The robust job growth of 528,000 in July, reported Friday, surprised forecasters and confirmed that we are not in a recession—yet. But the Fed seems determined to push us into one.

Despite the victory laps taken by Larry Summers, Jason Furman, and others who blame inflation on the stimulus of the relief spending of 2020 and 2021, most of the economy’s short-term price pressures do not reflect excess demand. Other large economies with no comparable stimulus programs are experiencing comparable rates of inflation.

Labor has far less bargaining power today than in the stagflationary 1970s. As my colleagues at the Economic Policy Institute observe, anytime wages lag far behind inflation, they can’t be driving it.

The supply chain crisis, exacerbated by Russia’s invasion of Ukraine, is compounded by the ability of large companies to extract price hikes not justified by their own increased costs. All this is intensified by long-term policy failures. These include America’s failure to build adequate affordable housing, or to contain price-gouging by drug companies, as well as its half-century freeze on antitrust enforcement.

In this context, the Inflation Reduction Act (IRA) is a huge step in the right direction. It will cap drug costs to seniors, reduce health care costs, and cut energy costs to consumers via tax credits, as well as investing in renewable energy for the long term. One splendid new provision, added to make up for the revenue losses of the corporate concessions to Kyrsten Sinema, adds a 1 percent excise tax on corporations that buy back their own shares to drive up the stock price.

Why is this anti-inflationary? Because an inflated stock price creates "wealth effects" that make people feel richer and spend more. That in turn bids up prices of housing and other scarce goods.

Because of concentrated wealth, the new stock buyback tax hits mainly the top brackets, not ordinary people. It’s a powerful example of how the menu of measures to constrain inflationary pressures are not distributively neutral.

By contrast, the worst kind of anti-inflation medicine is the Fed’s blunderbuss policy of raising interest rates. It is not targeted at all. It hurts workers, small businesses, and people seeking to buy homes or those reliant on credit card borrowing. It helps banks, and creditors generally, at the expense of debtors.

Read the full story at prospect.org