Governor of New York Wants To Hand Out $3 Billion And Bring Back Inflation

Dec 12, 2024

To investors,

Politicians are not economists, nor do they understand economics. We are reminded of this every few years.

The latest reminder comes from New York Governor Kathy Hochul. She put forward a proposal this week to give an “inflation refund” to nearly 9 million New York residents.

Here is the description of the new program from her announcement:

“As her first proposal for the 2025 State of the State, Governor Kathy Hochul today proposed New York State’s first-ever Inflation Refund, which would deliver about $3 billion in direct payments to around 8.6 million New York taxpayers statewide in 2025. This new refund would send a payment of $300 to single taxpayers who make up to $150,000 per year, and a payment of $500 for joint tax filers making up to $300,000 per year. Today’s announcement is one of several proposals to help address the cost of living that will be unveiled as part of the Governor’s upcoming State of the State.
“Because of inflation, New York has generated unprecedented revenues through the sales tax — now, we're returning that cash back to middle class families,” Governor Hochul said. “My agenda for the coming year will be laser-focused on putting money back in your pockets, and that starts with proposing Inflation Refund checks of up to $500 to help millions of hard-working New Yorkers. It's simple: the cost of living is still too damn high, and New Yorkers deserve a break.””

This is insane. There is no other way to describe it. Handing out free money causes inflation, so if you hand out free money during times of high inflation then you make the situation worse.

November’s CPI report of 2.7% shows inflation is not under control, which means Hochul will accelerate inflation in New York if she hands $3 billion out to citizens.

Why would she do this?

Because politicians can’t resist the opportunity for a photo opportunity. Don’t believe me? Here is a video of Governor Hochul boasting about her plan to give $3 billion to New Yorkers less than 48 hours after the plan was publicly announced.

Famed economists Milton Friedman said “inflation in the United States is made in Washington and nowhere else,” but the Governor seems to want the state to get into the inflation game.

Here is the craziest part — the Office of the New York State Comptroller released a report in July forecasting a nearly $14 billion deficit over the next three years for the state. So instead of using the additional sales tax revenue that has been generated to pay down the deficit and/or debt, the Governor is proposing to hand the newfound revenue back to citizens, which will accelerate inflation and increase the cost-of-living.

These situations always remind me of high school class president races. The popular kid in school would run against a kid handing out candy. The kid handing out the candy would always win. That is how our current politicians act — handing out cash like candy.

One way to fix this would be to require every politician who gives out free money to put some of their personal funds into the bucket of capital being handed out. If Hochul wants to hand out $3 billion, would she also be willing to hand out $300,000 of her own money?

I don’t think we need to wait for the answer.

Politicians will eventually learn that handing out free money exacerbates the inflation problem. It may be shocking they didn’t learn this lesson in 2020, but here we are.

Let’s all hope we don’t have to live through the ramifications again.

Have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Founder & CEO, Professional Capital Management

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