HomeBudget & Tax NewsGovernment Pushing U.S. Economy Toward the Tipping Point

Government Pushing U.S. Economy Toward the Tipping Point

Government policies are pushing the U.S. economy near the tipping point, with shortages of labor and food, and higher prices, say experts.

American consumers are being hit hard as government monetary, regulatory, tax, and welfare policies rapidly push the U.S. economy into a cascade of supply shortages.

Americans are feeling the squeeze of continuing inflation as they go to the grocery store and the gas station. Family budgets strain to cover monthly expenses as their savings shrink and their 401ks decline.

U.S. Economy Slows Down

The slowdown in private-sector production will soon create revenue problems for all levels of government. Capital gains are expected to decrease dramatically in 2022 as falling markets damage individual investors and large corporations, reports The Wall Street Journal (WSJ). This will also result in federal and state budget shortfalls as capital gains tax revenues shrink accordingly. The loss could be as much as $250 billion.

“Tax revenue from capital gains looks set to fall off a cliff,” wrote Red Jahncke, president of the Connecticut-based Townsend Group International LLC, in an op ed for the WSJ. “Federal and state officials be warned: If you wait until July or later for confirmation that a major source of tax revenue has dried up, you may have waited too long to begin to make necessary budget adjustments.”

Elected officials should be planning now for the expected shortfall and how to address the budget impact. This, while the country is also facing a potential food shortage, which economists predict will worsen in the near term, Heartland Daily News reported.

Welfare State Expands

Expanded welfare benefits and labor shortages are causing “Bidenflation,” reports the Foundation for Government Accountability (FGA). This is especially true of the food stamp program, according to Hayden Dublois and Jonathan Ingram, in an FGA white paper published March 28.

“In October 2021, the Biden administration doubled down on its welfare expansion by unilaterally—and potentially unlawfully—implementing the single-largest permanent increase in food stamp benefits in the history of the program,” said Dublois and Ingram.

Increased benefits were supposed to be temporary, but continue to exacerbate labor shortages in the U.S. Economy.

“Congress has pumped nearly $5 trillion taxpayer dollars into COVID-19 ‘relief’ spending,” wrote Dublois and Ingram. “Many of these programs enable regular monthly payments that, when combined, are far more lucrative than work. These new initiatives have infected several significant government programs and threaten to tank the American economy.”

President Biden and the Democrat-controlled Congress increased the child tax credit from $2,500 to $3,600 and turned the credit into a monthly payment, and they eliminated the minimum earnings threshold, FGA notes. Families can receive the per-child tax credit without working, creating another taxpayer-funded handout.

Able-bodied adults with dependents can now receive food stamps without any work requirements, the FGA reports. People who could be working, and are desperately needed to work in an economy with a labor shortage, are not incentivized to find a job.

“Until policymakers stop paying people to stay home, America will have more labor shortages, higher inflation, and a growing welfare state with no end in sight,” write Dublois and Ingram. “Now more than ever, policymakers must reject the dependency trap and get Americans back to work.”

‘Welfare State Victimizes People’

Paying people not to work harms them, says Yaron Brook, chairman of the board of the Ayn Rand Institute and a policy advisor to The Heartland Institute.

“The welfare state victimizes people,” Brooktold Budget & Tax News. “It demonizes and hurts the people who are receiving welfare, as they become dependent on the state. They become less happy, less fulfilled, less satisfied, and they demand more and more. The neediness of people is infinite.”

The Supplemental Nutrition Assistance Program (SNAP), or food stamps, is the largest federal food program in the United States, with one in seven Americans enrolled, Yahoo Finance reports.

Progressive economists claim more support is needed to ensure low-income families do not experience food insecurity, Yahoo Finance reports.

Congress allocates taxpayer dollars to food-support programs. An increase in the cost of food can have a significant impact on the federal budget, the American Action Forum reports.

Government-Caused Shortages

Food shortages would not be an issue if government would stop intervening in markets, says Brook.

“Food shortages are due to a number of things,” said Brook. “First of all, it’s ridiculous trade policies, policies that protect special-interest groups but hurt the American citizens. You see this with baby formula. This is driven by the dairy lobby and the ridiculous restrictions of the FDA.”

The baby formula shortage is exacerbated by government programs that purchase large amounts of product at an unreasonably reduced price, says Brook.

“Government completely distorts markets through price signals and incentives,” said Brook. “Markets, left alone, do very well. The more the government intervenes, the more problems it causes.”

Regulation and government bureaucracy compound the problem, Brook says.

“We don’t allow Europeans to sell baby formula here, because they don’t label the same way the FDA labels it,” said Brook. “They also require registration with the FDA, which is a time-consuming process. There are tons of baby formula manufacturers. Canada has the ability to produce plenty of formula, but it contains milk. The U.S. government won’t allow Canadians to sell formula here because it’s protecting the U.S. milk industry.”

When parents try to bring formula into the country on their own, it is confiscated by customs.

“This is all devastating to parents, who are in a life and death struggle,” said Brook. “And there are numerous distortions and perversions going on, perversions and distortions created by the government, resulting in centrally planned economies. We know centrally planned economies never work.”

U.S. Economy on the Brink

Government interference in markets is not new: it has been going on for decades, in both Democrat and Republican administrations, and there are no politicians currently standing up for free markets, capitalism, and competition, says Brook.

“No one is arguing for the shrinking of the welfare state or the regulatory state,” said Brook. “No politician is calling for less statism. Look at all the government spending. It grows with every administration.”

If the government continues to encourage dependency by offering economic support with no work requirements, the burden on the taxpayer will grow, the FGA reports. Regulations tie the hands of entities that could alleviate food shortages. Bureaucracy stalls solutions. As elected officials in both parties neglect these issues, we may be reaching a critical time, says Brook.

“Given the increase in tariffs, shift against global trade, and now the increase in subsidies and controls of the Biden administration, we are close to—if not already at—the tipping point,” said Brook.

For more great content from Budget & Tax News.

More on inflation, unemployment, and shortages.

Eileen Griffin
Eileen Griffin
Eileen Griffin writes from Richland, Washington.

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