Friday, September 24, 2021


Biden, Pelosi, Neal, and the Democratic Party are “Shooting Themselves in the Feet,” but…

September 14, 2021 by  
Filed under Business, Health, Money, News, Opinion, Politics, Weekly Columns

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(ThyBlackMan.com) As House Democrats of the Ways and Means Committee, Chaired by Rep. Neal, negotiate the spending of $3.5 trillion, over the next ten years, they are making it clear up front, they want to keep the current consumer tax cut to families’ plan. However, they have reverted to calling it, a tax credit rather than a tax cut. Using this language in negotiating and speaking to Republicans and some Democrats about the proposal may make it easier, to call it a tax credit, rather than what it really is, a consumer tax cut. Anytime you receive money from the federal government, that you do not have to pay back, it is a Tax Cut.

It is pretty clear Democrats intend to vigorously compete for the open seats in the 2022 elections in the House and Senate. They are flooding the economy with money and by advancing the Tax Cut to Families with Children, they are making sure money is put directly into the hands of the consumer to spend, as we approach the November elections. The cost of the bill has yet to be settled, but it appears the Tax Cut to Families with Children will survive intact.

During the last few months, indeed the last few years, I have written extensively about the need of a Consumer Tax Cut to grow our economy and create the millions of jobs we need. This is not the Data Driven Consumer Tax Cut Plan envisioned in my book, “The Fix This Time,” but we are headed in the right direction, but in the wrong vehicle (will explain later). Here is what we know, without a shadow of a doubt (COVID19 taught us), when the consumer spends, our economy grows, as consumer spending accounts for 70% of our job creation and has made the United States, the #1 economy in the world.

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Here are the facts in regard to the current Consumer Tax Cut to Families with Children and its cost. Using Democrats’ figures, roughly $15 billion monthly in TAX CUTS started going out with 170 days left in this year, as the Tax Cut to Families programs got underway in July and is scheduled to end on December 31st. It resulted in $529 million a day being given to and spent by consumers, every day, on average.

Because the 10-year, $3.5 trillion bill will be passed through a procedure called budget reconciliation, Democrats are depending on their party for passage, if they can hold them together, and will not need Republican votes. However, there are risks, and issues associated with providing consumers with what is acknowledged, as the first four-year, Direct Consumer Tax Cut in history, which Mr. Biden and his team can manage if they really want to. Democrats are using the Tax Cut to Families with Children, as a delivery vehicle, to place money directly into the hands of the consumer to spend, instead of a more traditional Data Driven delivery system.

Therein lies our risk and issue, as I mentioned, is Mr. Biden and Democrats up to fashioning a stronger long-term data driven Consumer Tax Cut Plan, is the real question? If Mr. Biden and Democrats do not deliver, a long-term Job Creating and growing economy to the American people, that is actually solid, as far as doing what it is supposed to do and seen as working, they will disappoint and fail, all of America, not just Democrats, but Republicans, as well. It would, indeed, be a disappointment, of the gravest kind.

So, let us take a closer look at the Tax Cut to Families with Children Plan, as the delivery vehicle of our first “acknowledged,” Consumer Tax Cut. Can we do a better job, based on using Data, because we all want our first real consumer tax cut, to be successful? It sure will, make life a lot easier, for all of us, and that includes large and small businesses, and corporate America.

Slow growth is a real possibility. An increase in inflation, is cause for concern, because of the current daily flushing of $529 million, through our economy, as a result of the Tax Cut to Families with Children. And Democrats want to add more spending through third party programs in the proposed $3.5 trillion budget, which will add to those inflation worries. This is concerning to the Federal Reserve (Fed).

What the Democratic Party should be concerned about is, you must first have a legitimately long-term growing economy, foundationally, one that is actually increasing GDP, and creating jobs, before weighing the economy down with questionable third-party programs, which do not grow jobs but are deficit producers. The Federal Reserve recently announced, it will consider rolling back its easy money policies, as we approach the end of the year, to fight inflation, which should be of concern to Mr. Biden, his team, and Democrats. The last thing they want to see, is job creation, impeded by the noise associated with the increase in interest rates.

However, a major flaw or shortcoming of the $529 million a day Consumer Tax Cut to Families with Children Plan is, it cannot tolerate any daily increases in interest rates. Yet, incremental increases in interest rates are the main tool the Federal Reserve uses to control inflation. The reason the plan has a problem in this area is because the recipients of the tax cut are vulnerable to layoffs as interest rates rise, like any other active worker group.

Layoffs will reduce the effectiveness of the Tax Cut to Families with Children when it comes to job creation, due to a loss of income to the recipients, as a result of them being laid-off from their jobs, leading to a reduction in consumer spending, which reduces economic growth, and the ushering in of a slow growth economy, much like what plagued Democrats, after the 2008 Great Recession. There is nothing wrong with the Fed raising interest rates to control inflation. Biden and his team, if they are studying the DATA should realize this possibility and address it through a Tax Cut vehicle that can withstand increases in interest rates, and still fuel growth through consumer spending, creating jobs, even as the Fed incrementally raises rates. To not do so, is confirmation of what was said in regard to risk, mentioned above. Does the Biden administration have respect, for DATA, and facts, when it comes to long-term job creation, and economic growth?

So, what should the Biden administration do? It can reduce the amount of the money being spent on Families with Children Plan and shift the difference to a data-based demographic, which will complement the Federal Reserve’s efforts to control inflation. We have seen with our own eyes, in the last two months, in real-time what a Consumer Tax Cut can do. We know in principle, putting money directly into the hands of consumers, really works in creating jobs. Democrats executed a winning strategy to grow the economy with its direct tax cut, creating 1.053 million jobs in July, and now 235,000 in August, in spite of the Delta Variant of the COVID19 virus!

Consumption data show low- and middle-income Americans are more likely than wealthy earners to spend benefits, from the government immediately, and stimulate economic growth and create millions of jobs. Baby Boomers, as a homogeneous group, who are retiring at a rate of 10,000 a day, is statistically the best target of the consumer tax cut. When it comes to daily interest rates increases, Baby Boomers are not affected, because they are for the most part retired. Thus, they are able to continuously spend benefits from the federal government, WITHOUT LOSING A BEAT, consistently creating jobs, and growing the economy, as the Federal Reserve incrementally raises rates to control inflation.

DATA shows, they are responsible for close to 40% of all consumer spending (consumption). That means they will spend the benefits from the federal government, creating jobs. Baby Boomers also, include a fair number of minorities and rural whites. A 10%, $25,000 Consumer Tax Cut, will drop $254 to $300 million, a day into our economy, for businesses, both large and small to compete for, over the next 10 years, which is the duration of the tax cut. This $1.5 trillion Consumer Tax Cut Plan, as a result of consumer spending, will continue to consistently create jobs at a hefty rate.

So, you now understand the title of this piece, Democrats have the winning strategy, right in the palms of their hands, going forward when it comes to growing the economy, and jobs. It is called a CONSUMER TAX CUT, but… their delivery vehicle is weak. Unless they change vehicles, they are shooting themselves in the feet! To risk our economic expansion, and which party will control Congress, on a shaky tax cut delivery system that will be affected by interest rates, when Biden can change the vehicle is incredibly short-sighted. The numbers, when it comes to job creation, and inflation are real! Will Mr. Biden, and Democrats follow the DATA?

Staff Writer; James Davis

Mr. Davis is a leading expert and consultant in Financial Analysis and Social Dynamics. He is a graduate of Florida A. and M. University (FAMU), a former stockbroker, and a human rights activist who resides in Sanford, Florida. He was awarded the prestigious Governor Haydon Burns Scholarship to attend FAMU and while at FAMU was awarded the first Martin Luther King Scholarship. He is the author of three books, among them is “The Fix This Time,” Boost Your Retirement Income! Simultaneously Create Jobs and Spur Economic Growth (https://www.amazon.com/dp/B00MI3PD2M).

Mr. Davis can be reached through his blog @ https://thefixthistime.com.


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