He’s trying to make the case that inflation’s miraculously going to come down from 10 percent without job losses or a higher unemployment rate. That thought is a major triumph of hope over experience, and he knows it.
There are a lot of ways to read President Biden’s op-ed in the Wall Street Journal, “My Plan for Fighting Inflation,” but one thought I have is this little essay is basically signaling that he is trying to prepare us for some very bad economic news ahead.
He won't meddle with the Fed as it jacks up interest rates and pulls cash out of the economy, but he knows full well that the economy is moving toward recession.
That recession part is what all the gobbledygook words concerning transition are about. He’s trying to make the case that inflation’s miraculously going to come down from 10 percent without job losses or a higher unemployment rate. That thought is a major triumph of hope over experience, and he knows it.
Other than this futile attempt to get ahead of the recession curve, there was nothing new in Mr. Biden’s so-called inflation fighting plan. There’s no domestic spending freeze: He still wants to spend on housing, child care, elder care, and undoubtedly the usual “Build Back Better” agenda.
He’s still banking on a fossil fuel-free economy with more subsidies for various Green New Deal projects. Remember last week in Japan, he was talking about “transitioning” to a fossil-free economy?
The Bidens are not unhappy with record gas prices at the pump, or even today’s $120 world oil price. How’s that Strategic Petroleum Reserve oil sale working for us?
Let me repeat my view that a fossil-free economy would generate a permanent recession with millions of job losses that would combine high unemployment with high inflation. In other words, a disaster.
Mr. Biden wants to spend more on infrastructure, though his own EPA, with its hugely restrictive environmental impact reviews, is not only stopping fossil fuels and pipelines, but also highways, bridges, roads, and tunnels as well. The president still wants national prescription drug price controls. And he’s still attacking profitable businesses.
If he really wanted an inflation antidote, he would open the spigots for oil and gas production. But that’s not what he wants.
He talks about reducing the federal deficit, but that’s a one-time event from the end of emergency spending, assisted by a huge revenue windfall, partly from inflation, and partly from the successful Trump tax cuts.
According to the CBO, deficits are going up $16 trillion over the next 1- years, publicly held debt will come to 110 percent of GDP, and federal spending will exceed 23 percent of GDP — way above the 50-year average.
There is no mention of supply-side incentives that would come from deregulation. Not just of energy, but business in general. Meanwhile, there are the usual Biden-mean (the opposite of Iowa-nice) falsehoods.
He said the economy had stalled when he took office, but in fact in the fourth quarter of 2020 it increased 4.5 percent and in the first quarter of 2021 it increased 6.3 percent.
That's why the March 2021 “stimmy” was unnecessary and highly inflationary; the economy was already growing very rapidly.
Mr. Biden wrote about families increasing their savings, but, in fact, the savings rate for April came in at 4.4 percent, significantly lower than the 12.6 percent saving rate of a year ago.
He talked about improving consumer confidence, but unfortunately the latest Conference Board and University of Michigan confidence measures show substantial declines.
Meanwhile, after taxes and after inflation, real disposable income has fallen more than 6 percent during the past 12 months.
Mr. Biden, of course, took yet another poke at President Trump, saying “my predecessor demeaned the Fed.” But, in fact, nobody could figure out why Chairman Jay Powell increased the Fed’s target rate four times in 2018 with an inflation rate below the Fed’s target at 1.9 percent.
Right after the Trump tax cuts were enacted, the economy was actually growing at a 4 percent rate, again with virtually no inflation, and Mr. Trump had every reason to be cross at the Fed chairman he appointed.
Mr. Biden couldn't resist his attack on successful people, once again calling for a confiscatory wealth tax, and punitive international taxes on American companies. So here we go again with the idea that higher taxes will reduce inflation.
Really? Actually, higher tax rates will reduce economic growth incentives and lead to supply-side inflation increases.
So, there was no inflation reset from Mr. Biden today. It’s Vladimir Putin’s fault.
We’re going fossil-free instead of increasing oil and gas production. We’re going to keep on with federal spending, borrowing, and debt creation, and none of this is going to hurt the economy or working people one bit.
But we are going to let Mr. Powell tighten as much as he wants, because there will be no economic consequences. I’m not buying it. Glad the cavalry’s coming.
From Mr. Kudlow’s broadcast on Fox Business News.
