By TIPPINSIGHTS EDITORIAL BOARD, Tipp Insights
The Wall Street Journal published President Biden’s column outlining his plan to slay inflation. Thanks to the Journal for accepting the column. It showed the world how clueless Team Biden is. Our initial reaction was disbelief. The column epitomizes the state of affairs in the Biden administration and emphasizes why the President must can his economic team and replace it with a few experienced economists.
The article’s watchword is “transition,” a new mantra borrowed by Team Biden led by Biden economic adviser Brian Deese, from the Fed’s last year’s playbook that inflation was “transitory.” Despite a previous column by Dan Henninger in the Journal and a tippinsights editorial, Team Biden doubled down. The article accentuates “transition” four times. If you believe President Biden, we are in a “transition” to a ‘milk and honey’ economy.
Here’s President Biden’s three-point plan to tame inflation.
First, inflation is the Federal Reserve’s business. I’ll let the Fed manage it. While I’m at it, I’ll take a gratuitous shot at my predecessor without naming him. This way, I am uniting the country.
Second, make things more affordable for families, including gasoline prices. Of course, it’s an opportunity to reiterate the blame for high gasoline prices on Vladimir Putin and take credit for draining the strategic petroleum reserve. Never mind, gasoline prices had risen 41% between the inauguration and the start of the war.
Further, Biden also provides a laundry list of subjects every politician blathers about to obfuscate and provide some meat: fixing the supply chain (that he has not been doing for the past 18 months), improving infrastructure (which will need more government spending*), reining in the cost of shipping companies (as if energy is free for them), making housing more affordable (déjà vu, 2008), lowering the price of prescription drugs (the Congress has been working on this for the past two decades to no avail), and reducing the cost of child and elder care (meaning more subsidies and increased government spending).
*(The issue with infrastructure is not that it will need more spending but that these projects take forever to complete, and the benefits to the economy come in slowly. Furthermore, America is facing a significant labor crunch in construction, and we are short on skilled labor, so even shovel-ready projects have been slow to take off.)
Third, lower the deficit by increasing taxes on businesses and billionaires—a great way to incentivize!
Glaringly missing in the article are mentions of the impending recession and possible stagflation and how 401K portfolios are taking a beating in the stock market.
President Biden disingenuously takes a victory lap that he has reduced the deficit. He hopes that mere mortals like us have forgotten the multiple waves of the pandemic stimulus in 2020. The President noted that the CBO deficit would fall by $1.7 trillion this year, the largest drop in history.
Of course, the President ignored his fiscal policy’s role in creating inflation. His $1.9 trillion government spending alone added two to four percentage points to the current inflation of 8.3 percent. His policies had pumped copious money into the economy even when the unemployment rate had declined, and economic growth had returned. The liquidity gusher has goosed up demand, but we have not seen any serious attempts to ease the supply bottlenecks. As a result, the average Joe is experiencing historically high inflation in the prices of groceries, gas, housing, and everything else.
We must thank Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) here. If Biden’s Build Back Better had passed, inflation would now be in double digits.
While it is true that unemployment has been low for the past two years, President Biden’s claims are only half true because the labor participation rate has remained low. Many who exited the labor market during the pandemic have not returned. Generous entitlement programs, increased savings resulting from monetary handouts, and inflated asset values serve as a disincentive for many to return to the labor force.
President Biden naively believes that higher taxes, governmental intervention in markets, and even more regulation will lower inflation. They won’t. He fails to appreciate that his continued penchant for spending, excessive regulation, higher taxes, open borders, and stymieing of the energy sector will only intensify and not ease inflation.
Action is needed to reduce demand and increase supply to rein in inflation. Demand will cool down if the Fed increases interest rates and takes quantitative tightening seriously. The administration must resist the temptation to boost the economy with easy credit, redistribute income by resorting to higher taxes, or canceling student loans. To spur supply, the administration must focus on making regulations business-friendly. While climate risk is real, choking the domestic energy sector through regulation reflects an incredulous belief that alternative energy sources will quickly bridge the demand-supply gap, especially when geopolitical developments have widened the gap.
In the column, Biden brags about his many accomplishments. However, most Americans do not recognize them, as evidenced by the fact that only 29% approve of his handling of the economy in the most recent TIPP Poll.
The President must break free from the grip of the far left and begin to care for all American families. He also needs a capable team of economic advisers to guide him. If he continues on his path to nowhere, voters will teach him a lesson in the midterm elections.
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