Economists continue to raise concerns that a recession is imminent as low-income Americans run out of discretionary income to spend. The worries many mean Congress provides low-income Americans money to cope with the soaring price of oil and gas, which leaves few funds to pay for other necessities, such as food and housing, which have become more expensive.

As has been the case with consumers worldwide, U.S. consumers have been the economic victims of the Russian-Ukraine war. First, it added fuel to the oil and gas prices. As a result, Americans have to pay more to keep their homes and drive to work and the local store. Meanwhile, rising oil prices have raised the cost of transporting every product, including food, worsening food inflation. When rent hikes are added to the equation, life becomes far more expensive than a year or two ago.

Rising inflation is terrible for every household. It’s like universal taxation that diminishes the value of household income. But it is worse for low-income families than high-income households, as they spend a substantial percentage of their income on essential items that have risen in price, like oil and gas.

Therefore, it should not surprise anyone that low-income Americans feel worse these days than they felt back in the pandemic recession. That’s why Congress may be wise to send out oil money to low-income Americans to cope with the higher energy bill.

While U.S. consumers have been the economic victims of the Russian-Ukraine war, they have been financial beneficiaries of that war, too. Oil and gas companies pump out as much oil as they can at skyrocketing prices, boosting their top and bottom lines. That’s why Congress should be taxing these companies to pay for the money it sends to low-income Americans.

The trouble is that large oil and gas companies enjoy oligopoly power, meaning they are in a position to pass the tax on to consumers, aggravating rather than easing the pain of high oil prices.

“The problem with an across-the-board tax on fossil fuels is that it will hit the lowest-income users the hardest, making it politically and morally impossible – as France discovered with its gilets jaunes rebellion,” said Michael Edesess, managing partner at M1K LLC.

Edesess advocates for introducing a pollution tax, which benefits low-income Americans and helps fight climate change.

“Virtually every economist in the world believes that the best way to mitigate climate change is to tax emissions of greenhouse gases, particularly the carbon dioxide that is emitted by burning fossil fuels like gasoline,” he said.

“Therefore, the best way to implement such a tax, both politically and economically, is to make it 'revenue-neutral,' that is, it won’t add, on net, to the government’s revenues. Instead, all or a portion of it can be returned to citizens, but in a 'progressive' manner – that is, the lowest-income recipients will get a disproportionate percentage, enough to neutralize the tax’s impact. Such a tax will tend to discourage the use of fossil fuels, and thereby reduce carbon dioxide emissions but in a politically acceptable way.”

Meanwhile, oil money will help low-income Americans maintain their spending on other items, saving the economy from another recession.