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Economists Letter to the U.S. Congress on the “Inflation Reduction Act of 2022”

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By Robert Bradley Jr.

“… we agree with the urgent need to reduce inflation, but the ‘Inflation Reduction Act of 2022’ is a misleading label applied to a bill that would likely achieve the exact opposite effect.”

Philosophic fraud is a term to describe purposeful misdirection. It may not be prosecutable, but it is strategic deceit.

I was reminded of this upon reading (and signing) the Economists Letter on the $739 billion Inflation Reduction Act of 2022, which is scheduled for a vote tomorrow (Saturday). It’s all a rush with a bill so huge and laden with so many special interest giveaways.

The letter follows:

Dear Leader Schumer, Leader McConnell, Speaker Pelosi, and Leader McCarty,

The U.S. economy is at a dangerous crossroads. Forty-year high inflation is causing immense strain for households and small businesses, and it is prompting steep interest rate hikes that, while necessary to counter fiscal policy excesses, increase the chance of a deepening recession.

As such, taming inflation must be the top short-term economic priority to avoid further economic decline and hardship. Unfortunately, the inaptly named “Inflation Reduction Act of 2022” would do nothing to the sort and instead would perpetuate the same fiscal policy errors that have helped precipitate the current troubling economic climate.

At a time when the economy already faces supply/demand imbalances, the residual effects of stimulus, labor shortages, and supply chain disruptions, this bill would compound rather than alleviate many of these problems.

In particular, its $433 billion in proposed government spending would create immediate inflation pressures by boosting demand, which the supply-side tax hikes would constrain supply by discouraging investment draining the private sector of much-need resources.

Of particular concern, the corporate minimum tax would fall heavily on capital-intensive manufacturing, thereby undercutting efforts to shore up the resilience of America’s supply chains.

In addition, the prescription drug provisions would impose price controls that threaten healthcare innovation, creating a human health toll that would add to the financial woes that Americans are already experiencing. Even the one superficially appealing aspect of the bill–deficit reduction–is likely to prove illusory due to implausible spending phaseouts.

In summary we agree with the urgent need to reduce inflation, but the “Inflation Reduction Act of 2022” is a misleading label applied to a bill that would likely achieve the exact opposite effect.

Sincerely, [200+ economists]

Final Comment

Many of us in the energy/climate policy debate are stunned to see defeat snatched from the jaws of victory (think where we were two weeks ago!) with the likely passage of a Big Government bonanza, aided at many steps by a corporate sector that has failed the citizenry at every turn.

In the face of this setback, I am reminded of this quotation from the dean of 20th century economics, Ludwig von Mises:

Occasionally I entertained the hope that my writings would bear practical fruit and show the way for policy. Constantly I have been looking for evidence of a change in ideology. But I have never allowed myself to be deceived. I have come to realize that my theories explain the degeneration of a great civilization; they do not prevent it. I set out to be a reformer, but only became the historian of decline. [1]

Throwing good money after bad with energy/climate, in particular, makes the waste and futility of the anti-CO2 crusade that much worse–and when the world is going in a different direction. And it ups the ante for policy reform, which needs to be radical, such as abolishing whole agencies like the U.S. Department of Energy as part of a sweeping effort to reestablish fiscal discipline and free the economy.

——————

[1] Mises, Notes and Recollections (1978), p. 115. This was Mises’s autobiography, which was given this subtitle by his friend Henry Hazlitt: “Ordeal of an Economist.”

The post Economists Letter to the U.S. Congress on the “Inflation Reduction Act of 2022” appeared first on Master Resource.

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August 5, 2022

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