While Americans were doomscrolling through election results on the morning of November 9, something more consequential than the Democrats’ potentially holding the Senate was unfolding: an ominous round of tech layoffs. According to internal documents, Meta (formerly Facebook, Inc.) is letting go of more than ten thousand employees, with additional pink slips likely to follow. The Meta news comes on the heels of Salesforce’s latest sacking spree, which reportedly put hundreds of workers into the ranks of the unemployed earlier in the week.
Though tech has become a punching bag for the American political Right, these developments are signals of a coming wider recession. While we have been caught up in the midterm melee, bad economic trends have become more pronounced in recent weeks. Take, for instance, the recent OPEC Plus decision to cut oil production. Though the White House framed it as cynical realpolitik — and while it certainly met with the Kremlin’s approval and showed the failure of President Joe Biden’s fist-bump diplomacy — the decision was a sober, preemptive retrenchment in the face of a global downturn.
Meanwhile, with inflation raging at levels not seen in forty years, the U.S. Federal Reserve is ratcheting interest rates ever higher, sending shivers down the spines of investors and macro observers. Though the Fed may yet land the monetary equivalent of a figure-skating quadruple axel, stemming inflation without sparking a recessionary pullback, the odds are against it. The OPEC production cuts can be interpreted as a targeted blow against the Biden presidency only by the most conspiratorially minded. OPEC sees a looming demand slide ahead as the inflation bubble bursts, a view that comports with other energy forecasts, such as those from the U.S. Energy Information Administration and the International Energy Agency. As is the case in American tech giants’ belt-tightening, OPEC’s planning is a reaction to economic expectations. Across many sectors, the repercussions of policy mistakes are now being felt.
With its clunky phrase “Putin price hike” and the accusations it has hurled at OPEC Plus, the White House has deflected responsibility for the economic woes of its own making. According to the Economist, Biden’s signature 2021 bill, the American Rescue Plan, and other recent fiscal profligacy have added 2.5 percent to the vicious inflation that is draining Americans’ savings and prompting the Fed to hike rates. The president and his handlers claim that the stimulus was a needed jolt for an economy stuck in the mire of a pandemic. But the Economist — no one’s idea of a Trumpian mouthpiece — disagrees, writing, “Whereas Mr. Trump’s stimulus arrived when America was suffering the economic equivalent of cardiac arrest, Mr. Biden’s came as it was staging a healthy recovery.”
With the House set to flip to a Republican Party that garnered five million more votes across all races than the opposition (and the Senate hinging on another Georgia runoff), the electorate has revoked its 2020 mandate from the Democratic Party platform. As a matter of both decorum and political prudence, the president would be wise to eschew partisan legislative ambitions and prioritize salvaging our economy. No issue set provides a better opportunity to do so than does energy.
Working with the new Republican House majority, the president should repudiate once and for all his pledge to “end fossil fuels”; he should lend his unqualified support to permitting reform; and he should endorse a predictable long-term investment environment for energy resources.
As oil expert Ellen Wald argued in the pages of the New York Times in late October, while the Biden administration cannot dictate the terms of the world oil market, it can make a positive difference for Americans and global consumers alike by easing the regulatory burden that companies face within our own country. The administration should halt its internal carbon-pricing exercise, direct relevant executive agencies to prioritize pipelines, disavow the Jones Act’s misguided protectionism, and look again to federal lands and waters for oil production. Actions like these, Wald writes, “would lower global oil prices and cut into Saudi Arabia’s oil profits.”
One temptation Biden ought to avoid is lashing out at foreign targets. An oil-product export ban, with which the administration has flirted, would exemplify this ill-advised response. The No Oil Producing and Exporting Cartels bill, soon to be debated in Congress, does, too, granting states the ability to sue OPEC members for antitrust violations. Satisfying as that may sound, it would not generate the new production that is needed. Instructively, a similar idea emerged in June 2008, when Republican presidential adviser Thomas W. Evans suggested using antitrust law to “allow the states to seek relief in the Supreme Court.” Crude oil cost more than $140 per barrel that month, but the Great Recession was just about to unfold; before the end of the year, the oil price had plummeted to below $35 a barrel.
An under-discussed aspect of our current energy crunch is that it shows the enduring demand for oil and gas, regardless of its origins. Biden, by way of his advisers Jake Sullivan and Brian Deese, seems to have misinterpreted the OPEC cuts, arguing that it shows the benefits of his preferred alternative energy sources. But prices tend to win out over politics. If the so-called energy transition were well on its way, supplying the affordable energy we all seek, prices for oil and gas would give heartburn only to the companies watching their customers switching to alternatives. In reality, long-term demand for these fuels continues to grow globally, even if a short-term drop in demand is likely. Demand for oil is going up about one million barrels per day each year — providing leverage to the geopolitical actors who recognize this fact and undermining the security of those who wish it were not so. Despite its cuts this fall, OPEC itself predicts growth in the long run, expecting a demand boom through the middle of this century.
President Biden and a Democratic Congress have inflicted nearly two years of economic damage through wanton spending and hostility to reliable resources. Further damage can be mitigated, and perhaps a crippling recession can be avoided, by righting American energy policy. In the second half of his term, the president must now turn his attention to the brewing storm, work with Republicans on Capitol Hill, instill investment confidence, and chart an energy course that will give the country a sailor’s chance to reach safe economic harbor.
Unfortunately, the midterms not only overshadowed our economic peril but also seem to have clouded the judgment of the man in the Oval Office. When asked on November 9 what he will do differently in the next two years of his presidency given that most Americans think the country is on the wrong course, Biden responded, “Nothing, because they’re just finding out what we’re doing.”
When election mania subsides and the layoffs mount, Americans will find out indeed. And they will be none too pleased.
Jordan McGillis is a policy analyst at the Manhattan Institute, a free-market think tank. He was formerly deputy director of policy at the Institute for Energy Research and resides in Southern California.