Larry Kudlow: Tax increases will deepen the recession

If you’re in a recession, it makes absolutely no sense to raise taxes. This was a logical view, shared by liberals, conservatives, Keynesians and workers of the show, but no more.

In Biden’s upside-down world, where right is wrong, wrong is always wrong, stagnation does not exist, inflation does not exist, fossil fuels do not exist and 75% of America does not exist, there is nothing in common to leave feeling. So let me try. In recessions, don’t raise taxes, and to quote prominent economist Larry Lindsey, who will be here shortly, “there weren’t two consecutive quarters of negative growth that wasn’t ultimately considered a recession.”

The corollary this evening is this: With inflation soaring, don’t kill yourself. So, in the past few days, Congress, led by Democrats but sometimes with the help of Republicans, has, in its wisdom, committed to spending nearly $600 billion in Schumer Reconciliation Bill And another $280 billion in CHIPS+ corporate welfare, industrial planning, and a boondoggle pork drum bill. So, in rough numbers, it’s just under $900 billion.

In today’s personal income report, all inflation news was higher than expected. The PCE deflator rose 1% in June, after only 0.6% and 0.2% in the previous two months, with a 3-month change of 7.2% at an annual rate.

What are the tax increases in the settlement bill between Manchin and Schumer?

Contrary to the wisdom of Wall Street, we have seen two consecutive quarters of lower GDP, but Inflation is on the rise In any case. In terms of taxes, you’re looking at a tax increase of $740 billion, including a harmful alternative tax of 15% on corporations, whose taxable income is less than book earnings.

These companies are not evil. They did not break the law. Instead, they use statutory tax credits and deductions, but especially 100% immediate investment expenditures, which increase productivity, real wages, and typical family income. This 15% minimum tax will prevent them from creating these critical jobs and technology-enhancing business investments.

Ironically, Senator Mansion’s coal industry will be hit hard by this — as will all mining, metals, drilling, manufacturing, and even financial services. This turns out to be dumber. But guess what? AMT green energy tax credits will be exempted for new businesses. Now isn’t that just a kick in the pants?

So, you could argue, and I would argue, that all the Green New Deal obsessive spending on climate change and so-called additional CHIPS+ would boost inflation, while tax increases would sink the recession even deeper.

Incidentally, these tax increases are still not enough to cover all spending, so there is no “deficit reduction” in this financial complexity. To put it mildly, this is not good. It’s better for Congress to do nothing and come home early. Indeed, this is kind of the story of the Biden administration.

Came to office strong middle EconomieWith a growth rate of about 6% and less than 2% inflation. They didn’t have to do anything, and by the way, anyone could see that Joe Biden would have preferred to stay in his basement and do nothing, but no, they had to be activists – green activists, high tax activists, big-spending activists, union activists, fossil fuels Hate Activists, Tax Successful Activists, Open Border Activists, Hate Police Activists, “I left Afghanistan early” activists, “I was a dollar shorter and a day late in Ukraine” activists.

The Fed’s preferred inflation measure climbs to 4.8% in June, nearing a nearly 40-year high

All this radical neo-monetary theory and neo-monetary theory could cause climate activism in 18 short months to flood the economy, cause disaster on the borders, disrupt our culture, support criminals – not victims – and so on.

Guys, I don’t like activity, and I’ve never liked it. Years ago when I was working for Reagan, the head of the CEA, Murray Weidenbaum, used to tell the Cabinet: “Don’t just stand there, scrap something.” I love that. There is a reason why conservatives prefer limited government.

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Indeed, this is a very good test of the votes of Congress: if it limits the government, vote for it. If the government is expanded, vote against it, the whole problem with Biden is that they have tried to rule as big government, central planning, over-regulating operatives, and they have destroyed a great country.

So, guys, we have a lot of work ahead of us. We need to make America great again.

This article is excerpted from Larry Kudlow’s opening comment to the July 29, 2022 edition of Kudlow.