270. 5 Top Issues You Should Know | This Week's Economy Ep. 70 📈

Don't miss my insights on the top economic and fiscal issues.

Hello Friends!

Welcome to Episode 70 of "This Week's Economy." Watch the episode on YouTube below or listen to it on Apple Podcast, Spotify, or your favorite podcast platform.

Today, we're diving into why we need less government spending, more abundant energy, and less involvement by the Federal Reserve and how these influence you. Let’s explore five key items:

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1. Elimination of Taxes on Tips

Issue: With the RNC taking place this week, it's an opportune time to discuss Trump’s proposals and RNC platform, particularly his proposal to exempt tip income from federal taxes. The Committee for a Responsible Federal Budget estimated that this would reduce federal revenues by up to $250 billion. Similarly, Senator Ted Cruz is leading the charge with the No Tax on Tips Act in Congress, supported by many groups, including the National Restaurant Association.

View: Exempting tips does nothing to address the root cause of our economic problems: government overspending. It could worsen the situation by significantly reducing incentives to work in non-tipped jobs as it picks tipped jobs as winners and others as losers. This tax idea also narrows the income tax base, shifting the burden of government spending on others and keeping tax rates higher otherwise. As a reminder, sound tax policy is the largest tax base with the lowest flat rate. The current economic situation hits all American workers hard, especially from high taxes and inflation. We need to address these problems to help all Americans prosper. Expanding the Trump-era tax cuts would help along with reforming the tax code to remove credits and deductions that narrow the base and reduce tax rates instead. Congress must also cut federal spending and pass sustainable budgets to address the ammunition of debt given to the Fed to print money and create inflation. Read more

2. Power Struggles in Houston, Texas

Issue: After Hurricane Beryl hit the Texas Gulf Coast on July 8, 2024, over 3 million individuals were left without power, and many remain without power. This is another example of how Texas faces ongoing challenges to its electrical grid. Governor Greg Abbott and Lt. Governor Dan Patrick have come out swinging against the government-created monopoly provider of electrical wires and poles of CenterPoint Energy, as there will be an investigation of why it has taken so long for Texans to regain power.

View: Texas is one of the most vibrant and attractive states in the United States, but the electricity market presents significant challenges. Texas must refine its energy strategies, emphasizing market-driven solutions like unleashing nuclear power and ending tax breaks and low-interest loans to energy companies to ensure a level playing field. Moreover, the state should deregulate the electricity market and remove barriers creating monopolies like CenterPoint Energy for a competitive electricity market. We should also acknowledge government failures of not only creating the monopoly in Houston but also the lack of removing debris and receiving federal funds for so many natural disasters when Texas would be better served dealing with these situations in civil society, where Texans can help Texans and get government out of the way. By championing policies that reduce government involvement and promote market activity, Texas can strengthen its infrastructure to support its growing population and sustain its status as a beacon of prosperity and freedom. Read more

3. Need for School Choice

Issue: The Republican Party announced support for universal school choice at the Republican National Convention. The Dallas Express reports that Texas Senator Bryan Hughes expects the statehouse to pass school choice next legislative session.

View: Too many kids are failing in school, and many families feel stuck within the current monopoly government school system. School choice programs have been shown to increase student performance, graduation rates, and overall satisfaction. By allowing families to select schools that best meet their needs, we can ensure that all children have access to high-quality education, regardless of socioeconomic status. Universal education savings accounts allow tax dollars to be used for more productive purposes for K-12 education, empowering parents to choose the best educational options for their children. This should also be a path to reform school finance systems in Texas and across the country by ending antiquated school finance formulas and replacing them with a universal ESA approach so that money follows the student, not systems. Read more

4. Elevated Inflation

Issue: The Bureau of Labor Statistics recently reported that the producer price index showed that wholesale price inflation reached its highest rate since March 2023 in June. The report noted, “On an unadjusted basis, the index for final demand rose 2.6 percent for the 12 months ended in June, the largest advance since moving up 2.7 percent for the 12 months ended March 2023.” However, Federal Reserve Chair Jerome Powell claimed that the Fed had made “considerable progress” toward defeating the worst inflation spike in four decades.

View: The Federal Reserve has long been behind the curve in addressing inflation, which remains elevated compared to the Fed’s 2% target. The core issue lies in the Fed's bloated balance sheet of $7.2 trillion, which has been declining but not quickly enough to counteract historic increases. These actions result in Americans losing purchasing power because too much money is chasing too few goods. To fix this, Congress must take practical steps to reduce spending and remove the ammunition it's giving the Fed to keep a bloated balance sheet, thereby creating inflation and passing strict fiscal and monetary rules. Read more

5. Need Sustainable Budgeting to Combat Deficits

Issue: With the RNC this week, the federal deficit must be discussed. The deficit in June was $66 billion. Bloomberg reports that interest payments on outstanding debt continued to drive the federal government’s budget deficit to $1.27 trillion for the fiscal year through June. During Biden’s presidency, the federal debt has increased by more than $7 trillion.

View: Congress must address its spending problem and tackle the federal deficit. Overspending has a trickle-down effect, requiring governments to raise taxes on citizens by raising taxes, increasing debt, or creating inflation. It changes price signals from government action instead of allowing voluntary exchanges by people in the marketplace to allocate scarce resources best. This hurts the potential of entrepreneurs to grow their businesses, leading to uncertainty and the burden of high taxes paid by American households, reducing the potential for economic growth. Americans already see the impact of increasing inflation, and Republicans should push for less spending. Read more

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Media Hits and Events:

• Check out my interview with Austin Peterson on his Wake Up America show as we discuss the Republican VP candidate Sen. JD Vance and more.

• Read my article at Kansas Policy Institute on how Kansas can lead the way with responsible budgeting and further tax reforms.

Let People Prosper Show

• Don't miss the latest Let People Prosper Show episode 105 with Dr. Liya Palagashvili! We had a great discussion on a pro-worker approach for good jobs. Be sure to follow her on Substack here.

• This upcoming Monday’s Episode 106 of the Let People Prosper Show is with Dr. Meg Tuszynski, Managing Director of the Bridwell Institute for Economic Freedom in the Cox School of Business at Southern Methodist University and a Research Assistant Professor at the Cox School. We discuss economic freedom and how it improves the careers of women (and men). Don’t miss it!

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Conclusion

Thanks for tuning in to Episode 70 of "This Week's Economy." I hope these issues help you better understand our world. Please like, subscribe, and share this episode. For more insights, visit vanceginn.com. Get a paid subscription today so you do not miss more information under the paywall.