There has not been much good economic news lately for working families. Inflation is soaring, consumer confidence is plunging, and Congress is pushing for even more spending and taxes on the economy.
After spending nearly $6 trillion, Congress is now considering a new $3.5 trillion tax and spending plan, in addition to the $1.2 trillion infrastructure bill. Many experts are warning that this new spending will fuel even more inflation and that the proposed tax increases will raise prices even more.
Consumer prices are increasing at the fastest rate in 30 years, rising 5.4% in July after increasing 5.4% in June and 5% in May. Since December, consumer prices have increased at a 7.1% annual rate. Producer prices rose 7.8% in July, the largest increase in a decade.
Not surprisingly, consumer confidence is sinking. The University of Michigan index of consumer confidence fell 13.5% in the first half of August, one of the largest drops ever. Consumers reported “a stunning loss of confidence,” said Richard Curtin, the survey director, who added that “consumer complaints about rising prices have reached an all-time high.”
Consumer confidence is falling because prices are rising faster than wages and income. Jason Furman, a former economic adviser to President Barack Obama, reports that U.S. “households are falling behind” because inflation has risen dramatically and “prices have risen more rapidly than wages.”
Families are seeing rising prices for groceries, gasoline, and other everyday necessities. Last month, families paid 5.9% more for meat, poultry, fish, and eggs. Gasoline prices are up 41% over a year ago, and utility prices are up 19%.
The White House tells us all these price increases are transitory and will soon moderate. But Federal Reserve Board Chairman Jay Powell said recently that “inflation could turn out to be higher and more persistent than we expected.”
Hence, why so many financial experts are concerned about the consequences of spending another $3.5 trillion and raising taxes.
We cannot tax and spend our way to prosperity. More spending will fuel more inflation, and higher corporate taxes will mean even higher prices and lower wages. With inflation rising and paychecks shrinking, now is not the time to pass another costly spending and tax increase bill.
Bruce Thompson has served as a Senate aide, an assistant secretary of Treasury for legislative affairs, and a director of government relations for Merrill Lynch for 22 years.
