Is "Inflation Reduction Act" a Big Lie?
or business as usual
I suppose the Inflation Reduction Act just signed by President Biden is part of the cunning midterm plan by which Democrats hope to prove to the voters that all is well in the land of Oz — except for those ultra-MAGA neo-Nazis of which you’ve heard tell.
I know that our Democratic friends are deeply concerned about the 30,000 odd lies that President Trump emitted in his campaign and administration. Believe me, liberal friends, this Inflation Reduction Act counts as a Big Lie.
As far as I can tell, the Inflation Reduction Act contains mainly more money for the Green New Deal and lots of handouts to Democratic constituencies. Plus tax increases!
And therefore has nothing to do with inflation. As Milton Friedman wrote:
Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.
As a matter of fact, the broader money supply M2 has been flat since January 1, 2022. So inflation will go down, eventually, once the 40 percent increase in M2 since January 1, 2020 has worked its way throught the system.
Now if I were president I would be reducing spending and taxes as much as possible in order to restart the economy. That’s what Ronald Reagan did in 1981, and the result, after a nasty little recession in 1981-82, was a decade of growth and declining inflation.
Then, after I had got the economy back on its feet after the COVID blow to the solar plexus, then, and only then, would I think about goodies for my supporters.
And one thing I would not be doing right now would be spending hundreds of billions on green energy. Know why? Because the green energy revolution is going to hurt the economy, big time, maybe even by cutting it off at the knees. Leaving aside the fact that green energy based on wind and solar is physically impossible, the green energy revolution will at the very least cause enormous disruptions to the economy that will seriously affect GDP. The great economic leaps of the last 200 years were technological leaps, like coal-fired trains and ships, oil-fired road transportation, the computer revolution, that suddenly made things cheaper. The green energy revolution will make energy more expensive and less reliably available. It will make the voters mad has hell, and tempt politicians to do stupid things.
Then there is Art Laffer’s simple view of spending and taxes.
If you increase taxes on a businessman then he will not create as many jobs.
If you increase spending then some guy that might have been looking for a job will decide to take the handout instead.
So, to make things real simple,
Job One for government is to grow the economy.
Job Two for government is to reward your supporters.
In that order! If you hand out money to your supporters first, as the Democrats have done over the last two years, then the economy will falter, and there won’t be any money for your supporters unless you inflate the money supply.
People in politics do not understand this. They do not understand that top-down politics is poison for the economy, whether it is Stalin and his Five Year Plan, Mao and his Great Leap Forward, or Klaus Schwab and his Build Back Better, and now President Xi and his Belt and Road Initiative and semi-fascist economy.
What is more, we can already see that governments in Europe are responding to energy shortages and price hikes with rationing and subsidizing energy with borrowed money. I expect that by the winter here in the US that President Biden will be proposing similar policies. Because that is the only thing that politicians understand. If there is a problem, you shovel money at your supporters.
Believe me, the European governments will Make Things Worse, and so will the Biden administration if it follows the Europeans.
So I predict that nothing will get fixed until the next Republican administration that features a Republican Congress. That is because it is the Republican Party voters, the ordinary Commoners, that just want the economy to work, and don’t want handouts for green energy or activism or just to buy food and pay bills.