Monday, November 28, 2022
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California Fights Inflation by Creating More Inflation



Here’s the latest great idea out of California. Let’s fight inflation by creating more of it.

In an effort to provide relief from inflation, on October 6th, California governor Gavin Newsom actually added to inflationary pressures by distributing $9.5 billion in a free money giveaway called, “The Middle Class Tax Refund.” The “refunds” range from $200 to $1,050 per person and serve as a compliment to the $9 billion distributed last year under a similar program.

Advertised by the governor as “inflation relief,” apparently making 250 grand means you’re in the middle class because even single filers at that income level get a refund. The first reaction is, “what?”, but we’re talking California here, so maybe 250k really is scraping by.

For decades, California liberals have feasted off the cash cow built by the early pioneers in the 20th century. The inherent advantages in weather, size, western coastline geography and access to Asian markets provide benefits that other states don’t have. Companies that rely on overseas shipping find it extremely difficult to relocate, and yet, liberals have somehow turned California into a cesspool so unappealing, businesses and citizens are leaving in droves for the desert in Arizona and the humidity of Texas just to escape woke, progressive lunacy.

So, it’s not surprising that when common sense dictates the state of California should be hoarding cash and boarding its metaphorical windows in anticipation of the coming recession hurricane, instead, it’s doling out more free cash in the same way a firefighter would put out a house fire by pouring gasoline on the blaze.

Like most government mandated laws and policies in California, this one reeks of the same bizarro-world mentality we’ve become accustomed to. Whatever common sense dictates, California will do the opposite. Let’s look at how the giveaway will actually exacerbate inflation, and how that money could be put to much better use.

The Inflation Relief Plan Will Cause More Inflation

Even the most ardent Keynesian economist would have to admit that the distribution of stimulus money and PPE loans during the COVID pandemic was an unmitigated disaster in the long term. The loose money party is over, and the stock and bond markets have been feeling the hangover since January. The general public is still largely unaware of the deep, lengthy recession we’ll probably see in the second or third quarter of 2023.

Apparently, Gavin Newsom learned nothing from our recent harsh lesson in cause and effect. Distributing free money to deal with inflation only increases demand for limited goods, which drives up prices and contributes to an inflationary spiral that will probably compel Newsom to offer another handout sometime next year.

Free Money Depresses Workforce Participation

Businesses of all size express frustration at the difficulty in finding employees. The consequence of this labor shortage is higher wages, which ultimately translates into higher prices. Worker shortages also contribute to the bottlenecks in the supply chain. Even though the statewide moratorium on evictions finally ended in July, California still offers free rent in many of the largest municipalities. If an indolent person is living rent free and receiving free money, where is the incentive to seek work?

Tax Cuts Instead of Hand Outs

If Newsom is so keen on returning money to the people, why doesn’t he consider an income tax cut? California has the highest personal income tax rate in the country at 13.3 percent, and I’m sure the people who actually earned the money would appreciate being able to keep more of it. However, we all know that isn’t going to happen. Woke liberals love the power associated with deciding who is deserving of the money other people earn. It’s the epitome of their smug self-righteousness and quest to transform America into a dependent society.

Pay Off a Portion of the State Debt

Despite the governor’s claims to the contrary, California is deeply in debt. The state currently owes $1.6 trillion, which includes an unfunded pension liability of an estimated $880 billion. Even a mild recession will put California right back in the same financially unstable position it found itself in during the 2008 financial crisis. Instead of trying to buy votes and play the role of a modern George Peabody, maybe Newsom should consider using any surplus to pay down the state’s enormous debt.

On second thought, nah… Headlines and sanctimony feel a lot better than fiscal responsibility.

Count on California for the Next Bad Idea

Whether it’s taxes, energy, free speech, crime, homelessness, personal responsibility or a myriad of other issues that require a modicum of common sense, we can always count on California to make the wrong choice.

Fighting inflation by creating more inflation… Brilliant.