This is Biden’s Inflation Plan‽
(DC Deconstructed: A View From the Carriage House is a recovering 2020 congressional candidate’s ironic view of Washington politics. I live in a small, quirky carriage house, and this column is my view of DC as I see things. If I don’t get too much hate mail, then maybe we’ll keep it rolling. On the other hand, if I get enough hate mail, maybe I’ll keep doing it “just for the sake of my own stupid pleasure.” Let’s find out.
P.S. Each heading is a quote from something somewhere or other. To the person who emails me 11 correct identifications, I’ll buy you a drink at Martin’s Tavern…or we can have a friendly chat over the phone while I’m at Martin’s having a drink. Why 11? Because that’s how we play NumberWang around here.]
“Milton Friedman isn’t running the show anymore.”
Joe Biden – April 2020
Glibly thus did then-presidential candidate Joe Biden describe his economic vision for America on the campaign trail in April 2020. Had he not so clearly delineated his economic approach against that of the Nobel Prize-winning economist of the Chicago School, comparisons between Republican policies and Democratic policies might be murkier. The results of Biden’s 2021 stimulus package are now in. As senior economists at the US Treasury warned him, this package was bound to be inflationary and has proven to be so. Good old Milton Friedman would have told him the same. It is clear now as to who is running the economic show.
When Biden spoke those words, I was reminded, as I am more so now, of the t-shirts that were in vogue in my youth that read:
“God is dead.”
“Nietzsche is dead.”
President Pangloss might think the economy is going great guns. He might even think that Afghanistan was a success. Maybe the fanboys actually believe we have the “fastest-growing economy in the world” (not true) or that core inflation is down (wrong again), but most Americans are not quite as convinced. They’re worried about inflation and consumer sentiment plunged to an all time low. The Business Roundtable CEO Economic Outlook Index has declined dramatically in six months. After 18 months of Biden’s presidency, and amidst the January 6 Committee’s anti-Trump extravaganza, people prefer Trump to Biden in a head-to-head contest.
Given the dire state of affairs, this would be the time for the president to get serious, demonstrate clear thinking and come up with new ideas. Instead, Biden has published a rather curious op-ed detailing his plan to tackle inflation in The Wall Street Journal. Sadly, this plan amounts to very little. Biden grandly promises three things:
- To leave the Federal Reserve alone,
- To push green energy, and
- To reduce the deficit.
To use this Irish Catholic president’s own words, this plan is malarkey.
“Don’t use three words when one will do, don’t shift your eyes, look always at your mark but don’t stare, be specific but not memorable, funny but don’t make him laugh, he’s gotta like you then forget you the moment you’ve left his sight…”
Biden’s op-ed is rather prolix. He uses a lot of words but says little and is utterly forgettable. There is another point to remember. The law prohibits Uncle Joe from playing footsie or getting handsy with the Federal Reserve. So, the president is promising not to do what the law tells him not to do. No shit, Sherlock!
In recent months, the Federal Reserve has not exactly covered itself with glory. The cover story of the April 23rd-29th edition of The Economist was “The Fed That Failed.” I agree. I’m not sure I have faith in the very people who ignored inflation as a “transitory” phenomenon. Yet I would prefer they deal with inflation instead of Uncle Joe.
Ah, dream too bright to last!
Ah, starry hope! that didst arise
But to be overcast!
Biden’s second promise kicks the fever dream of ideologues on the left. They believe that a Green New Deal would build infrastructure, create jobs, and bring down inflation at the same time. It would be a magic bullet or, even better, a bullet train to the Promised Land.
This green romance does not seem to survive first contact with reality though. Nickel prices may not be at the highs they soared to in March but they are still bloody high, and you can’t go green without Class 1 nickel. Even if we did have reasonable nickel prices, the US has a single nickel mine, the Eagle Mine in Michigan. There is simply not enough nickel to go green.
Furthermore, as we learned from the energy crisis of the 1970s, it’s not great to put all your eggs in a foreign-sourced basket. This is what the Biden administration has ended up doing by canceling the mining leases of the Twin Metals mining project that was the other nickel mine in the US.
Twin Metals claims it has 99% of US nickel reserves, yet Biden’s Interior secretary said she “can’t answer” if it will ever be allowed. We import a lot of nickel. In fact, Russia is one of the main suppliers of nickel to the US. So, nickel mines in the US make eminent sense. Instead, the administration seems to be hell bent on killing nickel babies in their cradles and putting clean energy security at the mercy of the likes of Russia.
It is not just nickel that is scarce. We have a single US mine for rare earths. China produces four times what we do and makes up 60% of the rare earths global market. There’s no way we can be a green energy powerhouse when China has six state-owned mining companies while the US has only one, single mine: Mountain Pass. We very much have a simple problem; the US lacks the raw materials to go green.
It is not just raw materials that are the problem. When it comes to solar power, 90% of all panels installed in the US come from China and Southeast Asia. Note that panels from the latter part of the world are manufactured by Chinese companies. These companies have been accused of dumping solar panels into the US market, undercutting American companies in the process. These companies petitioned the US Commerce Department, which launched an investigation into the matter.
Under the Biden administration, that investigation has been practically buried. So, China will continue to corner the market in solar and we will offshore our green energy to the Middle Kingdom. Under President Pangloss, we will build the entire US green economy around the kindness of strangers from sea to shining sea.
I would think that the key lever to control inflation would be to curb energy prices. Since February 24 when Russia invaded Ukraine, there has been a supply shock when it comes to oil and natural gas. For years, the Democrats have been squeezing domestic energy production and distribution in an idealistic and ideological pursuit of making the US cleaner and greener. They have killed offshore drilling, fracking, shale gas, the Keystone XL pipeline and the like.
Today, the US needs more domestic production and distribution if it is to control inflation and achieve energy security. Yet the Biden administration seems to be unable to dismount from its ideological high horse. The president is busily sending oil execs nasty letters, canceling oil and gas lease auctions, and doing his best to make sure the US doesn’t have any lease sales while he’s in office.
Biden has anointed Amanda Lefton to draw up the US offshore energy policy. She has drafted a five-year leasing plan that was released on July 1, in a pre-July 4 holiday Friday afternoon news dump. This makes drilling all but impossible in the waters off the Atlantic and Pacific coasts. If this does not tighten energy supply, I don’t know what else will.
Instead of producing more oil and natural gas, the US seems to be looking to import them from abroad, including Iran and Venezuela. Surely, it is unlikely that their production methods are cleaner than US ones. Also, why should US taxpayer money go to foreign ones, especially those with a history of hostility to Uncle Sam.
It is not only production but also refining capacity that needs to go up in the US. That would lower oil prices at the pump and bring down inflation. Yet Chevron’s CEO, Mike Wirth, recently said he didn’t envision a new US refinery ever. What is going on?
Refineries are capital intensive. As Wirth said, “You’re looking at committing capital 10 years out, that will need decades to offer a return for shareholders, in a policy environment where governments around the world are saying we don’t want these products.” Given the likes of Lefton in charge, it makes little sense for Wirth or any oil and gas executive to make capital investments in the US.
In the country of the motor car, Biden has promised to eliminate fossil fuels. He has turned up the rhetoric against oil companies. Recently, the president said, “Exxon made more money than God last year” before angrily telling the company “Start investing. Start paying your taxes.” For all its faults, it is highly unlikely that Exxon stopped doing either.
Few know that oil companies have to pay royalties when they drill on federal lands. These have remained flat for more than a century, but recently the Biden administration hiked up royalties by a whopping 50%. Given surging inflation, this is not exactly the best time to hike up royalties. Biden claims oil companies aren’t investing and are gouging consumers. It seems that the Biden administration is doing the gouging instead. Note that gasoline prices went up by over 40% during the first year of the Biden presidency. Blaming the “Putin price hike” for all the US energy troubles is a bit too clever by half.
Lately, I feel the haters eatin’ away at my confidence
They scream out my failures and whisper my accomplishment
Biden’s third promise is to reduce the deficit. In his op-ed, Biden’s claims that he has already done so. Yet the president feels that people do not give him credit for his many accomplishments. Is this true?
Let us just examine one of the accomplishments for which Biden pats himself on his back. The president claims that he has reduced the deficit this year. Given that he passed the $1.9 trillion COVID stimulus last year, a reduction in the deficit this year was not such a big deal. As pointed out earlier, economists in the US Treasury had told senior officials in the Biden administration that the stimulus would be inflationary as it has clearly proved to be.
Biden has also signed into law further spending of $1.1 trillion on “infrastructure,” which takes his total expenditure to $3 trillion already. Ironically, little of the money earmarked for infrastructure will actually be spent on infrastructure. Yet Biden has the cajones to tout his credentials as a deficit reducer.
In reality there are three reasons why he isn’t increasing the deficit in a wild blowout. First, the US Congress has put the kibosh on Build Back Better, which originally planned to spend approximately $4.5 trillion over 10 years. Second, the COVID panic is finally over in the US. Third, tax receipts are way up because job numbers are up with COVID under control and inflation-triggered wage increases have put people in higher tax brackets.
At a time when the stock markets have crashed and people are feeling poorer, Biden makes another curious argument in his op-ed. He will dramatically increase the budget for the Internal Revenue Service (IRS) to collect “taxes Americans already owe.” As many others have done before him, the president is promising to reduce the infamous “tax gap,” the $600 billion that the IRS loses out on because of unreported payments (often in cash) and the sheer complexity of the US tax code. While I support collecting taxes that are owed, significantly increasing the size of a tarnished, partisan IRS at a time of economic and political uncertainty does not make sense.
While concluding this op-ed, Biden does what any good politician does in a campaign. He paints his Republican rivals as barbarians at the gate who would sack the US economy. Most Americans now no longer buy Biden’s shtick. They have lost confidence in his competence to run the economy and the midterms are likely to reflect that fact.
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.