My OpEd ran in today’s Moscow-Pullman Daily News. Dems are trumpeting the end of inflation and that we are not in a recession. They are wrong for many reasons.
Americans are racking up record levels of credit card debt. A report last Friday from the Federal Reserve shows that Americans are more in debt now that at any other time in history as the cost of essential goods and services continue to skyrocket.
And things are quickly getting worse. In May there was a 7% increase in credit card debt; in June that rose to 16%. That’s a $40 billion debt accumulation in June alone. Debt from credit cards now accounts for $890 billion in American total household debt. Even adjusted for inflation, that’s worse than during the financial crisis of 2008.
Furthermore, Americans’ total household debt (including credit card debt) now totals over $16 trillion. That debt load is more than the GDP of all the EU countries combined.
The credit card debt is mostly attributable to the 9.1% inflation rate, which now costs the average American an additional $717 per month. I don’t know about you, but I don’t have that kind of discretionary income. And even if prices stopped increasing altogether, the inflation of the last twelve months costs the average household an extra $8,604 per year. Did you get an $8,604 raise this year?
Many Americans are using credit cards to makes ends meet, most knowing full well that credit card debt is one of the hardest to overcome. The average credit card interest rate is now 17.6%. I have always dissuaded the use credit cards due to the usurious interest rates.
Modern Monetary Theory (“Bidenomics”) argues that the government can solve economic problems by “printing” money until it causes inflation, at which time taxes need to increase to rein in that money. That’s what the federal government did when it printed $5.14 trillion in response to Covid-19.
Bidenomics is all about printing money to get whatever Democrats want. Biden’s 2023 budget proposes spending an additional $73 trillion over the next 10 years.
Politicians love using oxymorons for titles. The Democrats just passed their $433 billion “Inflation Reduction Act (IRA).” The title alone is an Orwellian example of doublespeak.
A few months ago, I discussed that our government has three ways to pay for these liabilities: direct taxes (the most honest way), borrowing money (selling bonds to push direct taxes into the future, essentially taxing the next generation), or via the inflation tax (Bidenomics).
Up until now, Democrats have been using the inflation tax to fund their overblown spending. In the IRA, however, the Democrats raised everyone’s taxes in an attempt to pay for their climate change initiatives.
Senate Finance Committee ranking member Mike Crapo (R-Idaho) said “The more this bill is analyzed by impartial experts, the more we can see Democrats are trying to sell the American people a bill of goods. Nonpartisan analysts are confirming this bill raises taxes on the middle class and produces no meaningful deficit reduction when gimmicks are removed and the full cost is accounted for.”
Crapo requested an analysis of the IRA by the nonpartisan Joint Committee on Taxation (JCT). The JCT determined that the IRA will increase taxes by $16.7 billion on Americans earning less than $200,000 a year. Nearly every tax bracket would pay more in taxes, and those making below $10,000 per year would see the largest uptick: a 3.1% increase in their taxes.
Do you recall Biden’s campaign promise not to raise taxes on anyone earning under $400,000 per year? Will this be his “Read my lips: no new taxes” moment? Doubtful. That only applies to Republicans.
Riffing off Ronald Reagan, we don’t have a $31 trillion debt because we haven’t taxed enough; we have a $31 trillion debt because we spend too much. In fiscal year 2021, the US government spent $6.82 trillion but only had a revenue of $4.05 trillion. With apologies to Wilkins Micawber from David Copperfield, “Annual income $4.05 trillion, annual expenditure $6.82 trillion, result misery.” Part of that misery is the inflation we live with.
There is one thing that the next congress could do: freeze spending until the deficit is zeroed out. I have little hope of this happening, though. Both Republican and Democrat politicians get reelected by spending taxpayer money and bringing home tax-funded projects to their districts.