In what looks like a bit of good news for Joe Biden, the latest economic data released by the government suggests the economy just might be about to turn the corner.
The inflationary price spike has peaked, at least for the moment; commercial interest rates appeared to have dipped slightly, and unemployment remains low. All this has some economists at least thinking a soft landing without a recession may still be possible.
Other indicators suggest there’s still a long way to go before America is back on the road to prosperity. People are still feeling the effects of Bidenflation in their pocketbooks and wallets, and, from what they’re telling pollsters, they may still be running out of money before they run out of month.
A recent Financial Times/University of Michigan poll found that 33 percent of voters thought Biden’s economic policies “had hurt the economy a lot,” and only 14 percent said they were in a better position financially now than they were before he took office.
Gas prices may be stable — in a sector of the economy that can quickly become volatile — while the housing market continues to drag. Heritage Foundation economist Richard Stern estimates that total yearly mortgage payments on a median-priced single-family home have risen from $ 8,500 to $24,000 annually under Biden — an increase of more than 285 percent over what they were under Donald Trump.
Biden likes to say the economy is strong thanks to “Bideneconomics” and that he’s the greatest job-creator president in U.S. history. At best, that’s misleading. He’s counting the jobs that came back after the lockdowns ended as new jobs, so he really should not take credit for them.
It may be, and there are several studies out there to back up the claim, that Biden inherited an economy made stronger by 2017’s Tax Cuts and Jobs Act and that — rather than the record level of government dollars distributed under the rubric of assistance during the pandemic — has kept us out of an official recession for most of his presidency.
One of them, which was conducted by economists associated with the U.S. Treasury Department and the National Bureau of Economic Research, found by looking at 12,000 corporate tax returns in the two years before and after TCJA became law that the reduction in the corporate tax rate, bonus depreciation, and other changes made to the tax code increased domestic investment by 20 percent.
The increase in economic activity created by the TCJA before the pandemic provided the cushion needed to survive the lockdowns, not Congress’s generosity with the taxpayers’ money.
Some of the new laws’ provisions, like the tax credit for research and development, have bizarrely been allowed to expire, along with the 2021 childcare tax credit. They are politically popular and, up to a point, economically meaningful. Pro-investment policies like the R&D credit help feed American consumers. Farmers buy new equipment to keep productivity up so food prices remain down. American manufacturing’s investments in new and expanded facilities produce what people like Biden used to call “good jobs at good wages.” Childcare expenses consume an increasingly large portion of family budgets. If these issues aren’t going to be addressed through a rate reduction that keeps that amount of tax paid the same — and there’s not much of a chance of a bill like that getting through this Congress or being signed by the president – then an extension of the entire package of expired deductions through 2025, which the TCJA expires in its entirety, needs to be a priority for Congress before it leaves for the year.
These extenders are vital to the future growth needed to reduce the debt. We cannot tax our way out of our problems, but that doesn’t mean they are not significant. On that point, there’s surprisingly bipartisan agreement. Referring to the NBER study, for example, former Obama economic adviser Jason Furnam said it showed “taxes actually do matter,” adding that it provided “the most convincing estimates of the response of investment to corporate tax changes that I have ever seen.”
Congress must act on the extenders package now before the end of the year. If it doesn’t, it invites additional long-term damage from what amounts to a hidden tax increase while the economy is still on very thin ice.
Peter Roff is a former UPI and U.S. News & World Report columnist and writer who is now affiliated with several public policy groups including the Trans-Atlantic Leadership Network. Email him at RoffColumns AT GMAIL.com. Social media @TheRoffDraft.