With inflation accelerating and the economy slowing, the Federal Reserve Board has launched an aggressive campaign against inflation. The board approved the largest interest rate hike in nearly 30 years, said more rate increases are coming, and released a new forecast of slower growth and higher unemployment.
That very same day last week, Senate Majority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA) met with President Joe Biden at the White House to discuss legislative priorities. Their interest in raising taxes on the “rich” looms large.
Talk about bad timing. With the economy reeling, markets plunging, and fears of recession growing, now would be the worst time to raise taxes. The president keeps claiming that a tax increase would magically reduce inflation, but even normally reliable Democratic Party allies disagree with his tax plans. The Tax Policy Center, a center-left group affiliated with the Brookings Institution, opposes raising taxes to reduce inflation.
A tax increase could be exactly the wrong medicine later this year or in 2023, once a succession of Fed interest rate hikes slow growth or even throw the economy into a recession,” according to the center. As for raising business taxes, the center noted that it is “hard to see how raising taxes on goods producers would increase the supply of goods” needed to ease inflation.
Raising taxes now along with these interest rate increases would almost certainly throw the economy into a recession. Congress should reject this new Biden-Schumer-Pelosi trillion-dollar tax increase and leave the inflation-fighting to the Fed.
Bruce Thompson was a Senate aide, assistant secretary of treasury for legislative affairs, and the director of government relations for Merrill Lynch for 22 years.
