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Experts say Holcomb's plan could hurt inflation more than help it

Holcombs Plan experts weigh in.png
Posted at 8:13 PM, Jun 09, 2022
and last updated 2022-06-10 10:11:36-04

INDIANAPOLIS — Getting some of your tax dollars back may seem like something to be excited about, but economists say putting more money back into the economy isn't a solution for inflation it will likely make things even worse.

"At this point just throwing an extra billion or billion and a half into the economy of Indiana which is what this plan would do is going to modestly stoke inflation,” Mike Hicks, an economist at Ball State University, said. “It's not going to be another eight percent on top of this but it would be enough to hit the pocketbooks of every household in Indiana. “

According to Hicks, giving Hoosiers this stimulus check will also likely make certain goods and services even more expensive than they already are. Mainly because when people have more money in their pockets, demand for just about everything needed on a day-to-day basis goes up.

"The challenges of a plan like this is we've known for almost a century that the real causal factor of inflation is this extra supply of money,” Hicks said. “So, nobody in their right mind would put money back into an economy to reduce inflation. "

That’s why financial planners like Peter Dunn say the best thing Hoosiers can do with this money is to save it rather than spend it.

"This is really to make up for inflation,” Peter Dunn, the CEO of our Money Line, said. “So, this is money you have already spent and because prices are so high. So really this should go into savings. This should replenish our accounts which have dwindled because of inflation. “

Democrats proposed a different solution for inflation and prices and the pump. They proposed getting rid of the gas tax temporarily, which is something that had no Republican support at the statehouse.

Hicks said that isn't a good solution for inflation either.

"The opposition by the Holcomb administration to the gas tax cuts is thoughtful and smart,” Hicks said. “But that's a better idea than the tax rebate because inflation doesn't affect us all equally."

Hicks added that states can do little to help inflation, which is why the Federal Reserve is looking to increase interest rates soon. That’s why economists are saying if you are in the market to buy a car or house, you should do it now before interest rates are increased.

Typically, the Federal Reserve looks for interest rates to be around two percent. Right now they are at eight which is why so many goods and services are expensive.