AS IF JOE BIDEN DOESN’T HAVE ENOUGH to worry about — Covid, immigration, crime, stagflation — he now faces a global energy crisis which already has engulfed Europe, China and India, as U.S. gasoline prices soar.
THE GREEN BACKLASH: Suddenly, there’s a sign that consumers are questioning tough new environmental laws, which the public increasingly thinks are responsible for higher prices. Wind and solar power, hyped by climate activists, is not sufficient to make a big difference immediately.
THE ENERGY PRICE SPIKE ALREADY IS A MAJOR ISSUE in the U.K., for many reasons — a supply crunch, the impact of Brexit, and an acute shortage of workers, especially truck drivers. Even a lack of wind this summer in northern Europe is a factor. The acute supply crunch is very good news for producers in Russia and Iran.
THIS WILL NOT BE A PRETTY PICTURE as world leaders meet in Glasgow at an energy summit later this month. Instead of bashing the Big Three of coal, oil and natural gas, many countries are desperately seeking more of those fuels as winter approaches. Curbs on consumption — including factory shut-downs — are beginning in China and India.
THE U.S. IS STILL A DOMINANT PRODUCER, but gasoline prices are up by more than $1 per gallon since spring; prices above $4 per gallon are increasingly common. This is a huge political headache for Biden, since he has few policy options; opening up the Strategic Petroleum Reserve was suggested — and quickly rejected — by administration officials last week.
THE ENERGY PRICE SURGE will take a bite out of real disposable income as the 2022 campaign season heats up. Republicans will make inflation a major theme, blaming it on huge new government spending and regulatory hostility toward energy producers. How bad could it get for Democrats? They could lose the House next year by 10 to 15 seats, perhaps more.
TAX HIKES ON THE CHOPPING BLOCK: As the $3.5 trillion price tag for social programs plummets to $2 trillion or less, it’s becoming increasingly clear that tax hikes will be pared back significantly in a final bill (if there is one).
IF THE DEMOCRATS NEED “ONLY” $1.5 trillion in revenues, that wouldn’t be very difficult to attain — a new 25% top corporate rate could raise about $400 billion, a new top capital gains rate of 25% would raise about $125 billion, and a top individual tax rate of 39.6% would raise about $170 billion.
OTHER REVENUE RAISERS that will be claimed by Democrats could include tougher enforcement from the Internal Revenue Service, producing (on paper) $200 billion, savings from government purchases of prescription drugs, and so-called “dynamic scoring,” the optimistic assumption of stronger economic growth, which could produce a few hundred extra billion.
THE MEDICARE SAVINGS, facing a barrage of drug industry criticism, would be controversial, as would changes in pass-through income taxes, and complex new international taxes, which are are looking inevitable in some form. But these options might not be needed to get the revenue assumptions to at least $1.5 trillion.
WHAT WOULD GET LEFT ON THE CUTTING ROOM FLOOR? The Progressives’ wish list — killing the step-up basis, toughening estate laws, taxing unrealized gains, new taxes on stock buybacks, etc. — might not survive in a final bill because, quite simply, the revenue from these provisions might not be needed in a bill costing $2 trillion or less.
VERY WELL-PAID LOBBYISTS may succeed in killing or greatly watering down the items listed in the paragraph above (lobbyists already appear to have killed reforms to “carried interest,” as usual).
THE LEFT WILL HOWL as Congress rejects new taxes on unrealized gains for the super-rich, but the Progressives’ options are clear: either accept scaled-back tax increases — or nothing at all, if the bitter fight among Democrats persists.
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