The Inflation Reduction Act (IRA) of 2022 has reignited the debate over the root cause of today’s inflationary environment and recession.
From global supply chain snafus to Russia’s invasion of Ukraine, many economists and market analysts have alluded to a wide range of issues adding to the highest level of the Consumer Price Index (CPI) in 40 years. But some experts say that the source of rampant inflation was excessive pandemic-era government spending.
With inflation eating into economic growth prospects, the next discussion will be if exceptional public expenditure—from the pandemic to the IRA—have fueled the recession.
Looking Back at Fiscal Stimulus Efforts At the start of the COVID-19 public health crisis, the federal government approved the $2.1 trillion CARES ACT, which consisted of $500 billion in direct payments to Americans, $208 billion in loans to major industries, and $300 billion in Small Business Administration (SBA) loans. At the same time, the Federal Reserve launched its multi-trillion-dollar quantitative easing program, an initiative that included purchasing government and corporate bonds and mortgage-backed securities and slashing interest rates to near zero….