Inflation is at the forefront of many Americans’ minds as midterm elections draw nearer. Inflation has been eating away at Americans’ budgets and wages for the past year or so, and many are hoping that new legislative members will step in to help.
Who Put You in Charge?
Unfortunately, the issue of inflation has been largely left up to the Federal Reserve, whose reaction to rising inflation has been to raise interest rates across the board, making it more difficult for people to qualify for loans. Projections suggest that the Fed will keep this up through 2023 in an effort to slow demand and decrease inflation.
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Bad News for the People
The fallout from rate hikes usually consists of job losses and income hits that target vulnerable American workers. As interest rates rise, companies have to cut costs, and payroll usually takes the first hit. The Fed has predicted that unemployment will rise to 4.4% in the following year and remain that high through 2024. If the estimate is correct, around 1.5 million Americans will lose their jobs in the next couple of years. According to the Fed, this is unavoidable.
Will Congress Help?
The short answer is no. Congress is deeply divided at the moment and is barely holding onto its Democratic majority. It is unlikely that Congress will take up anything that will decrease costs. Some senators have tried, though. Bernie Sanders, Ed Markey, and Jamaal Brown proposed legislation that would slap a 95% tax on companies’ increased profits during inflation. Ro Khanna and Sheldon Whitehouse proposed imposing a windfall profits tax on oil and gas companies and using that money to instead send out quarterly checks.
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The Rich Get Richer
American companies saw record profits in 2021, even with rising prices. Corporate pretax profits increased 25% year over year up to $2.81 trillion. Oil and gas companies are also celebrating increased profits. Executives, of course, are celebrating as well, with the media salaries for CEOs increasing by $20 million since last year.
More Problems
Curbing Americans’ demand could send the entire economy into a tailspin. Consumer spending currently accounts for two-thirds of all economic activity. According to reports, shopping has already cooled off since last spring. A tax hike aimed at curbing company profits as well as consumer spending could increase the probability of a self-induced recession.
Congress is running out of time to take action on inflation. Republicans are predicted to regain control of the House after midterms this November. This shift could kill any attempt from the Democrats to pass a tax hike or any other inflation-killing policies because these measures tend to be partisan. While the odds of a bipartisan effort to slow inflation are low, they aren’t zero. With the tight races of midterms looming though, tensions are high and the chance of any cooperation between the parties is slim.
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This article was produced and syndicated by Wealth of Geeks.