Hawkeye Reporter

Iowans for Tax Relief policy director John Hendrickson said proposals to increase spending and raise taxes by President Joe Biden and Democrats in Congress are a disaster waiting to happen and must be halted before the economy is wrecked.

“The current Build Back Better agenda that is being advocated by President Biden and Democrats in Congress is dangerous,” Hendrickson told Hawkeye Reporter. “The $3.5 trillion ‘human infrastructure’ bill [total amount yet to be determined] would not only increase taxes that would hurt the economy, but it would also revolutionize the welfare/entitlement state and it would force more people not to work.”

Sen. Joe Manchin (D-W.Va.) has criticized the massive spending bill saying, “Congress should proceed with caution on any additional spending and I will not vote for a reckless expansion of government programs. No op-ed from a self-declared independent socialist is going to change that.”

Iowa Gov. Kim Reynolds. | Photo Courtesy of Governor's Office

The latter statement was in clear reference to recent criticism from Sen. Bernie Sanders (I-Vt.). 

“Millions of jobs are open, supply chains are strained and unavoidable inflation taxes are draining workers’ hard-earned wages as the price of gasoline and groceries continues to climb,” Manchin said.

As Democrats in Washington continue to debate the contents of Biden’s massive social welfare spending package, infighting could complicate a looming Oct. 31 deadline to pass the bill according to the Washington Examiner.

Hendrickson said Hawkeye State residents don’t need further inflationary woes.

“President Biden and Democrats have said that this plan will cost ‘zero’ and that inflation is a ‘high-class’ problem,” he said. “Iowans are experiencing this inflation regardless of their income level. This is especially true for lower- and middle-class Iowans who are paying more for groceries and gasoline. Inflation is dangerous and it is a hidden tax.

“As people pay more for groceries, gasoline and other necessities it makes it more difficult to save. In addition, inflation destroys savings,” Hendrickson said. “Iowa is already struggling with finding people to fill jobs and this proposal would discourage people from working and create greater labor shortages. The tax increases would also be harmful.”

According to an Oct. 13 report from the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 5.4% over the last 12 months, ending in September 2021.

The consequence is increased costs of living everywhere for Americans. The Bureau of Labor Statistics’ Consumer Price Index (CPI) reported notable upticks over the past 12 months on items particularly important to average U.S. households, including food (up 4.6%) and energy ( up 24.8%). 

In what they deem the “inflation tax” the Wall Street Journal editorial board points out that “workers are paying the price” for increased costs since “real hourly earnings are down 1.9% since January.”

Jason Furman, who was chairman of the Council of Economic Advisors during the Obama administration and is currently a Harvard economist, says inflation has eaten up all of the wage gains for Americans going back to the Donald Trump administration.

Biden has called this current period of inflation and price spikes “temporary,” according to Reuters.

The Wall Street Journal recently reported that officials at the Federal Reserve see “‘transitory’ inflation lasting quite a while.”

“This inflation is being fueled by the out-of-control spending,” Hendrickson said. “The federal government cannot continue to spend trillions. The debt is approaching $30 trillion. President Biden and Democrats seem to think they can repeal the laws of economics.”

Some close advisers to Biden have indicated they do not think rising prices and inflation affect the average citizen.

As reported by Fox News and others, chief of staff Ronald Klein shared a Twitter post with the comment “This” and two downward-pointing emojis that called inflation a “high-class problem.” Republican National Committee rapid response director Tommy Pigott replied, "Struggling to pay for food, fuel, and housing because of rising prices is not a ‘high class problem. Biden is making everyone worse off, but instead of stopping the damage, their strategy is to try to gaslight Americans."

Some economic commentators and analysts have expressed concern about the impact that increased, sizable government spending could have on the economy.

A study published in the Cato Journal by the Cato Institute concluded that reckless spending through increasing American debts contributes to inflation considerably and will cause numerous economic issues in the months and years to come if nothing is done.

During a recent Fox Business segment, financial commentator and former Trump administration official Larry Kudlow explained how he believes increased government spending, like the one currently proposed, will negatively impact the economy.

“First, government spending brings government regulation,” Kudlow argued. “This regulatory avalanche will choke off business activity of all kinds,” creating what he calls a “supply side obstacle.”

Kudlow also said increased entitlements will dampen productivity and reduce the incentive to work.

Hendrickson noted his state is setting an example that Biden and congressional Democrats should follow.

“Iowa’s economy is doing well,” he said. “The budget has a $1.24 billion surplus and recent revenue projections show strong revenue growth. Iowa's economy is growing. Gov. Kim Reynolds and President Biden offer two very contrasting views of government. President Biden should learn from Gov. Reynolds that following a policy of fiscal conservatism works. Prudent budgeting and lowering tax rates create economic growth and it has resulted in a strong and stable financial foundation for Iowa. “he tax and spend agenda does not work.”

A recent economic white paper by the Niskanen Center, a non-partisan think tank working to promote and open society, echoes concerns that increased government spending on entitlements and subsidies can lead to increased prices and what they call “cost disease socialism.”

Steven Teles, Samuel Hammond, and Daniel Takash authored the September 2021 paper where they acknowledge that while “soaring costs have blown a hole in the budgets of the working and the middle classes, offsetting the full benefits of a growing economy” some of the solutions proposed by progressive politicians such as “simply socializing the costs and blowing an equally large hole in the federal debt is not a sustainable alternative.”

Teles, Hammond, and Takash find that “the root cause of escalating costs is overwhelmingly regulatory, rather than budgetary,” and that “shifting costs onto the public would not only fail to fix the underlying problem it could also make cost disease substantially worse” resulting in a “vicious cycle in which subsidies for supply-constrained goods or services merely push up prices, necessitating greater subsidies, which then push up prices, ad infinitum.”