President Biden and the Democrats are poised to pass the poorly named Inflation Reduction Act to much fanfare in the mainstream media, but once upon a time even President Barack Obama knew the last thing you wanted to do was increase taxes in the middle of a recession. This is Biden’s fourth round of stimulus in an inflationary economy, further suggesting everything he does is backwards.
According to much of the mainstream media, President Joe Biden is on the comeback trail, experiencing a resurgence after a string of recent and upcoming legislative victories on everything from gun control to climate. John Harris, writing for Politico, wondered, “Wait, Is the Biden Admin Better Than People Thought?” “Suddenly, the mood is looking up…Following a pattern with long roots in his career, Biden is looking a little like the student who is failing his class for most of the semester, then pulls an all-nighter and slips the paper under the professor’s door at 6 a.m. It turns out the paper is actually pretty good. There’s no way he’s getting an A for the term, but no fair grader would give him an F, either. A solid B is within reach.” Matt Robinson, writing for Newsweek, declared that “Democrats are Back in Business,” describing the upcoming climate deal as a “game changer.” “There have been signs of a blue breeze recently. Gas prices are falling rapidly. The generic ballot, the most predictive measure for the midterms, has moved two points in Dem’ direction. Truly awful Republican candidates have brightened Democratic Senate prospects. Even today’s announcement of negative GDP came with the note that the quarterly numbers were trending better.” Likewise, CNN’s Stephen Collinson believes, “Democrats this week have the chance to validate their monopoly on political power in Washington, create a legacy of true significance for President Joe Biden and even boost their hopes in daunting midterm elections in three months.”
To paraphrase President Biden himself, there is no doubt these pundits and publications believe the climate legislation, somehow named the Inflation Reduction Act, is a big fucking deal, both for the President’s short term political prospects and for the future of the world itself. Perhaps the best description I’ve seen comes from CNN this morning: “The Inflation Reduction Act may not live up to its name and cut the cost of living, but Democrats say it will create real quality of life improvements for millions.” As this description suggests, very little attention has been paid to whether or not it will achieve its stated goals of reducing inflation, carbon emissions, and the deficit, or what unintended consequences it might have on a broader economic environment marked by high inflation and a shrinking gross national product, which is normally known as a recession. The media is happy to call it a big win regardless of whether it achieves an of its stated goals, but the track record of massive subsidies for green energy programs isn’t very promising to say the least. We’ve only been at it since Jimmy Carter was in office.
This time, the bill provides some $369 billion in subsidies to achieve a 40% reduction in carbon emissions by 2030, what’s being described as the most aggressive investment ever taken. A summary written by the lawmakers themselves claimed, “The combined investments in the FY2022 Budget Reconciliation bill would put the U.S. on a path to roughly 40% emissions reduction by 2030, and would represent the single biggest climate investment in U.S. history, by far.” Note the fine print: We will not actually realize a 40% reduction, rather we will be “on a path to one” whatever that means. The bill also promises lower “energy costs for Americans,” increased “American energy security,” the “decarbonization of all sectors of the economy,” focused “investments into disadvantaged communities,” and “resilient rural communities.” Beneath the surface, however, it’s impossible to see how this almost random grab bag of government spending will achieve anything even close. There is nothing new here: Consumer home energy programs, tax credits for energy efficiency, a rerun of tax credits for electric vehicles, and grants for affordable housing, all techniques tried over and over again in the past with mixed at best results. There are also tax credits for businesses to install solar panels and wind turbines, tax credits for “clean technology manufacturing facilities,” and those to transition traditional car manufacturing plants to electric vehicle plants. President Barack Obama did much the same thing in 2009, backed by some $340 billion, but environmentalists have yet to take a victory lap. Of course, no modern bill could be complete without at least a peon for the woke crowd, and so there are “Environmental and Climate Justice Block Grants” and “Neighborhood Access and Equity Grants.”
Precisely how any of this would result in coming close to halving carbon emissions is left completely unsaid, much less how the money is actually going to be spent at a granular level, beneath the buzz words, and what metrics will be in place to ensure success. Putting this another way, if $369 billion can really cut carbon emissions by 40% in 8 years, why not spend a trillion and cut them to zero? Sadly, the deficit reduction measures are perhaps even less convincing. This is primarily a spending bill, after all, with additional funds for healthcare subsidies and other progressive priorities along with massive tax increases. The money left over will supposedly be used to reduce the deficit by $300 billion over 10 years, a rounding error in the federal budget if ever there was one. The tax increases will, perhaps needless to say, be immediate: A new 15% minimum corporate tax for large companies, billions of dollars for the IRS to audit more taxpayers, and some changes to carried interest for investors and hedge fund managers. Somehow, all of this is supposed to add up to the magic bullet of a green economy, a balanced budget, and reduced inflation, at least if you believe the hype. The nonpartisan Congressional Budget Office, apparently does not. Their calculations put the actual deficit reduction at barely a third, $102 billion, less than a rounding error. They also believe the bill will do nothing to combat inflation, a thought echoed by a study produced by the Wharton School of Business and economists quoted on even progressive websites such as Vox.com. “We’re talking about small impacts one way or the other, not likely to have any significant change in what consumers are feeling overnight,” Shai Akabas, director of economic policy at the Bipartisan Policy Center, explained to the site. The White House and Democrats in general are nonplussed, however, continuing to cite experts of the real card carrying kind who say otherwise. White House Press Secretary Karine Jeanne-Pierre told reporters, “You know, leading economists have said that this Inflation Reduction Act that’s been analyzed by them, that’s been looked at by these economists, will indeed reduce inflation.”
They would all do better to heed the advice of President Obama. In August 2009, he said what used to be common knowledge for obvious reasons, “The last thing you want to do is to raise taxes in the middle of a recession,” and yet this is precisely what his former Vice President plans to do, a move that is far worse in an economy also beset by massive inflation. Who do you think is going to pay for these corporate tax increases? Are Elon Musk, Jeff Bezos, and Mark Zuckerberg going to pick up the tab? Of course not, the companies affected will pass the costs along in lower wages for employees and higher prices for customers, adding to the pressure instead of alleviating it. We’re about to pump hundreds of billions of fresh dollars into an economy already beset by supply chain challenges, which will necessarily increase demand, and, given the limited supply, drive up prices even further. This is what’s known as an inflationary spiral, only the plan is to spin it faster rather than slow it down.
Incredibly, this is all occurring even as the Inflation Reduction Act is essentially the fourth round of government stimulus, replete with new, never before spent money: Biden began with the $1.9 trillion coronavirus relief bill. He followed up with $1 trillion in infrastructure investments. The result so far has been brutal for consumers: The highest inflation in 40 years coupled by a rapidly slowing economy that just notched two quarters of contracting growth, what President Biden and his team euphemistically refers to as a transition instead of a recession. Any sane or rational President and party would have stopped there, understanding that new money chasing the same challenged supplies is precisely the wrong strategy under these conditions. Instead, he piled on an additional $52 billion to manufacture semiconductors, and is now planning to ice the cake with another $400 billion plus. What could possibly go wrong with all of this new, largely unnecessary spending? The vaunted CHIPS Act targeting the technology industry is a further illustration of the insanity: The US government is forking over $52 billion to a mature, highly profitable sector, money that will line the pockets of already huge corporations like Intel and Nvidia to make a product that has been in production for decades, on the off chance they produce these microchips in the United States. This is an industry that already generates close to $700 billion in worldwide revenue. Their products are in such high demand that a lack of availability has unleashed havoc on markets as diverse as automobiles, laptop computers, and microwave ovens. The companies that produce them need no incentive to make more on the American taxpayer dime, but we’re going to line their pockets with $52 billion anyway. These are the very policies that make inflation worse, not better.
Ultimately, the overall picture of the Biden Presidency is one of a man hellbent on doing the opposite of what would be effective at any given moment. Rather than increasing spending, we should be reforming the overall process and ensuring every dollar is spent wisely with no impact on inflation. Rather than raising taxes during a recession, we should be reducing the burden on individual taxpayers and putting more money in American pockets. Rather than subsidizing mature industries, we should be incentivizing manufacturing here at home with regulatory and additional tax reform that better rewards investment in the American economy. Rather than flooding the green energy market with more dollars, we should be flooding the overall energy market with more supply. The mainstream media can say what it wants, make up whatever standard it seeks to apply to policies that make absolutely sense, some of which were rejected by Barack Obama himself, but I’m reminded of George Costanza from Seinfeld. As he put it, “It became very clear to me sitting out there today, that every decision I’ve ever made, in my entire life, has been wrong. My life is the opposite of everything I want it to be. Every instinct I have…It’s all been wrong.” I submit to you that Joe Biden is President George Costanza: Every instinct he has is wrong and we’re all paying the price.