Forbes magazine reports that two Democratic Party senators facing re-election in 2022 have proposed suspending collection of federal excise taxes levied on each gallon of gasoline sold (see: Gas Tax Holiday Could Backfire On Democrats). Likewise, the current governor of Florida, Republic Ron DeSantis has proposed the same bad idea (see: Gas and sales tax ‘holidays’ are gimmicks. Floridians deserve real relief | Commentary).
The problem right now is this: there are too many dollars in circulation and not enough goods and services produced to take up those dollars. Production and imports hitting shelves stalled owing to lockdowns. Yet, the Pelosi-Schumer Congress borrowed and spent way too much in a failed and foolish effort to prop up the economy during the Covid-19 lockdowns (see right here on the True Dollar Journal: The Pelosi-Schumer Spending Inflation, the Worst in Decades. Why is it Happening?).
Since the Bernake-Yellen-Obama Greatest Deflation, the biggest credit bubble burst in the history of mankind, the Federal Reserve has pushed too many dollars into circulation owing to quantitative easing. Yet, production relative to those dollars has yet to come back.
It was only into the second half of Trump's second year when the U.S. economy began to advance after one of the longest depressions hidden by quantitative easing. That long awaited expansion was cut short in Trump's fourth year when Democrat-controlled states issued lockdowns and brought to halts their states' economies.
The Right Fixes
Without attempting to pick winners, the smart approach simply would be for Congress to accelerate amortization schedules for capital investments in effort to increase production. The fix for their first mess up, excessive spending, is to get more goods and services into the economy, which will take up those dollars.
Here are some smart fixes:
- Spending by Congress needs to fall.
- The Federal Reserve needs to end quantitative easing as well as raise the Fed Funds rate over time until commercial and residential rates approach 4%.
- Illegal immigration needs to be halted.
- Illegal immigrants need to be stopped from participating in the economy and thus given incentive to self-deport.
- Firms need to be given incentive to increase production.
Gab It
