by Rod Williams, Aug. 2, 2022- I have reached a point to where disgust with extreme partisanship makes me less likely to believe something just because a Fox news host or a Republican Congressman tells me it is true. When they continue to support the big lie of the stolen election and still display fealty to Donald Trump they are not to be trusted.
Congress is on the verge of passing a bill called the Inflation Reduction Act which will raise taxes on the super-wealthy and fund some green energy initiatives and allow Medicare to negotiate with drug companies to lower drug prices and do some other things. I tend to think raising taxes in a recession is never a good idea. However, this bill is probably not as bad as some on the right would have you believe. It may not do much good, but probably not a lot of harm either.
I have read the editorials and news accounts of the bill and watched the talk shows. Actually understanding the economic impact of the bill would take more time than I could give it and is probably above my paygrade anyway. Since I certainly do not trust the Tucker Carlson's of the world and do not trust the woke partisan mainstream media to tell me the truth, I need guidance from some trusted source.
One source I have trusted is The Committee for a Responsible Federal Budget. I have considered them "conservative," but that is because it seems to me that most people that actually understand economics are conservative. Over the years The Committee for a Responsible Federal Budget has advocated for many policies favored by conservatives. The organization has advocated social security reform and has been a major voice advocating deficit reduction. They have opposed student loan forgiveness proposals. They have also been a major voice in alerting the public and Congress about the pending insolvency of many of the trust funds, such as the Highway Trust Fund to be insolvent by 2027 and the Medicare Hospital Insurance Trust Fund insolvent in 2028.
The Committee for a Responsible Federal Budget is truly non-partisan. It has some prominent Democrats who were founders and currently serve on its board and some steller Republicans. The current co-chair is Mitch Daniels, former governor of Indiana, and who served as Director of the Office of Management and Budget under President George W. Bush. It has some of the most credentialed economists in the country servings as researchers and analysts.
Here is the recent press release from CFRFB.
IRA Will Help Fed Fight Inflation
AUG 1, 2022 - A recent Penn Wharton Budget Model (PWBM) study has been used by opponents to claim the Inflation Reduction Act (IRA) would increase rather than reduce inflation. In reality, the study finds the legislation would have essentially no effect on inflation in the near term and would reduce inflation modestly over time. We believe the actual deflationary effects of the bill will be more significant on both fronts for several reasons. Specifically, the IRA’s deficit reduction is likely to be higher than estimated by PWBM, accompanying regulatory and permitting reforms will help reduce inflationary pressures, and the microeconomic effects of the bill – by lowering observed prices for households and businesses – will likely help combat persistent inflation.
Ultimately, we expect the IRA to very modestly reduce inflationary pressures in the near term while lowering the risk of persistent inflation over time and thus make it easier for the Federal Reserve to reduce inflation without causing a recession. Policymakers should follow the IRA with further inflation-reducing actions and should especially avoid policies that would worsen inflation and make the Federal Reserve’s job harder.
.... However, the effects are likely to be modest, especially in the near term. The IRA can assist the Federal Reserve in fighting inflation by making its job easier, but it will by no means replace the need for action from the Fed. To further support the Fed's efforts, lawmakers should build on the IRA with further deficit-reducing and health-care-cost-lowering legislation and actions. And they should especially avoid measures that would worsen inflation, such as extending the student debt repayment pause.
The IRA isn’t going to fix inflation on its own, but having fiscal and monetary policy row in the same direction is an important step forward. (continue reading)
Sounds boring right? Policy is often boring. I don't understand the "Penn Wharton Budget Model' but there are people who do and I trust them more than TV pundits screaming "Socialism!"
If I were in Congress I would not buck the party and vote for IRA because despite the recommendation of CFRFB there are other responsible voices persuading me it is not a wise move. But every policy decision is not black and white. There are a lot of grays. Every vote is not the good guys on one side and the bad guys on the other. Sometimes one is not 100% certain of one's position but only 51% certain of one's position. Sometimes if people would talk to one another rather than scream at one another they might end up with better solutions. One should be able to disagree without being disagreeable. Thinking rather than just emoting is a virtue. Compromise and bi-partisan should not be dirty words. One should strive for a little courtesy, modesty, and dare I say, "moderation."
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