(NewsNation) — A group of Democrats have an answer to the rising gas prices and soaring inflation that is getting worse because of the war in Ukraine: another round of payouts to some Americans.
The Gas Rebate Act, introduced by Democratic Reps. Mike Thompson, Calif., John Larson, Conn., and Lauren Underwood, Ill., would give $100 a month in energy rebates for those within certain income limits — like $75,000 for single filers, $150,000 for joint filers, and then $100 per month for each dependent up to two.
In California, Gov. Gavin Newsom is proposing a $400 debit card for car owners per car they own up to two. Newsom is also backing a plan to temporarily waive public transit fees and reduce fuel taxes. Gas in California right now averages $5.90 per gallon, according to AAA. The increase in gas prices this year will cost the average American household $2,000. That’s on top of the $1000 in extra food costs.
University of Chicago economics professor Austan Goolsbee joined “On Balance With Leland Vittert” to talk about whether this would work, and what’s really causing the problem.
Leland Vittert: Another round of stimulus. How is that the answer when you’ve got runaway inflation?
Austan Goolsbee: I don’t think it is the answer. And it strikes me that like they’re doing it for political reason, and I think they’d be well served to kind of take a step back and ask, “Would they even get political credit if you pass that?” So if you look, in the year 2021, the tax cuts to the average family were well larger than the amount that prices went up due to inflation. It was almost $1,000 more. But it wasn’t as though the federal government got lots of credit for having done that. People were still upset about the inflation. So, I just don’t see that this would have that great of a political impact.
Vittert: Yeah, I’ve never seen a poll like the one we’re about to put up. A new NewsNation inflation poll showed 95% of people are very or somewhat concerned about inflation. Now you might ask, in what luxury home are the 5% who are not concerned living? We always talk about the 1%, now we have the 5%. It feels like what you’re saying is that the timeline on this getting under control, it just continues to spread out and be longer.
Goolsbee: Definitely. Look, there’s war in in Ukraine, and as we’ve discussed before on this program, Leland, there are going to be some economic sacrifices, there are going to be some costs. You’ll see it even more in Europe than in the U.S. because they get their energy from Russia. But that whole thing has extended the timeline of what even the most optimistic people were hoping for getting the inflation rate down. That’s just a reality, and the problem of that reality is not on a political timetable. You can see in Washington they’re on like a November election timetable. The answer is there’s not a whole lot you can do by the summer before the November election. You need to get a bunch of things in the wider economy and the wider geopolitical world to go in your favor, and they’re not under your control.
Vittert: You made a point in terms of the political timetable, and Democrats understand who is getting the blame for this. NewsNation polling shows 44% of Americans blame either (President Joe) Biden or Dems in Congress. Only 30% blame Russia. More, 33%, blame President Biden. Only 21% blame the oil companies. Inflation’s one thing, paying more is one thing. President Biden yesterday said that there’s going to be very real food shortages. Would you have advised him to be as blunt, No. 1? And No. 2, give me the next sentence. What should the average American do about it?
Goolsbee: Well, I thought he was saying the food shortages were going to be in Europe. It was part of his call to ramp up production, and we were going to export natural gas and food to Europe to try to relieve the problems that they’re having on that front. I think the fact that Ukraine is a big producer of wheat and other farm commodities is likely to mean that American farmers have a proverbial bumper crop. They will never have seen prices [(as high as we’re about to see) in recent years. But we’re going to continue to see extended inflation at the grocery store the way we have through the COVID period.
Vittert: And you brought up the COVID period, which is sort of when this big government spend began. We spent nearly $6 trillion on COVID relief bills. Are we going to look back on this and say it was just too much? It’s almost like giving a kid a little too much candy at Disney World. When they come off it, it’s going to be really painful.
Goolsbee: Some people are saying that. I’ve been saying from the beginning, that if you are of that view, that inflation came not from the supply chain disruptions, not from COVID, which I’m more in the COVID camp, but if you think it came from too much monetary and fiscal stimulus, you should be hyped up about 2022 when all of that stuff rolls off, and, in your phrase, the sugar high ends. I mean, it should be an abrupt end to the overheating of the economy as we move into a period of fiscal drag, because we’re not going to get increases the way we saw in 2021. The reason I don’t think that there’s going to be an immediate drop to the inflation rate is I don’t think that it mostly came from government stimulus. I think mostly it came from we got the supply chains deeply messed up. People could not spend money on services, which is what they usually spend money on. They all went out to buy physical goods and we just can’t handle that.