Washington’s Fight Against Inflation

What you saw in the stock market yesterday is that Washington has no answer to the problem of inflation. It makes you more and more depressed. As Zero Hedge said, the inflation rate for 27 consecutive months was higher than the previous month. For many people on Wall Street, this price rise seems to be endless. To make matters worse, the president seems to have no clue.

After taking office, Joe Biden kept his promise on price stability, but failed to deliver. His economic policies are particularly depressing. His oil war was particularly hurtful. I just need to mention the cancellation of Keystone XL pipeline, the extension and cancellation of all federal land leases, especially the Russian oil embargo. These actions have directly pushed up the oil and gas prices of American consumers. Energy is the single most important factor in this inflation.

As President, Joe Biden made four important economic legislation pass Parliament and become law. Let’s take a brief look at each of them and pay special attention to their impact on inflation.

The first Central Economic Act is the American rescue plan signed by law in 2021. Most economists believe that this is the most extensive direct social welfare plan since the great society of Lyndon Johnson in the 1960s. The bill gives most of us a check for $1400. I was surprised when I received it by mail.

But no matter how well you think about it. There is no doubt that this is an important reason for the rise in inflation. It spent 1.9 trillion US dollars, which is part of the 5 trillion US dollars increase in the money supply we discussed. In my opinion, this baseless printing of money is the main cause of inflation today.

The following two symbolic economic legislation are very similar, and we will discuss them together. Both have very long-term goals. Although commendable, I think you will agree that this has little impact on today’s economy.

The first is the Chip and Science Act. It involves the number of semiconductor chips produced overseas. The bill will fund research and development in science and technology. The second bill is the Infrastructure Investment and Jobs Act. The bill will help the United States rebuild infrastructure, roads, railways, water conservancy facilities, etc. The bill is another long-term plan that will take years.

So I grade these two projects: the Chip and Science Act and the Infrastructure and Employment Act are basically neutral. Depending on the effective implementation, there may be some help in the future. But when federal spending went wrong, they did increase it.

No matter how you distinguish them, neither of these two bills will help reduce today’s inflation.

Now let’s take a look at the final economic legislation of the Biden administration. The law with the perfect name: the Inflation Reduction Act. It was passed in less than a month, which seems to be the answer to all our questions. Whoever came up with this title knows how to hit our popularity button.

Unfortunately, if there is legislation that does not fit the subject, it is it. The bill consists of two health insurance, one environment and two taxes.

For the two components of health insurance, today’s inflation does not come from medical expenses. Yes, medical expenses are rising, but all medical expenses add up to less than one tenth of the impact of food and energy. Therefore, although medical subsidies can bring some downstream benefits, they are insignificant. This has no real impact on curbing today’s inflation.

The next provision of the Inflation Reduction Act is environmental. As you think, this is all the necessary green energy subsidies you expect.

But the following rule is that all oil and gas companies do not like the requirement of reducing carbon emissions. I haven’t seen the final version of this part of the bill. However, as far as the punishment degree of traditional fossil fuel production is concerned, this part of the bill may further increase the standard energy cost and increase inflation.

Finally, the bill provides two ways to raise taxes, or raise taxes as Washington likes to say.

First of all, more funds have been provided to the Office of National Taxation. As I have read, there are more funds available to hire more than 80000 new IRS officials.

The second part is the increase of corporate tax.

I can’t see how any of them can effectively fight against inflation. Enterprises and individuals regard tax evasion as a priority over new business development, so they can curb business activities.

Therefore, if I rate these three symbolic provisions of Biden’s Economic Legislation, I will call them a big mistake. This is not only because fighting inflation is likely to be inefficient. Because he didn’t even try. Once the topic is passed, you will find Biden’s pet project, green subsidy, new version of Obama care, and pork project meeting the requirements of local voters.

Don’t expect to be ignored.

Wall Street is getting more and more depressed. More and more people believe that President Lee has no clue in combating the overall economic policy, especially inflation.