have spiked by over a dollar since this same time last year!
But while the DCCC’s chart is a joke (perhaps unwittingly), inflation is no laughing matter for American families. A recent Gallup poll found that 45% of American households are experiencing some degree of hardship due to inflation, including 71% of low-income households. That’s bad enough, but it may not be getting better anytime soon.
After all, it shouldn’t be shocking that inflation is coming now. Throughout 2020, Congress passed over $3.4 trillion in emergency relief to combat the coronavirus and help Americans affected by lockdowns. A significant legislative response to the virus was right at the time, helping to preserve the economy’s ability to rebound as people adjusted to the new normal.
But Congress got addicted to unchecked spending and couldn’t stop when it was time to. The incoming Democratic trifecta promptly passed a $1.9 trillion stimulus bill, the American Rescue Plan Act (ARPA), chock-full of unnecessary “bailout” money to states and other boondoggles.
That spending spree was enough to push inflation to its highest level in over 30 years. Certainly there are other factors at play here, notably supply chain blockages, but it’s hard to imagine that running a $3 trillion deficit for two straight years did anything but make the problem worse.
So with that in mind, what did Congress do? Power on ahead and pass a $1.2 trillion infrastructure bill that will not benefit the economy discernibly according to the Penn-Wharton Budget Model, of course. Though the White House insists that it was “paid for” — itself a euphemism for spending huge amounts of money while raising taxes by a commensurately huge amount so that the deficit doesn’t increase — but that’s largely due to creative use of gimmicks.
That’s also the official line about Build Back Better, the pending reconciliation bill that Democrats have moved onto next. It’s painfully clear that it won’t pay for itself in terms of deficit impact, but it’s not even as close to being paid for as is being widely reported. Though the Congressional Budget Office (CBO) estimates that the bill would add $367 billion to the debt over ten years, it would be far more if accounting for timing gimmicks.
The most egregious, but hardly the only, example of this comes in the form of the raised cap on the State and Local Tax (SALT) deduction. By taking advantage of the fact that the current $10,000 cap on the SALT is set to expire in 2025, Democrats are able to get the CBO to score the proposal to raise the cap as a revenue increase following 2025. Therefore, what is truly an enormously expensive policy that benefits the wealthiest taxpayers shows up as a minor reduction in tax revenue on the CBO’s balance sheet.
All told, American households are once again staring down the barrel of legislation that will not only add a great deal to the national debt, but also inject yet more cash into an overheated economy. That’s a pretty big lump of coal in the stocking for American taxpayers.
Andrew Wilford is a policy analyst at the National Taxpayers Union Foundation, a nonprofit dedicated to tax policy research and education at all levels of government.