Q&A: Inflation swallows up savings

Q: What are you hearing from Iowans about inflation?
 
A: So far this year, I’ve met with Iowans in nearly two-thirds of my 99 county annual meetings. Without exception, I’ve heard deep concerns about inflation and a looming economic recession. The volume has turned up as the Biden economy has led to $5 gas with no relief in sight. What the Biden administration insisted was “transitory” has proven to be long-term and painful. U.S. inflation hit a 40-year high, soaring to 8.6 percent, fueled by the reckless partisan spending spree enacted a year ago in March. The poorly named American Rescue Plan was pushed through on a party line vote when the Senate Democrat Majority Leader used the process of budget reconciliation to avoid having to work across the aisle with Republicans. The Biden administration leaned on the levers of government controlled by one political party and look what happened. What did the Biden administration expect after Congress had already injected the economy with $4 trillion in pandemic relief spending? They opened a fire hose on the U.S. economy and ignored warnings from Larry Summers, the Harvard economist and former Treasury Secretary and Director of National Economic Council under the Clinton and Obama administrations. He said more federal spending would fuel the fires of inflation. You bet your boots it did. The highest inflation in 40 years is eating into savings and making it harder than ever for Americans to make ends meet. The rising cost of consumer goods and services, from food to fuel, utilities and rent, is forcing families to dial back on dining out and rethink summer vacation plans. More Iowans are forced to dip into their hard-earned savings that’s been eroded by inflation to pay the bills. Many Americans recall the Great Inflation years of the Carter administration that reached more than 13 percent in 1980. Today, homeowners, farmers and small businesses are buckling down in anticipation of higher interest rates that it will take to tame inflation. In the meantime, I’m hearing from Iowans across the state who are struggling to pay for groceries and fill up the gas tank from one week to the next. Farmers struggled to find fertilizer and afford diesel to get their crops in the ground. Many are worried about paying for fuel at harvest time. Small businesses are stretched thin with soaring transportation, production and labor costs. I’ve urged President Biden to stop his War on American Energy. Instead of begging foreign dictators to increase production, roll back the executive orders he implemented that are driving up the cost of gas.
 Q: How would your Middle-Class Savings and Investment Act help Iowans?
 
A: As former chairman of the tax-writing Senate Finance Committee, I’ve worked to enact fiscally responsible tax policies that allow Americans to keep more of their hard-earned money and incentivize thrift, savings and investment. I wrote pro-growth tax policies during the George W. Bush and Trump administrations that closed overseas corporate tax loopholes to bring investment back to the United States and foster job creation, small business expansion and entrepreneurship in communities across the country, particularly among minorities. Priming the economic pump with pro-growth tax policies helps grow wages, savings and investment. Today, Americans -- especially seniors on fixed incomes -- are cash-strapped by 40-year high inflation. I’m working to deliver relief through the federal tax code. Under the Biden economy, the purchasing power of American consumers is shrinking and squeezing budgets, eating up paychecks and swallowing savings. Middle class families, retirees, small businesses and farmers have watched as their savings erode in value while still facing taxes on gains that may not even keep pace with inflation. This creates a perverse incentive to spend now rather than save, further fueling inflation. The Middle-Class Savings and Investment Act would target relief on interest income for lower and middle income Americans to help them save and invest. Specifically, it would exclude up to $600 interest income for married couples/$300 for individuals from taxation; double the size of the zero percent (lowest) tax bracket for long-term capital gains and qualified dividends, indexing the income thresholds to inflation; eliminate the marriage penalty on the Net Investment Tax, which subjects some income to an additional 3.8 percent tax, indexing its income threshold to inflation; and, increase the maximum ‘savers credit’ that an individual may receive for contributing to a qualified retirement account and expanding eligibility to more taxpayers. Making it pay to save, rather than spend is one tool Congress can use to help rein in inflation without the harmful consequences of more reckless federal spending, dangerous windfall profit taxes, or wage and price controls.