New Economic Data Highlights Need to Fight Inflation, Not Add To It
This morning, the Bureau of Economic Analysis estimated that Personal Consumption Expenditures (PCE) inflation rose by 1.0 percent in June and 6.8 percent over the past year. Yesterday, the agency estimated that the economy shrank by 0.2 percent (0.9 percent annualized) in the second quarter of 2022 after shrinking by 0.4 percent (1.6 percent annualized) in the first quarter.
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
Inflation is dangerously high, and it’s causing real harm to our economic well-being. The harder the Federal Reserve must work to control inflation, the greater the chance of a recession.
The best thing Congress and the President can do to help avoid a recession is to help the Fed fight inflation.
Lawmakers should be focused on legislation like the Inflation Reduction Act that could make the Fed’s job easier. Improved tax collection, drug savings, and deficit reduction would put downward pressure on inflation and help ensure fiscal policy and monetary policy are rowing in the same direction.
Actions that add to the deficit and put more cash into the economy move in exactly the wrong direction. Regarding the Honoring Our PACT Act, a bill meant to support our veterans should not be used as an excuse to backfill our discretionary budget and support even higher appropriations elsewhere. Lawmakers should pay for all new veterans spending.
Extending the current student debt repayment moratorium would be a huge unforced error. We have already spent nearly $300 billion on student debt relief over the past two and a half years—none of it paid for. Failing to collect debt payments going forward would further aggravate inflation while disproportionately benefiting doctors, lawyers, and others in high-income households.
With inflation and the national debt both far too high, it’s long past time that policymakers stop adding to the debt and shift focus to deficit reduction. The Inflation Reduction Act is exactly the kind of package lawmakers should put in place to help the economy in a number of ways.
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