Don’t hold your breath waiting for Biden’s economic miracle
President Joe Biden wants you to know he is serious about controlling inflation and has a plan to do it. Unfortunately, his plan reveals that his administration is either in deep denial or does not understand the true cause of inflation.
His proposal is therefore practically doomed to failure.
Writing in the Wall Street Journal, the president outlined three policy choices to deal with inflation caused, it seems, in large part by pandemic-related supply chain obstructions and intensified by the war in Ukraine.
His plan is simple: continue to believe that one of the main architects of our current inflation, Federal Reserve Chairman Jerome Powell, will raise interest rates fast enough and high enough to bring inflation under control without bringing down inflation. economy, give out more grants and tax credits, and let the deficit shrink – miraculously – without cutting spending.
Absent from the article, there is no acknowledgment of what readers of this column know all too well: that inflation has been fueled by Biden’s own reckless spending policies, particularly the bailout. USD 1.9 trillion adopted in March 2021.
Half a dozen studies have shown that the fiscal policies implemented during COVID-19 are one of the main culprits of current inflation. Biden also fails to mention the Fed’s overly accommodative monetary policy and its current slow response to inflation.
In other words, the president’s argument is astounding for its deafness, incoherent thinking, and sheer economic ignorance.
For example, Biden brags that Americans are much better off financially right now thanks to his policies. But he fails to note that inflation reduces the purchasing power of the dollar and lowers the value of Americans’ savings.
Likewise, he’s proud that “millions of Americans are[getting]better-paying jobs.” What he fails to note is that inflation actually reduces the real wages of these workers.
The president also takes credit for falling unemployment, most of which happened under his predecessor. As a reminder, after the initial pandemic shock, the unemployment rate fell from 14.7% in April 2020 to 6.3% in January 2021, when Biden took office. This rate now stands at 3.6%.
Biden boasts of having “led the largest release of global oil reserves in history”. That’s pretty interesting for a president who has done so much to hamper oil and gas production.
He goes on to say that Congress needs to approve more government spending in the form of green energy tax credits, child care subsidies and other “investments” to keep inflation in check.
Many of these programs were in the Build Back Better (BBB) legislation that was scrapped last year due to justified fears of inflation. These proposals are particularly ridiculous since our current inflation, fueled by public finances, will only get worse by increasing spending.
Yet the most striking part of Biden’s op-ed comes at the end. He rightly notes that “we must continue to reduce the federal deficit, which will help ease price pressures.” It’s true. But it’s also obvious that he has no intention of cutting spending, the most effective way to achieve his goal.
After all, he proudly lists additional spending programs he would like to implement while calling for more subsidies for crony industries.
The president continues to brag about the reduction in the deficit that has taken place since he took office – a reduction, he claims, that happened because he was able to “reduce government programs.” responsibly”.
It’s fascinating, because the only reason there’s been such a cut is because BBB — which would have made many of these emergency programs permanent — was killed when Democratic senses Kyrsten Sinema and Joe Manchin joined the Republicans in opposition.
Later, Biden acknowledges that “about half of the reduction (in the current account deficit) is due to an increase in income”. This claim is also interesting given that this rise in income is partly due to rapid inflation pushing middle-income Americans into higher tax brackets, a phenomenon known as “bracket creep.”
As for any further increase in revenue, I wouldn’t count on much. The purpose of the Fed’s anti-inflation policies is to slow down the economy. The president himself acknowledges this at the beginning of his article.
We’re all used to much of the muddled economic thinking of Biden and his lieutenants, and this article is no different. As such, I won’t hold my breath in hope that Biden’s grand government plan will get inflation under control.
Véronique de Rugy holds a master’s degree in economics from Paris Dauphine University. His doctorate in economics is from the Panthéon-Sorbonne University. She is a Principal Investigator at the Mercatus Center at George Mason University. His main research interests include the US economy, federal budget, homeland security, taxation, tax competition, and financial privacy. Its popular weekly charts, published by the Mercatus Center, deal with economic issues. She has testified several times before Congress, and her articles and commentaries have appeared in the National Review, New York Times, Washington Post, Wall Street Journal and others. She has appeared on C-SPAN’s “Stossel”, “20/20”, “Washington Journal” and Fox News. Ms. de Rugy has also been a resident scholar at the American Enterprise Institute, a policy analyst at the Cato Institute, and a fellow at the Atlas Economic Research Foundation. Read Véronique de Rugy’s reports – More here.
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