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Road to Perdition

Taxes The Economy

President Biden recently signed his much-debated bipartisan infrastructure deal.

What does that mean for the economy?

In the short term, some of the infrastructure funding will go immediately toward clearing port and transportation bottlenecks, so that might help improve supply chain issues.1 Fingers crossed.

Though it could be years before you or I drive across a new bridge or highway funded by the bill, some of the maintenance funds could get used in spring construction blitzes.2

Since the job market is already tight, the economy isn't likely to see an immediate surge in hiring due to infrastructure spending; however, some reports suggest ~800,000 new jobs could be added by 2030, though many of them will be temporary rather than long-term jobs. And there is also the ongoing question of will people return to work?

Some economists don't think inflation is likely to increase due to the slow pace of spending, though the deal is projected to add an additional $256 billion to the already grim federal budget deficit over the next 10 years!

Bottom line, analysts project long-term benefits to the economy in lower business costs, increased labor force participation, and improved competitiveness.3 Albeit at the expense of the nation's indebtedness.

Inflation might not be as temporary as the Federal Reserve would like it to be.

Prices are up all over, and folks are understandably upset at paying more at the grocery store, gas station, and most everywhere else.

Many analysts hoped that data blips, supply chain clogs, and other pandemic-related disruptions were creating a temporary spike in inflation that would resolve soon.

Still, inflation has remained stubbornly high. Although energy is showing signs of retraction.5

In the U.S., prices have increased 6.2% over the last 12 months — the biggest spike since November 1990. And you can see in the chart that some categories measured by the Consumer Price Index (CPI) have soared by much more.6

Since the Fed's goal is to keep long-term inflation around 2% (and that's what we've experienced this century), folks are concerned that "temporary" inflation is lingering longer than we want.

So, are prices going to continue to rise in 2022?

That's likely, but how much, how fast, and for how long depend on a lot of global factors, including whether the Fed raises interest rates or takes other actions.

I'm keeping an eye on it.

Will your taxes go up in 2022?

That’s the question of the month on Capitol Hill as lawmakers debate the Build Back Better deal that could come with tax law changes.

We don’t know when (or if) the bill will be passed, but I'm watching closely and I'll update you when we know what's likely to happen.

I wish you and yours a relaxing Thanksgiving with great food, great fun, and great memories.

P.S. It’s the time of year when the analysts start making predictions for 2022. What are your predictions for next year? What will be the big themes? Click Here and let me know your thoughts!

2 https://www.cnn.com/2021/11/09/politics/biden-infrastructure-bill-spending-economy/index.html
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific situation with a qualified tax professional.