Bidenomics and the Rising Cost of Borrowing: An Unseen Tax on Lower Income Americans
As we navigate the economic consequences of the Biden administration, it's critical to unpack the impact of what is now being referred to as 'Bidenomics'. For those unfamiliar with the term, Bidenomics refers to the economic policies pursued by President Joe Biden, encompassing measures such as increased government spending and borrowing.
The record spending/borrowing binge under Bidenomics has made notable waves in the US economy. It's not just that the government's coffers are being drained; it's the repercussions this fiscal approach has on everyday Americans that's truly disconcerting.
To comprehend the situation, we need to turn our attention to the relationship between increased government borrowing and interest rates. As the government borrows more, it sells more Treasury bonds. These bonds compete with other forms of debt for investors' attention, like corporate bonds and consumer loans. To attract investors, interest rates on all forms of debt must rise. And so, a spike in government borrowing can lead to a spike in interest rates.
This has, indeed, been the reality under Bidenomics. The Board of Governors of the Federal Reserve System has reported a significant uptick in interest rates recently, which they attribute, at least in part, to increased government borrowing.
This rise in interest rates affects all Americans who borrow money - for their homes, cars, education, or credit card expenses. And it also impacts corporations, who borrow to invest and grow their businesses. However, corporations often pass along these additional costs to consumers in the form of higher prices for goods and services.
Unfortunately, the burden of these higher borrowing costs is not equally distributed. Lower-income Americans, who are more likely to carry debt and less able to absorb the increase in the cost of goods and services, feel the pinch more than most. In effect, the rise in interest rates acts as a regressive tax, hitting the less well-off hardest. This is an unseen, yet very real, Biden tax on lower-income Americans.
While it's critical to invest in our nation's future, it's equally important to consider who bears the brunt of the financing. The unseen tax of higher borrowing costs is a direct consequence of Bidenomics, and it's a burden disproportionately carried by those least able to bear it.
We need policies that promote economic growth and shared prosperity, not those that increase the divide between the rich and poor. The impacts of Bidenomics underline the need for a balanced, sustainable approach to fiscal policy.
Jim Pruden, thank you for bringing this to our attention.
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