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This past Wednesday, President Joe Biden made a statement that defied everything from logic to reality to common sense when he announced the following during an address at the White House: “Today, we received news that our economy had zero percent inflation in the month of July.”
I initially wanted to pay it little mind. Many of us have long suspected that the president is a bit muddled cognitively, so for all I knew, it was another one of those remarks that the White House later “clarifies,” like his cancer gaffe from a couple weeks ago or that time in March he accidentally endorsed a regime change in Russia. (Oops.)
This one, however, was repeated almost verbatim by White House press secretary Karine Jean-Pierre on her Twitter account, expressly including the phrase “our economy had 0% inflation in July.” So it wasn’t a misstatement. It’s the actual spin. And it’s so misleading I don’t even know where to begin to describe how misleading it is.
That’s not to say that there wasn’t good news. Prices of some things eased in July, like energy, especially. Sure, it’s strange to feel a sense of relief when paying $3.34 per gallon, but it’s a lot better than paying the $4.69 I paid to fill my tank in late June. But if the Consumer Price Index went unchanged in July — likely how the administration is spinning “zero percent inflation” — while gasoline fell 7.7% from the previous month, something else had to increase for the index itself not to fall.
That, at least, was acknowledged by the White House, and indeed, the price increases offset by falling energy prices included food, medical care, shelter, and new vehicles — what they call “Core CPI,” or all items minus food and energy. While the increase was smaller than previous months, a good thing, the Core CPI still ticked up by 0.3% from the previous month.
What the administration conveniently left out of their announcement about inflation was that inflation is typically measured over the course of a 12-month period. And while it wasn’t quite as atrocious as the figure recorded in June, when consumer prices were found to have increased by 9.1% since June of the previous year, the 8.5% rate reported for July still shows that consumer prices in America are significantly higher than they were one year ago — hardly the rosy picture painted for us with the phrase “zero percent inflation.”
The Biden administration seems to have gotten used to telling us things about our economic health and welfare that aren’t exactly accurate. Last December, the president told us that inflation was at its “peak” and would soon fall. At the time, inflation was 6.8% and would spend the next seven months continuing to rise, with only one exception of a slight dip in April. Last month, the White House made a detailed case to the American people that the United States is not in a recession, even though the widely accepted definition of a recession is two straight quarters of negative GDP growth, which, sadly, was the case for the first six months of 2022.
Their quest to get us to believe things that aren’t exactly true will continue as they look to enact the Inflation Reduction Act of 2022, which passed the Senate last week with the long-sought assent of the two remaining Democratic holdouts. The first thing that isn’t true: the name, which implies that it might … well, reduce inflation. It probably won’t, according to a model from the University of Pennsylvania’s Wharton School of Business, which estimates that “impact on inflation is statistically indistinguishable from zero.”
Other claims, like deficit reduction, aren’t outright false, but whether or not they are true will only be known over time — lots of it — and future legislation. In the same Penn Wharton Budget Model, the projected deficit reductions vary significantly based on whether or not the temporary Affordable Care Act subsidies that the bill extends for two years are in fact made permanent later on. As written, the model estimates, cumulative deficits could drop by $248 billion. Should the ACA subsidies continue to be extended, that estimate drops to $89 billion by 2031. By then, myriad other factors could have just of strong as an influence on the actual reduction. Regardless, either of the current deficit reduction projections are already dwarfed by new spending, which totals well over $400 billion.
That’s a lot of money, and we’re going to need revenue to pay for it, which brings me to another mistruth, straight from President Biden himself: “Nobody making under 400,000 bucks would have their taxes raised, period, bingo.”
President Biden’s campaign pledge, made in May of 2020 while he was still working to clinch the Democratic nomination for President, was in doubt long before the IRA or its previous form of gargantuan spending, the deceptively-named Build Back Better, were introduced. Leonard Burman, co-founder of the Urban-Brookings Tax Policy Center, wrote in March 2021 that it is “algebraically impossible to replace an irrational tax system with a rational one that raises the same amount of money without raising taxes on many households. Some — and probably many — would have incomes under $400,000.”
Promises to lower, or at the very least not raise taxes are very popular in campaigns and elections. Most voters from the late 1980s will remember the famous line “Read my lips: No new taxes” from George H.W. Bush’s infamous speech at the 1988 Republican National Convention. 22 months after taking office, President Bush signed the Omnibus Budget Reconciliation Act of 1990. Not shockingly, it raised taxes.
Blanket promises about taxes are unwise. Along with Bush’s, Biden’s illustrates why. As Berman pointed out in his same article, adhering to such a promise drastically reduces a president’s ability to carry out any big policy items. Many voters, not all of them Republicans or libertarians, would be just fine with the idea of big government policy being placed on the back burner in order to keep such a serious promise. But living as we do in the land of reality, we know that politicians aren’t elected to not do things. They show up with an agenda and the urgency to enact it, doing so requires money — about $725 billion this time. It’s hard to avoid tax increases on the middle class when your agenda requires that kind of cash.
The Inflation Reduction Act doesn’t avoid those tax increases, as one can conclude from an analysis by the Joint Committee on Taxation. According to their table for the calendar year 2023, Americans making $100,000 or less per year before the IRA’s passage would have been projected to pay a combined $655 billion in federal taxes. Under the new law, that combined tax burden jumps to $661 billion in the same year. Each subsequent year in the JCT’s table shows that Americans in all income ranges, including at or less than $100,000, are projected to pay slightly more. Upon signing into law, the promise to not raise taxes on Americans making less than $400,000 per year will be broken.
We’re not in a recession. Inflation is at zero. Only the wealthy will see their taxes go up. It’s a whole lot of nonsense from an administration that needs you to feel like their policies are winners so that they can hang onto their razor-thin legislative majority after this year. Will voters in turn give them another win? The polls and pundits don’t necessarily think so. But regardless of which party controls the Senate or who holds the Speaker’s gavel, the Inflation Reduction Act is a loss for taxpayers. no amount of spin can change that — period, bingo.
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