As the Federal Reserve attempts to crush aggregate demand through the most aggressive monetary tightening policies in decades to cool red-hot inflation, California Governor Gavin Newsom has come up with the brilliant idea to stoke even more demand through a new round of stimulus checks.
NEW: Millions of Californians will be receiving up to $1,050 as part of a NEW middle class tax rebate. That’s more money in your pocket to help you fill your gas tank and put food on the table.
— Gavin Newsom (@GavinNewsom) June 27, 2022
The “inflation relief package” is a staggering $17 billion and will provide relief payments on an income-based system. Bloomberg Law provides more details on how the stimulus scheme works for households:
Newsom’s move to tackle high inflation by helicopter dropping billions of dollars in stimulus checks is utter nonsense and will only work counter to what the Fed is ultimately trying to achieve: recession by aggressively hiking interest rates and winding down the balance sheet to reduce aggregate demand, so consumer prices fall.
Newsom’s stimulus checks could temporarily fuel inflation in the state as households would instantly spend the free money on whatever they please. Solving inflation with more government will only worsen the situation. This is also something the Biden administration fails to see (read: .
How long until California Democrats beg for price controls as their policies could incite even more inflation? They can’t keep blaming ‘Putin Price Hike’ if their policies spike inflation.
As no lessor authority than The Wall Street Journal Editorial board succinctly concluded:
The Newsom manifesto appears to be from taxpayers according to their ability to the politicians according to their need.