Of course, the Penn-Wharton study has been much discussed this past week and it concluded that the bill would increase inflation. As did over 230 economists from the University of Chicago, Notre Dame, Virginia, Princeton, Columbia, Duke, et al.
And as Marc Thiessen succinctly sums up here, the Joint Committee on Taxation found that the bill would “raise taxes on Americans earning less than $200,000 to the tune of $16.7 billion in 2023 and would generate $14.1 billion from those making between $200,000 and $500,000 a year.”
So pretty much every economist that does not specifically write for the NYT or work for CNN is against this bill. Why? Well it goes against everything Econ 101 suggests. We are raising taxes during an economic down turn in order to raise government spending during record inflation. This would be akin to someone suffering from sunburn washing off all of their sunscreen so that they can then go out and stand in direct sunlight for eight hours straight to fix the sunburn problems. I mean it literally makes that little sense.
So "why" (one might ask) are the Democrats doing this? I can think of four reasons
- They believe it will help motivate their base for the 2022 election.
- This is likely their last chance for quite some time to tax and spend.
- The bill includes pork projects that have bribed certain endangered Democrats.
- They are just really stupid.
I am not discounting the concept that some of these Democrats might actually believe their own nonsense. These are probably the same people who steadfastly believe that the economic problems we have now have nothing to do with the Democratic led Covid lockdowns or the 6 trillion in spending that Democrats (and certain Republicans) have pushed through.
This is sort of like that old Paul Krugman argument we have seen for years. When things are poor because of Keynesian economic policies (as they generally are), he just argues that they would have been worse without them (or we needed to double down and spend more). When things are better because we are not using Keynesian economic policies (as they invariably are), he just argues that they would have been even better had we used them. You can literally never be wrong if you think that way.
This is sort of like that old Paul Krugman argument we have seen for years. When things are poor because of Keynesian economic policies (as they generally are), he just argues that they would have been worse without them (or we needed to double down and spend more). When things are better because we are not using Keynesian economic policies (as they invariably are), he just argues that they would have been even better had we used them. You can literally never be wrong if you think that way.
However, the "we didn't spend enough" is an argument that goes away when you toss in 6 trillion to the existing economy in just over a year. There is no "more than that". We spend 6 trillion and pretty much everything has gotten worse at an economic time when we were set up for a huge natural recovery. Spending several hundred more billion while taxing corporations and the middle class is just going to make it even worse. It pushes out our problems even further. How much further remains to be seen.
