Heading in the wrong direction

Fight Inflation by Lowering Deficits, Not Boosting Them

June 21, 2022

Yesterday, President Biden told reporters the Administration was nearing decisions on whether to cancel student debt by executive order and whether to endorse a gas tax holiday. Media reports also suggest Senate Democrats may be nearing agreement on a reconciliation bill that includes new revenue, drug savings, climate investments, and net deficit reduction.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

Inflation is surging at the fastest pace in four decades, and policymakers need to start taking that seriously. Cancelling student debt or extending the current payment pause will worsen inflation while delivering substantial benefits to higher-income Americans and driving up future tuition costs.

A gas tax holiday would modestly reduce prices at the pump but exacerbate overall inflationary pressures and increase demand for an energy source already short in supply.

Together, these policies could cost the federal government $250 billion or more over a decade at a time when debt is already headed toward record levels. These policies aren’t solutions; they are gimmicks that shift costs onto taxpayers and consumers.

Instead of making the Federal Reserve’s job harder, Congress and the President should be working to assist the Federal Reserve in its inflation-fighting efforts. A reconciliation bill that boosts tax revenue, lowers drug costs, and reduces deficits would represent an important step in the right direction.

Deficit-boosting legislation is part of how we got into this mess; it’s not going to get us out of it. The White House should put an end to ongoing COVID relief and focus its attention on deficit-reducing legislation

For more information, please contact Kim McIntyre, director of media relations, at mcintyre@crfb.org

One comment

  1. Another important fact about these fuel tax holidays is that the taxes are dedicated to building and repairing roads. In the case of the federal fuel tax, it goes mostly into the Highway Trust Fund that helps fund 84.5% of the nation’s highways. 15% of the fuel tax goes to mass transit and . 5% goes to leak cleanup and maintenance for the tanks underneath gas stations.
    The same is true for most states, that is helps fund their share of roads and bridges.
    If you stop collecting the fuel tax, then when the highway trust fund goes broke, the road work will stop. This happen in New Jersey and the state came up with an automatic method of raising or lowering the fuel tax by the balance in the highway trust fund in order to make good on the bonds that they sold.
    The last time the federal fuel tax was raised was in 1993. Now is not the time but it is over due. Maybe if it was raised with inflation over the years, Congress won’t have had to pass the $1 trillion infrastructure bill with $110 billion for roads that is now coming out of the general fund, or your income taxes.

    Like

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