Joe Biden is hosting a White House celebration of the passage of the Inflation Reduction Act [sic] today, touting all the goodies he has bestowed on the American people. He has saved the earth from warming with climate change provisions in the IRA. He has cut prescription drug costs (theoretically) with his plan to make the government Big Pharma’s biggest customer. He has raised taxes on the rich which, will cut inflation — so we’re told.
The White House is using the passage of the IRA as “evidence that their party can get important things done in Washington.” That may be true. But at what cost?
According to the Committee for a Responsible Federal Budget, the Biden administration and their Democratic allies on the Hill have authorized an astonishing $4.8 trillion in new spending. In 2020, the Trump administration added $3.8 trillion in federal spending as the economy shed millions of jobs and millions of Americans were in dire straits. That should have been enough to allow the economy to climb out of the hole it was in and jumpstart economic activity.
But once Biden got into office, Congress opened the spigot wide and approved massive amounts of questionable spending.
The $4.8 trillion of borrowing approved by the Biden Administration is less than the roughly $7.5 trillion President Trump added to the deficit over his term ($4 trillion excluding COVID relief), but much more than the $2.5 trillion President Trump had enacted at this point in his term.
This $4.8 trillion is the net result of roughly $4.6 trillion of new spending, roughly $500 billion of tax cuts and breaks, and $700 billion in additional interest costs, partially offset by $400 billion of spending cuts and $600 billion of revenue-increasing policies. Of the non-interest deficit increases, about $3 trillion is from legislation – including a net $1.6 trillion passed on a partisan basis and $1.4 trillion passed on a bipartisan basis. Another $1.1 trillion comes from executive actions.
Meanwhile, every action that the Federal Reserve has taken to get control of inflation has been countered by trillions of dollars in spending by the Democrats.
Inflation numbers today show that the Fed’s actions aren’t working (Headlines show 8.3 percent, down from 8.5 percent and core 6.3 percent up from 5.9 percent). In short, supply constraints are reducing the top number, but inflation created by the Fed and Congress’ excesses is going up.
I have a sense that more aggressive actions are needed from the Fed. I will, however, leave that part of the analysis to people with stronger opinions or knowledge than I on this. What I know for a fact, though, is that the Fed’s actions will have to be way more radical because the Biden administration and Congress won’t stop spending money like drunken sailors on a binging spree. (emphasis in the original)
If we could count on the Republicans to cut spending and rein in the Biden White House’s mania to give everyone everything they always wanted, we might have some confidence that the Fed would eventually tame inflation.
But Republicans have proven themselves to be just as wildly irresponsible about government spending as the Democrats. It’s hard to see whether either party has any desire to get government spending on a sustainable path.