Larry Kudlow: Tax Hikes Will Deepen Recession
If you’re in a recession, it doesn’t make sense to raise taxes. It was once a common-sense view, shared by liberals and conservatives, Keynesians and supply-side supporters, but no more.
In our backwards Biden world, where right is wrong, wrong is always wrong, recessions don’t exist, inflations don’t exist, fossil fuels don’t exist and 75% of America doesn’t exist. does not exist, there is no left common sense. So let me try. In a recession you don’t raise taxes and to quote the eminent economist Larry Lindsey, who will be here shortly, “there have never been two consecutive quarters of negative growth that were not ultimately considered as recessionists.
My corollary this evening is: in high inflation, we don’t spend ourselves. So in recent days, Congress, led by Democrats but sometimes aided by Republicans, has in its wisdom pledged to spend just south of $600 billion on Schumer Reconciliation Bill and another $280 billion in the CHIPS+ bill on corporate welfare, industrial planning, and boondoggle. So, in round numbers, just under $900 billion.
In today’s personal income report, all inflation news was higher than expected. The PCE deflator increased by 1% in June, after only 0.6% and 0.2% in the previous two months, with a 3-month change of 7.2% year-on-year.
WHAT TAX INCREASES ARE IN THE MANCHIN-SCHUMER RECONCILIATION BILL?
Contrary to the wisdom of Wall Street, we have had two consecutive quarters of declining GDP, but inflation is rising In any event. On taxes, you’re looking at a $740 billion tax hike, including a harmful 15% alternative minimum tax on corporations whose taxable income is less than book profits.
These companies are not bad. They did not break the law. Instead, they use tax credits and legal deductions, but most importantly 100% immediate capital expenditure, which increases productivity, real wages and typical family incomes. This minimum tax of 15% will prevent them from making these crucial business investments for creating jobs and improving technology.
Ironically, Senator Manchin’s coal industry will be hit hard, as will all of mining, minerals, fossils, manufacturing and even financial services. It gets stupider and stupider. But guess what? Green energy tax credits would be exempt from the new corporate AMT. Isn’t that just a kick in the pants?
So you could argue, and I will argue, that all the obsessive Green New Deal spending on climate change and the so-called CHIPS+ supplement will spur inflation, while tax hikes will drive recession deeper.
By the way, these tax hikes still aren’t enough to cover all the expenses, so there’s no “deficit reduction” in this tax mess. To say the least, it’s not good. Much better for Congress to do nothing and get home early. In fact, it’s a bit of the history of the Biden administration.
He took office amid a strong economy, with around 6% growth and less than 2% inflation. They should have done nothing and, by the way, everyone can see that Joe Biden would have preferred to stay in his basement and do nothing, but no, they had to be activists – environmental activists, environmental activists, high taxes, big spending activists, union activists, fossil fuel haters activists, tax successful people activists, open borders activists, police hate activists, activists of “I left Afghanistan too early”, activists of “I was one dollar short and a day late in Ukraine”.
FED’S FAVORITE INFLATION GAUGE RISE 4.8% IN JUNE, STANDING AT NEARLY 40-YEAR HIGH
All of this radical, woke, modern monetary theory climate activism has sunk the economy in 18 months, generated disaster at the borders, disrupted our culture, supported the criminals – not the victims – and so on and so forth.
My friends, I don’t like activism, I’ve never done it. Years ago, when I worked for Reagan, CEA Chairman Murray Weidenbaum used to say to the Cabinet, “Don’t just stand there, undo something.” I like this. There is a reason conservatives prefer limited government.
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In fact, it’s a pretty good litmus test for Congressional votes: if it limits government, vote for it. If the government is enlarged, vote against. The whole problem with the Bidens is that they tried to rule as excessive activists of regulation, central planning and big government and it destroyed a great country.
So, friends, we have a lot of work ahead of us. We need to make America great again.
This article is adapted from Larry Kudlow’s opening comment in the July 29, 2022 edition of “Kudlow”.