FOX Business host Larry Kudlow expresses concern about government spending and weighs in on the Inflation Reduction Act in ‘Kudlow.’
Save America. Kill the bill. The bill, of course, is the Schumer-Manchin Reconciliation Bill. Killing him will not be easy, but we will continue to do our best in terms of policy.
The more we learn about this bill, the less everyone seems to like it. The “Inflation Reduction Act” doesn’t appear to have much of an inflation reduction, based on the Penn-Wharton budget model.
It is not a supply side model, but its results suggest that the impact on inflation is statistically indistinguishable from zero. Let me say that there is never an automatic link between budget deficits and inflation anyway. So, to begin with, I never bought that argument.
The main cause of inflation is too easy money and in this current cycle too much federal spending has also contributed, but one of the killers of the economy besides skyrocketing inflation is Biden’s awakened regulatory throttling of the economy , beginning with fossil fuels, but continuing through virtually every business and industry.
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President Joe Biden addresses the 76th session of the UN General Assembly on September 21, 2021, in New York City. (Photo by Timothy A. Clary-Pool/Getty Images/Getty Images)
Biden slapped $200 billion in regulatory costs in his first year alone. That’s more important than a bunch of bogus accounting tricks designed to shrink the budget deficit for a couple of years.
If you look at the reconciliation, there’s a $739 billion tax increase and $433 billion in spending, but the Obamacare spending only qualifies for three years. Over 10 years it’s going to be over $200 billion, so it takes away about $150 billion in so-called deficit reduction and the idea that we’re going to give the IRS another $80 billion that’s going to bring in another $124 billion in tax revenue, that game is tried over and over again, and fails over and over again, and is just one more bogus nonsense.
Additionally, energy loans and loan guarantees qualify as interest-bearing assets that make a lot of money. Good luck with that. Do you remember Solyndra? Or how did those student loans work? But the big surprise is that the deficit reduction crowd forgot to add the $280 billion CHIPS+ bill that had no payments.
I’m sure it’s just an oversight, but all of a sudden when you count the actions of Congress last week, there’s almost $900 billion in spending against $740 billion in revenue, which looks like a shortfall to me.
Please feel free to check my calculations, but more importantly is this whole idea that spending 100% of business investment is a tax loophole. It is not. The reason taxable income is lower than countable income for corporations is that you can deduct by law, by intent, in the 2017 Trump tax cuts, to allow immediate bonus deductions for new plants, equipment, technology, etc.
This was done to make America more competitive, to increase productivity and real wages and typical family income on purpose, along with lowering the tax rate from 35% to 21%.
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Former Reagan economist Art Laffer discusses the impact of the Inflation Reduction Act on economic growth and how the Federal Reserve is handling inflation.
Those were the twin pillars of the supply-side business tax cut and it worked. Median earnings skyrocketed. Unemployment collapsed. Poverty fell. Inequality fell and there was no inflation and, abstracting from the closure of the pandemic, it was paid only when the Laffer curve was activated.
Schumer’s reconciliation bill would stop the surge in business investment. Big mistake ! And, because 70% of the corporate tax burden is borne by blue-collar workers, establishing an alternative minimum tax of 15% on countable income will lead to general tax increases.
According to the Joint Committee on Taxation, which is no friend of supporters of the offer, 50% of the minimum tax burden would fall on manufacturers. By the way, today’s ISM report for manufacturing fell to its lowest level since June 2020, but then to varying degrees all other industries will take on tax increases, including a 7.2% tax increase on the coal and a $25 billion tax increase on oil. , and for fossil fuels in general and, get this, there’s an exception for Green New Deal tax credits. There is a surprise!
There is also an exception for a refundable tax credit on semiconductors, although the chip industry will be hit hard by the minimum 15% corporate tax. What one hand gives, the other hand takes away.
A few other tidbits, again from the Joint Committee on Taxation: People making less than $10,000 a year will be hit the hardest with a 3.1% tax increase. People between $20,000 and $30,000 will have a 1.1% tax increase. People with less than $100k will get a $6 billion tax increase. People making less than $200k a year will get a $17 billion tax increase.
So almost everyone gets a tax increase. What a joy! Just like Christmas in August. Great things.
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Former Chairman of the Council of Economic Advisers Kevin Hassett discusses the President’s Inflation Reduction Act in ‘Cavuto: Coast to Coast.’
Here is a multiple choice question: Will this tax increase make the economy A) more rising, or B) more recessive? If you answered B, you win the lottery. Next question: Approximately $900 billion in additional spending will result in: A) higher inflation, or B) lower inflation? If you answered B, you also win the lottery.
But after taxes, after…inflation base, lotteries are not worth what they used to. For God’s sake, he saves America, ends the bill.
This article is adapted from Larry Kudlow’s opening commentary in the August 1, 2022, issue of “Kudlow.”