August 1, 2022
Despite the Biden administration’s denials, the U.S. economy is officially in a recession. For sixty-plus years, economists and political pundits defined a recession as two consecutive quarters of negative growth. The U.S. economy shrank 1.6% in the first quarter. The second saw a .9% contraction.
The administration’s attempts to redefine the word recession is a shameful effort to conceal the truth. But this is business as usual for President Biden and his fellow Democrats- their version of “truth” is whatever is most expedient to advance the Democratic agenda.
When economists and Republican lawmakers warned that passing a $1.9 trillion welfare expansion bill disguised as Covid relief would cause inflation, Democrats scoffed at the idea, passing the bill without support from a single Republican. Summer 2021, when inflation began to tick up, the administration’s talking point became higher prices were indicative of a healthy economy. Inflation then became “Putin’s price hike” before becoming “transitory”.
To date, the Biden administration accepts zero responsibility for harming the financial well-being of Americans. During the 2020 presidential campaign, Biden tweeted that he would “take responsibility” and not “blame others” if elected president. Like most of Biden’s rhetoric, these words were meaningless.
We now know that the claims about inflation and the economy Biden and many Democratic lawmakers made were wrong. No doubt the inaccuracies are not just incompetence but dishonesty as well.
How else to explain that during 40-year-high inflation and a recession, Democrats are aiming to pass a massive tax and spending bill calling it the Orwellian “Inflation Reduction Act of 2022”?
The bill consists of $433 billion in new spending on climate, healthcare, and 80,000 additional IRS agents, $451 billion in new taxes, and $288 billion in purported prescription drug savings. The so-called savings come from allowing Medicare to negotiate the price of some drugs. Except it is not a negotiation – if a drug manufacturer does not agree to the government’s set price, they are hit with a 95% excise tax on the total revenue of the drug.
Reducing drug prices sounds like a good idea. However, like most of the Democrats’ “good intentions” drug price controls would have negative consequences. For one, prices may increase as pharmaceutical companies will be less likely to invest in developing cheaper generic drugs.
The bill will also disincentivize drug makers from developing breakthrough drugs. U.S. drug manufacturers spend far more than any other nation on research and development. As a result, the U.S. is the world leader in producing new medicines. On average, it takes ten years and costs $2.6 billion to develop a new drug. If there is little to no chance of significantly profiting from their investment, companies will stop taking this enormous financial risk. So much for finding a cure for cancer or Alzheimers.
The majority of the new taxes in the Democrats’ bill come from the proposed 15% minimum income tax on corporations with profits over one billion. A long-held criticism from the left about large corporations is that some pay little to no taxes. However, some companies pay a low rate because of legal tax credits and deductions designed to incentivize certain behaviors.
For instance, corporations are given credits for worker pensions and deductions for research and development -behaviors that benefit employees and American society. Hence this new tax will make advantageous corporate behavior and business investment in general more expensive, disincentivizing both.
Numerous analyses prove what the left does not want anyone to know- corporations do not pay taxes, they only collect them, people pay the cost of corporate taxes. According to the Tax Foundation, imposing a 15% minimum tax on corporations will reduce GDP by 0.1% and cost about 27,000 jobs.
This bill also gives the lie to Biden’s long-held promise that he will not raise taxes on anyone earning under $400,000. An analysis by the non-partisan Joint Committee on Taxation found that under the bill, taxes will spike by $16.7 billion on American workers earning less than $200,000 in 2023. The JCT also concludes that:
“By 2031, when the new green energy credits and subsidies provide an even greater benefit to those at higher incomes, those earning below $400,000 are projected to bear as much as two-thirds of the burden of the additional tax revenue collected this year.”
The ridiculously named Inflation Reduction Act also does not reduce inflation. The Penn Wharton Budget Model found, “The Act would very slightly increase inflation until 2024 and decrease inflation thereafter.” However, they add, “These point estimates are statistically indistinguishable from zero, thereby indicating low confidence that the legislation will have any impact on inflation.” In other words, the Inflation Reduction Act is based on a lie. Reality- it is a disguised slimmed-down version of Build Back Better.
Unfortunately, the Inflation Reduction Act stands a good chance of passing. Using the legislative process called “reconciliation”, Democrats only need 50 votes to pass the bill in the Senate, which they appear to have with the announced support of West Virginia Senator Joe Manchin.
One possible holdout, moderate Democrat Arizona Senator Krysten Sinema, has not publicly commented on the bill. However, Sinema is on record approving of both a 15% minimum corporate tax rate and allowing Medicare to negotiate certain drug prices.
CHIPS and Science Act
Senate Minority leader Mitch McConnell had vowed to hold the $280 billion CHIPS and Science Act (legislation to boost U.S. semiconductor manufacturing) hostage if Democrats tried to pass their climate spending agenda. Believing Senator Manchin’s assertion that he would not support any version of Build Back Better, Senate Republicans helped to pass the CHIP Act. Republicans were played.
Hours after 17 Senate Republicans voted with Democrats to pass the corporate welfare bill for semiconductor companies, Manchin announced he reached a deal with Senate Majority Leader Chuck Schumer on the tax and spend reconciliation bill. Defying House Minority Leader Kevin McCarthy, who advised his members to vote against the measure, 24 House Republicans also joined Democrats in supporting the bill.
Republicans Throw Biden a Lifeline
Republicans now have neither leverage nor political tools to stop the tax and spend reconciliation bill from passing into law. This bill will not only harm our nation’s economy and health care but will give the failing Biden a much-needed political win.
Biden inherited a rebounding economy, expanding at 6% with inflation at 1.4%. A mere year and a half later, inflation is 9.1%, and the economy is officially in a recession. Further, Gallup polling indicates Biden has the lowest approval rating of all presidents since Eisenhower at this point in the presidency. November midterm elections should be a rout for the Democratic Party.
Unfortunately, the Republican party has thrown Biden a lifeline. If the CHIPS Act and the reconciliation bill both pass into law, Democrats will head into the midterms with two significant wins for their party.
Only Republicans snatch defeat from the jaws of victory.
Remember these names when they are up for re-election:
The 17 GOP Senators who voted for the CHIPS and Science Act:
Blunt (MO), Burr (NC), Capito (WV), Cassidy (LA), Collins (ME), Cornyn (TX), Daines (MT), Graham (SC), Hagerty (TN), McConnell (KY), Moran ( KS), Portman (OH), Romney (UT), Sasse (NE), Tillis (NC), Wicker (MS), Young (IN)
The 24 House Republicans who voted for CHIPS Act bucking Rep. Kevin, the House minority leader, who advised them all to vote against the measure:
Reps. Jim Baird (Ind.), Troy Balderson (Ohio), Mike Carey (Ohio), Steve Chabot (Ohio), Liz Cheney (Wyo.), Tom Cole (Okla.), Rodney Davis (Ill.), Brian Fitzpatrick (Pa.), Mike Garcia (Calif.), Bob Gibbs (Ohio), Anthony Gonzalez (Ohio), Kay Granger (Texas), Trey Hollingsworth (Ind.), Chris Jacobs (N.Y.), Bill Johnson (Ohio), Dave Joyce (Ohio), John Katko (N.Y.), Young Kim (Calif.), Adam Kinzinger (Ill.), Michael McCaul (Texas), David McKinley (W.Va.), Peter Meijer (Mich.), Michael Turner (Ohio) and Fred Upton (Mich.).
