There are too many dollars chasing too few goods and services in the United States. Until the Federal Reserve effectuates a meaningful reduction in the amount of dollars, countering inflation requires either increasing the supply of goods and services or reducing the demand. The latter option inflicts economic pain and tends to be nearly impossible for policy makers to engineer without also depressing supply, but unfortunately it seems to be President Joe Biden’s preferred course.
On Friday the president tweeted:
You want to bring down inflation?
Let’s make sure the wealthiest corporations pay their fair share.
The newly created Disinformation Board should review this tweet, or maybe they need to form a new Non Sequitur Board instead. Raising corp taxes is fine to discuss. Taming inflation is critical to discuss. Mushing them together is just misdirection.
Mr. Bezos is right to suggest that inflation is not caused by competitive corporate tax rates. In fact pro-growth tax policy acts as a crucial incentive for businesses to supply more goods and services and to create disinflationary innovations.
But Mr. Bezos may be giving Mr. Biden too much credit in dismissing the President’s tweet as mere irrelevant disinformation. It’s possible that the president is not confusedly combining two economic concepts. The chilling possibility here is that Mr. Biden understands exactly what he’s saying and that he intends to use confiscatory taxation to depress economic activity in a misguided belief that he can reduce demand and end inflation by crushing business. The president ought to remember the 1970s but apparently doesn’t.
Annie Palmer at CNBC notes:
White House spokesperson Andrew Bates responded in a statement that “it doesn’t require a huge leap to figure out why” Bezos, the world’s second-wealthiest man, would oppose Biden’s proposal to hike taxes on the ultra-wealthy and corporations.
“It’s also unsurprising that this tweet comes after the President met with labor organizers, including Amazon employees,” Bates said in a statement.
Bezos’ venture capital firm, Bezos Expeditions, didn’t immediately respond to a request for comment.
If the White House goal is to discourage supply by attacking business, it’s doing a marvelous job. Now unfortunately even one of the critics who tried to dissuade Mr. Biden from his inflationary spending agenda in early 2021 is endorsing the emerging Biden policy. Former Obama and Clinton economic adviser Larry Summers tweets:
I think @JeffBezos is mostly wrong in his recent attack on the @JoeBiden Admin. It is perfectly reasonable to believe, as I do and @POTUS asserts, that we should raise taxes to reduce demand to contain inflation and that the increases should be as progressive as possible.
Investors have lately been tortured by a fear that the Fed cannot slay inflation without triggering a recession. Now along comes the disturbing prospect that slowing the economy may be official White House policy.