The ‘Inflation Reduction Act’ To Increase Inflation And Impoverish Middle Class Americans

House Speaker Nancy Pelosi wondered aloud how Republicans could vote against Mother Earth. West Virginia Senator Joe Manchin possibly wondered how Republicans could vote against his so-called “Inflation Reduction Act (IRA).” In reality, Pelosi was closer to describing the contents of the IRA than was Manchin.

The Inflation Reduction Act To Increase Inflation And Impoverish Middle Class Americans

The IRA is revolutionary in what it purports to do for the climate. The only impact it will have on inflation is to increase it. The IRA deliberately sets about impoverishing many Americans by increasing taxes “on everyone” and increasing tax audits at the same time as prices are skyrocketing. Imposing steeper taxes at a time of steeper prices may not mean that much to the rich, but has the effect of a stealth double-tax that crushes especially middle- and working-class families, who now find themselves forced to choose between necessities such as food, gasoline or rent. Reports state that 42% of Americans are struggling financially.

The political theory governing this economic sledgehammer seems to be seems to be that a bigger, centralized government that controls people is “better” — at least for the politicians — than a government that prizes the individual, individual freedoms and the ability to spend hard-earned money the way he or she wishes, rather than how government chooses to spend it for him. This Marxist view looks at people not as individuals, but as a collective for the government to organize as it wishes or “thinks best” (for whom? The government or the people it is organizing?) — not quite what the framers of our Constitution had in mind. It is apparently easier for a government to control citizens without freedoms – economic or otherwise, as in China or North Korea — than citizens with free choice, unpredictability and the opportunity to achieve the American Dream — who will not as dependent on the government to be a nanny-state for them. The government can then promise everyone goodies to keep them dependent, while it decides what to dole out, when and to whom: what cars you must buy, what doctors and healthcare you are allowed to have; what “social justice” (here and here) and gender issues your children are to be taught in school; which companies — possibly of campaign donors — should be rewarded with subsidies and handouts, and which, such as donors to other political parties, should be targeted for audits and confiscations.

As the cost of energy — gasoline, heating, air-conditioning — continues to rise, in addition to financing America’s adversaries that produce oil and gas such as Iran, Russia and Venezuela, all purchases for Americans, in an increasing downward spiral, become increasingly unaffordable. All goods that are manufactured or transported continue to cost more, forcing Americans to pay even higher prices for virtually everything. Already squeezed, many Americans will be forced to start buying less. Restaurants, even fast-food places, for instance, will become luxury items and attract fewer customers; many small businesses will be forced to close and their employees will be laid off, creating still less purchasing power. Even if the government hands out a few hundred dollars, that is hardly enough to keep up with an 8.5% inflation rate. If the Biden administration believes that the top earners in the US are not paying their fair share of taxes, then Congress should change the tax laws. Between incentivizing the golden goose and killing it are many shades of gray.

If all that were not punishing enough for the average American, the Internal Revenue Service will now get $80 billion to hire 87,000 new IRS agents to conduct more audits and tax-collection. The Biden administration’s promise not to increase the taxes of households making less than $400,000 a year is about as solid as the Obama administration’s promise that “You can keep your doctor [and] healthcare”. The White House has been claiming that the government is going after only “the ultra-wealthy and corporations.” Really?

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First, as the adage goes, “Corporations don’t pay corporate taxes, people do.” Corporations simply pass on the increased expense by raising the price of their products or cutting jobs. The result, of course, is that even more people will be thrown out of work and unable to buy these now “luxury” items.

Second, of course, whoever imagined that doubling the size of the IRS is just what the American people have been pining for — spending $80 billion of the American taxpayers’ hard-earned money to target not Russia, China or Iran — but Americans? Or political opponents? On the charm scale, it is right up there with the government labeling parents “domestic terrorists.”

Moreover, these 87,000 new IRS agents will likely have zero interest in taking on either well-lawyered corporations or “ultra-wealthy” individuals. Incidentally, at what dollar amount does a wealthy person become “ultra”? Any self-respecting IRS agent would presumably prefer to come away from an IRS chat with something to show for it. The easiest target, of course, would be small business owners and middle-class individuals, for whom hiring a lawyer or accountant to refute a claim would cost more than just paying the IRS to go away. Just think of the IRS auditing, say, a lawyered-up Amazon corporation, which, until 2020, paid no taxes: “So, Walter, how’d it go today?” “Uh, zip.” What sort of return on investment for hiring 87,000 new IRS agents is that?

The best news of all, however, is that they are armed! The IRS recently took down a recruiting ad — at the same time as many Americans are advocating for gun controlsaying that agents must be “willing to carry a firearm” and “use deadly force, if necessary.” Now, that is what you might call persuasive. It also uncomfortably resembles the start of an armed federal militia to federalize the police, replace those precincts that were defunded, and begin targeting Americans — call it the Papa Doc or Venezuela model — definitely not what the founding fathers had in mind. That is where they came in, and the reason for the Second Amendment.

The government, the Wall Street Journal determined, was embarking on a plan, to “raise a total of $739 billion in revenue, and spend a total of $433 billion…. to reduce the deficit by about $102 billion over a decade” – in government terms, a rounding error, with your tax dollars. But not a dollar for more Homeland Security agents to address the nearly 5 million illegal aliens — including 900,000 “gotaways” — rampant human trafficking, escalating child sex slavery, and massive drug smuggling that resulted, last year alone, in more than 107,000 deaths.

Just as ruinous for Americans but a windfall again for Russia, are the new taxes the IRA slaps on oil and natural gas — precisely when much of the world, and Europe in particular, are counting on the US to help them out this winter after Russian President Vladimir Putin turned off the taps.

If the Inflation Reduction Act has nothing to do with bringing down inflation, what it does have something to do with is purportedly funding climate change and green energy. “The package,” again according to the Wall Street Journal, “will spend roughly $369 billion on climate and energy programs, including tax credits for buying electric and hydrogen vehicles and making energy-efficient home improvements,” most of which are made in — China. Reality, as author and climate change expert Bjørn Lomborg keeps insisting, is that when alternatives to fossil fuels become “much less expensive and more effective,” everyone will choose them without being forced:

“By forcing up the price of fossil fuels, policy-makers have put the cart before the horse. Instead, we need to make green energy much cheaper and more effective.

“Humanity has relied on innovation to fix other big challenges. We didn’t solve air pollution by forcing everyone to stop driving, but by inventing the catalytic converter that drastically lowers pollution. We didn’t slash hunger by telling everyone to eat less, but through the Green Revolution that enabled farmers to produce much more food.”

How comforting, however, to see that families having trouble buying gasoline at $4.50 a gallon (down from $5!) will now be able to rush out and buy a $60,000 electric vehicle! Not surprisingly, the minute tax credits to buy electric vehicles was announced, some car companies, while insisting the two events were not connected — perish the thought! – raised their prices by $6,000-$8,500, “roughly matching the $7,500 tax credit introduced under the inflation bill.”

If there are cuts in drug prices, ordinarily that would be wonderful – if they did not also mean government interference in the private business of pharmaceuticals and the resultant impediment to research and development in tackling diseases, among others, such as cancer, Alzheimer’s and Parkinson’s.

As for Nancy Pelosi’s climate change part: as long as China “is building more than half of the world’s new coal power plants,” and all of us on the planet are breathing the same air, we are essentially depriving Americans of low-cost energy independence while enriching, again, overt adversaries such as Russia and Iran that export oil for as high a price as they can. Other countries are likely to be less passionate about having clean energy and more passionate about the bottom line. Russia, for instance, has been trying for years to limit America’s oil production to prod the US to transfer its dependence on oil to, you guessed it again!, Russia. If the US had the widespread, inexpensive oil production it enjoyed two years ago, Putin would never have had the resources even to think of invading Ukraine. The US is, quixotically, funding both sides of this war.

Last week, the US Congress approved a $10,000-$20,000 Student Loan Relief plan – with the actual cost to taxpayers estimated at $1 trillion — with a T — over ten years. The cost of that will be unfairly dumped on the shoulders of the 62% majority of Americans — often lower-income, blue-collar Uber-drivers, welders, small shopkeepers — who never went to college. It is a grotesque reverse transfer of wealth from the poor to the rich. As Florida Governor Ron DeSantis put it:

“It’s unfair to force a truck driver to pay a loan for someone who got a PhD in gender studies. Taxpayers shouldn’t be footing the bill for student loan relief and Biden’s order isn’t constitutional. If anything, universities handing out worthless degrees should be on the hook.”

“Constitutional” in his statement means that the president does not have the power to allocate money; that is the Congress’s job.

Moreover, no one will ever repay a student-loan again – why should they? The giveaway incentivizes people just to hang around and wait for loans to be forgiven. Anyone who ever struggled or held down two jobs to repay a student loan must now feel like a chump. Worse, universities — who are not being called on to use part of their gargantuan endowments to help cover this lavishness — will simply be encouraged to raise their fees even further.

The biggest surprise of all in the IRA may have been, unbelievably, a new “Green Bank”, filled with $27 billion of your money for the Environmental Protection Agency — which, of course, knows so much about banking. It is supposed to be a “fund for clean energy projects,” but, as the government, cagily warns, “false claims risks exist.” What could possibly go wrong?

The Inflation Reduction Act and Student Loan Relief Act and all these giveaways by the government, are yet more examples of government largess with the money of its citizens. Once again, politicians are taking taxpayer money and distributing it to favored causes and businesses, and then limiting the choices we can make as to how we want to live. It is bad policy in a country where freedom is supposed to reign.

Peter Hoekstra was US Ambassador to the Netherlands during the Trump administration. He served 18 years in the U.S. House of Representatives representing the second district of Michigan and served as Chairman and Ranking member of the House Intelligence Committee. He is currently Chairman of the Center for Security Policy Board of Advisors and a Distinguished Senior fellow at Gatestone Institute. This article was originally published on Gatestone Institute.

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