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Everywhere Americans look necessities are getting more expensive. Gas, food, electricity and other materials that households require to work and live are becoming unaffordable, thanks to rising inflation and cost of goods as wages struggle to keep up.
The nation's inflation problem, critics charge, is inflamed by massive spending on the table in Washington. As Democrats continue to debate the contents of President Joe Biden’s massive social welfare spending package, infighting could complicate a looming Oct. 31 deadline to pass the bill, according to the Washington Examiner.
Vance Ginn, chief economist for the Texas Public Policy Foundation (TPPF), told Houston Daily that Biden's multitrillion dollar spending packages could continue to raise prices over the next decade while slowing down economic growth.
Through an analysis co-authored with the Committee to Unleash Prosperity, the TPPF found that Biden's "Build Back Better" plan will cause the loss of $3.7 trillion in GDP growth over the next decade compared to baseline GDP and an estimated loss of 5.3 million jobs across the country.
"That breaks down to a loss of $12,000 in real median household income," Ginn said. "Meaning inflation-adjusted household income will be $12,000 less over a decade. These are substantial costs not only to America as a whole, but in particular to families."
The analysis studied impacts on a per-state basis, too. Texas, the TPPF found, is expected to shoulder $394 billion of the new debt with an estimated 467,000 jobs lost.
The most hard-hit industries are likely to be the gas and oil sectors, as well as transportation and manufacturing. Family farms could also take a hit if the step-up basis tax rule is eliminated.
"This is also a substantial cost to families across the state of Texas," Ginn said.
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 CPI reported notable upticks over the past 12 months on items particularly important to average American households such as food (up 4.6%) and energy (up 24.8%).
Economic commentators and analysts are concerned about the impact that increased, sizable government spending could have on the economy. A recent study published in the Cato Journal by the Cato Institute concluded that reckless spending through increasing American debts contributes to inflation and will cause numerous economic problems in the months and years to come if nothing is done about it.
Yet, critics charge, the Biden administration insists that his tax law change proposals are geared to tap into the ultra-wealthy, not the middle class. Biden has said that the tax increases won't affect those making less than $400,000 per year, but Ginn argues that America's modest earners will absolutely feel the hurt.
"What we are finding and what others have found is that those making less than $400,000 a year will be impacted, whether it be from [earning] a lower income, because as I was saying the median household income will decline over time," Ginn said. "Or it could be from raising taxes."
For example, if the corporate income tax were raised from 21% to 26.5%, the public will shoulder the increase through lower wages, fewer jobs available and higher prices for goods and services, according to Ginn.
"That just ends up being passed along to the consumer, which is us the people," he said, adding, "those that are the poorest are the ones that will hurt the most" because they likely work in industries where wage increases are slowest.
Biden's taxation on unrealized capital gains proposal will also hurt the retirement funds and pensions of the average American, who would be required to pay a tax each year on their gains even if they aren't withdrawing, some analysts argue.
This would result in a substantial reduction in investments in the economy, Ginn said.
"Those sort of capital gains and investments is a driving part of new innovation and new capital for firms to expand, hire workers and raise wages," he noted.
Biden argues this current period of rising inflation and price spikes is temporary, according to Reuters. Ginn says if current projections of rising inflation and lagging wages continue, things will only get worse over the next decade.
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.”
Not helping the matter is that the "Build Back Better" plan's $3.5 trillion price tag will actually be closer to $5 trillion, Ginn said, if long-term expenditures over the next decade, such as extension of the Child Tax Credit, are considered.
During a recent Fox Business segment, financial commentator and former Donald Trump administration official Larry Kudlow said he believes increased government spending, like the one currently proposed, will negatively impact the economy.
“First, government spending brings government regulation,” Kudlow said. “This regulatory avalanche will choke off business activity of all kinds,” creating what he calls a “supply side obstacle.”
Kudlow also argues that increased entitlements will dampen productivity and reduce the incentive to work. This position is widely disputed in the working class communities of Millennials and younger, who point out that the aversion to certain jobs and industries is actually unlivable wages, draining corporate environments and poor work-life balances.
A recent economic white paper by the Niskanen Center, a nonpartisan think tank working to promote an open society, echoes concerns that increased government spending on entitlements and subsidies can lead to increased prices and what they call “cost disease socialism."
At least one close adviser to Biden has indicated they do not think rising prices and inflation affect the average citizen. As reported by Fox News and others, Ronald Klain, Biden's chief of staff, shared a Harvard professor's tweet that called inflation a “high class problem."
Steven Teles, Samuel Hammond and Daniel Takash authored the September 2021 Niskanen paper where they acknowledge that although “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 “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. This results 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.”
Sen. Joe Manchin (D-W.Va.) criticized the massive spending bill, urging lawmakers to "proceed with caution" in allowing more spending in Congress.
“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," he said according to the New York Post.