In his State of the Union address last night, President Joe Biden told Americans that he had a realistic plan for bringing down inflation. The agenda he laid out, however, has little chance of doing so.
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Consider, for example, the president’s remarks about the high price of prescription medicine. It’s undoubtedly the case that U.S. consumers are forced to pay for drug research and development for the rest of the world. That needs to change.
But a cap on prescription drug prices is not the way to go about it. In reality, the proposal amounts to a tax on pharmaceutical companies.
The basic idea is that if drug companies attempt to charge prices above some government-set maximum, the federal government will simply tax the difference. Although this proposal is scored as a major revenue increase by the Congressional Budget Office, even many liberals are worried that it will stymie innovation.
The president also had some ideas designed to help workers: increases in the minimum wage, additional regulations targeting pay discrepancies and legislation designed to give unions the upper hand when organizing new workplaces. These are all controversial measures that, whatever their merits, are likely to raise costs for U.S. businesses — and increase the problem of inflation in the short term.
And then there was his worst proposal of all, at least from an inflation standpoint: his promise that the federal government will “Buy American.”
Read the full article here by Karl W. Smith, Advisor Perspectives
