Pragmatically recognizing that they will lose their control of the Congress — at least the House — in the 2022 midterms, Dems are attempting desperate Hail Mary passes to push through as many uber-progressive legislative packages with the narrowest margin in decades by applying a simple majority Senate budget reconciliation vote.
The Senate membership is split 50-50, with Vice President Kamala Harris representing a possible Democrat tie breaker.
Buried under that tall stack of pork-larded kitchen sink spending proposals are more than $3 trillion in tax increases.
As Democrat Senate Majority Leader Chuck Schumer recently crowed: “Every major program that President Biden has asked for is funded in a robust way.”
But that “funded” claim is very far remote from true.
The proposed $4.1 trillion (and counting) Democrat/Biden administration’s cradle-to-grave social engineering plan would grow government debt without coming anywhere close to raising enough revenue to pay for it other than through deceptive economy-crunching tax increases and inflation (another form of taxation.)
For starters, the Biden budget bust proposes to spend 24.5% of gross domestic product on average over the next 10 years. A previous 2009 single-year post-World War II record before the pandemic was 24.4%, with a 50-year average closer to 20%.
Meanwhile, federal government revenues are projected to rise only to 19.7% of GDP by the end of that 10-year budget period, just below the record share of 20% in 2000 during the dot-com boom. This gap reflects additional pressure on debt even as rising deficits from the Social Security and Medicare already head toward exhaustion.
The Democrat plan would add $300 billion to Medicare entitlements which will expand automatically without requiring an annual appropriation by Congress.
And oh yes, Biden has also proposed to reduce the Social Security eligibility age to 62.
Nevertheless, Joe Biden has supposedly comforted us to say: “These steps will enhance our productivity — raising wages without raising prices. That won’t increase inflation. It will take pressure off inflation, give a boost to our workforce, which leads to lower prices in the years ahead.”
Besides, as he explained on July 20, “Our experts believe, and the data shows that most of the price increases we’ve seen are — were expected and expected to be temporary.”
Biden added that his spending plan will actually keep inflation in check: “If we increase the availability of quality, affordable child care, elder care, paid leave, more people will enter the workforce.”
So, how’s that working out so far with enhanced COVID-relief federal employment subsidies that require no obligation to work?
In other words, don’t believe your lyin’ eyes … there’s really nothing to see here.
Many small business owners who have taken big hits, for example, are likely to disagree.
Under pressure to raise commodity and service prices because their own costs are rising — especially for labor — some 46% of them reported job openings that couldn’t be filled last month. This occurred in large part due to market distortion caused by excessive jobless benefits that exceed what people can make by working.
Those price increases contributed to a June drop in real average earnings by 0.5%, down 1.7% in the past year. If real wages continue to fall, workers will predictably demand higher pay untied to productivity increases, which will further increase inflationary pressures.
In addition, the consumer price index (CPI) rose 0.9% in June, up 5.4% from a year earlier. This monthly increase was nearly twice what economic forecasters predicted.
Used car and truck prices were up 10.5% during the month, accounting for about half of the CPI increase, and pump costs have already climbed 30% this year.
The Biden White House budget office had originally forecast inflation of 2.1% in 2021 and 2022, and in March, federal officials set their prediction for 2021 at 3%.
Yet at its June monetary meeting, the Federal Reserve, which had underestimated inflation at each of its meetings this year, announced that consumer prices had increased by 5.4% over a year ago.
The Labor Department confirmed in June that the 5.4% so-called “core price index” rise since last year accounted for the highest 12-month change rate since August 2008…the fastest pace in 13 years. That June index excluded the often-volatile categories of food and energy which rose 4.5% from a year before.
So, is this inflation rise simply transient and temporary?
Don’t be too sure.
According to Federal Reserve Chairman Jerome Powell: “This particular inflation is just unique in history.”
“We are humble about what we understand,” Powell admitted to the Senate Banking Committee.
As the government continues to pile up debt, the current federal budget trajectory is on course for a second $3 trillion deficit in a row.
The Congressional Budget Office (CBO) projects that, if approved, all those Democrat new-spending dollars would enlarge the federal debt, which skyrocketed past the ominous level of 100% of Gross Domestic Product during the 2020 pandemic year, to an economically fatal 195% of GDP by mid-century.
The Democrat solution?
Let those “rich people” pay for the increases by raising the nominal capital gains tax rate from the current 20% to 39.6%, plus add an extra 3.8% Obamacare and Medicare entitlement charge and also extend Medicaid benefits to millions of future Democrat-voting illegal open southern border crashers.
Who, exactly, are those rich folks?
Many are corporate shareholders who pay a double tax, since the money is taxed at the corporate level before being remitted to them. And lots of them are investors who live in places like California and New York City, where the combined federal, state, and local tax rates would reach 56% and 58%.
The Biden proposal will hit families with average incomes as well as the wealthy. Like, for example, a household that invests in and holds an asset that “appreciates” in inflation value over decades even if its real value stays the same.
Since under Biden’s proposal, someone who inherits assets of more than $1 million would be required to pay capital gains taxes on the full appreciation after they inherit the property, at time of sale the taxed sticker price value might easily push that recipient into a high capital gains bracket.
Altogether, the Dem’s Marxist Bernie Sanders-Elizabeth Warren-AOC wing asks us to believe that government can continue to borrow, print and spend money without reducing its value through inflated prices we then must pay for products and services.
Here’s a better idea.
Why not maybe spend less so that more money stretches farther?
After all, a few trillion not blown away here — another there, and pretty soon were talking about saving our kids and theirs some real money.
Larry Bell is an endowed professor of space architecture at the University of Houston where he founded Sasakawa International Center for Space Architecture and the graduate space architecture program. His latest of 10 books, "What Makes Humans Truly Exceptional," (2021) is available on Amazon along with all others. Read Larry Bell's Reports — More Here
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