Biden, Congress can curb inflation by ending costly federal policies

Timothy Carney
Conservative Opinion

Timothy Carney

Timothy Carney, Senior Fellow, American Enterprise Institute
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Inflation is here, it’s big, and it’s not stopping anytime soon. But the Biden White House has tried to deny that it exists, minimize it, or claim it will go away soon. None of those strategies are working, and Americans are getting more and more upset about rising prices.

Washington—and Joe Biden in particular—helped cause this inflation. Congress has spent record amounts in the past two years, from the 1.9 trillion dollar American Rescue Plan, to the 1.2 trillion dollar infrastructure bill.. Some of the spending was necessary to get people and businesses through the pandemic, but much of it was a typical Congressional reaction of pointlessly throwing money at problems. 

The result was trillions flowing around an economy where less stuff was getting made and fewer services were getting done. More money and less to buy with it is the perfect recipe for inflation.

So if Congress and the Biden Administration helped cause the problem, can Congress and Bidenthey also solve the problem?

Not quickly. Sucking money out of the economy, either through taxes or Federal Reserve policy could cause even more pain, so it will take a long time to stop the runaway train of Bidenflation. In the meantime, Congress should remember Ronald Reagan’s wisdom: Whenever there is a problem, check to see how government is making it worse—and then stop doing that!. 

The federal government has many programs that make things more expensive than they should be all the time, even in times of low inflation. Congress could offset some of our current inflation by removing those policies that drive up prices.

For example, some farm subsidies make Groceries are more expensive because of some farm subsidies. The sugar program, for instance, places strict limits on the import of foreign sugar. Also, the US Department of Agriculture has a program that basically promises to buy sugar if prices fall too low. But these sugar programs ultimately drives up the price of sugar for both food makers and consumers. In 2021, the U.S. price of raw sugar in the U.S. was about twice that of the rest of the world. 

SimilarThese programs, and other USDA programs like them, prop up the prices of other foods, making the American family’s grocery bill bigger in normal times, and in times of extraordinary inflation.

Then there are taxes. The federal gas tax of 18.4 cents per gallon doesn’t merely hit you at the pump. Everything you buy that has to travel by truck becomes more expensive because of the gas tax. 

Tariffs are taxes on imports. Tariffs They add to the price of the imported materials, but also to the cost of the many consumers goods that use those materials. For instance, a tariff on aluminum drives up the price of U.S.-made cars, washing machines, and refrigerators.

Other trade policies push prices upwards. The Jones Act, for example, is a federal law that requires all shipments between U.S. ports to sail on U.S.-flagged ships. In effect, this forces people in New England who want something from a port in Louisiana to either pay higher shipping costs or find a foreign seller who can ship on a less expensive cargo ship.

And the Export-Import Bank of the United States is a federal agency that subsidizes U.S. exports by giving loans and loan guarantees to foreign buyers. When a Dutch company gets a subsidy from Uncle Sam to buy John Deere tractors, that drives up demand for John Deere tractors—which is good for John Deere, but costly for American farmers. Those farmers in turn pass along the costs to us.

Finally, there are the mountains of federal regulations that add to the price of everything, from a kid’s toy to a new car.  

If Biden and Congress want to help the U.S. consumer in this time of inflation, they should scrap federal policies that drive up costs. Abolish the sugar program, the Jones Act, and the Export-Import Bank. Cut the gas tax and tariffs. And roll back the costliest regulations.

 

This won’t stop inflation, but it will make life a bit more affordable for Americans, who are currently feeling the squeeze of higher prices.


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