The talk of the town today is President Joe Biden’s Wall Street Column Magazine: “My plan to fight inflation.”
There are many ways to read this, but one of my thoughts is that this little piece basically shows that he is trying to prepare people for some very bad economic news ahead.
He won’t intervene at the Fed when it raises rates and pulls cash out of the economy, but he knows all too well that the economy is heading for a recession.
The recession part is all about transition rhetoric. He tried to show that inflation would magically drop from 10% without causing unemployment or higher. The idea was to hope for a major victory over experience, and he knew it.
Biden’s so-called “anti-inflation plan” is nothing new except for this futile attempt to get beyond the recession curve. Domestic spending is not frozen. He still wants to spend his money on housing, childcare, elderly care, and no doubt the usual “build back better” agenda.
He remains pinned on a fossil-free economy, with more subsidies for various Green New Deal programs.Remember last week in Japan, he was talking about
“Transition” to a fossil-free economy?The Bidens are not dissatisfied Record gasoline prices at the pump, and even the world oil price of $120 today. How will SPR oil sales affect us?
Let me reiterate my view that a fossil-free economy will lead to a permanent recession, leaving millions unemployed, along with high unemployment and high inflation. In other words, a disaster.
Mr Biden wants to spend more on infrastructure, despite his own EPA scrutiny of its environmental impact, stopping not only fossil fuels and pipelines, but highways, bridges, roads and tunnels. The president still wants state prescription drug price controls, and he’s still attacking profitable businesses.
If he really wanted an antidote to inflation, he would turn on the taps of oil and gas production, but that’s not what he wants.
He talked about reducing the federal deficit, but it was a one-time event after emergency spending ended, with a huge revenue windfall, partly from inflation and partly from Trump’s successful tax cuts.
According to the CBO, the deficit will increase by $16 trillion over the next decade. Public debt will reach 110% of GDP, and federal spending will exceed 23% of GDP—well above the 50-year average.
There was no mention of the supply-side incentives that deregulation would bring — not just energy, but commerce in general. At the same time, there are the usual Biden-style (as opposed to Iowa) lies.
He said the economy had stalled when he took office, but in reality it grew 4.5% in the fourth quarter of 2020 and 6.3% in the first quarter of 2021.
That’s why the “stimulus” of March 2021 is unnecessary and highly inflationary; the economy is already growing very rapidly.
Biden has written about households saving more, but in reality, the saving rate was 4.4% in April, down from 12.6% a year ago.
He talked about improving consumer confidence, but unfortunately, the latest Conference Board and University of Michigan confidence indicators show a sharp drop.
Meanwhile, real disposable income, excluding taxes and inflation, has fallen by more than 6% over the past 12 months.
Sure, Biden poked Trump again, saying “my predecessor devalued the Fed,” but the truth is, no one can figure out why Jay Powell raised the Fed’s target rate four times in 2018 while inflation was low The Fed’s target is 1.9%.
With the economy actually growing at 4% with virtually no inflation just after the Trump tax cuts were implemented, President Trump has every reason to be unhappy with his Fed chair appointee.
Biden couldn’t resist his attack on the successful, renewing his calls for a forfeiture tax and punitive international taxes on U.S. corporations. So, let’s do it again, higher taxes reduce inflation.
Really? In effect, higher tax rates reduce the impetus for economic growth, leading to higher supply-side inflation. So Mr Biden did not reset inflation today. This is Vladimir Putin’s fault.
Instead of increasing oil and gas production, we will not use fossil fuels. We’re going to keep doing federal spending, borrowing, and debt creation that won’t hurt the economy or working people, but we’re going to keep Jay Powell as tight as possible because there will be no economic consequences. I don’t buy it. Glad the cavalry is here.
This article is adapted from Larry Kudlow’s opening remarks in the May 31, 2022 issue of Kudlow.