Biden Must Own Inflation and High Interest Rates - The American Spectator | USA News and Politics
Biden Must Own Inflation and High Interest Rates
Fed Chair Jerome Powell meets with Joe Biden to discuss inflation, June 1, 2022 (Reuters/YouTube)

The nation needs the Congressional investigations, but they are, I caution again, predictably un-strategic, even awkward. Republicans stupidly sold the hearings as conclusive (thus inorganic), accordingly seen as partisan payback, not transparent good government. Lacking choreography, they appeal mainly to a Fox News constituency, intersecting with a reliable but aging internet conservative donor base.

What about independent voters and anti-woke Democrats? They will determine next year whether Republicans in the House expand, and in the Senate (finally) regain, control; and, of course, the presidency. (Spoiler: Neither Trump nor Biden will be his party’s nominee.)

The assorted hearings, so far perceived as retribution and thus implausible, could still be recalibrated, and good for the country, in that way positive for Republicans. The electorate wants policy, not polemic. Accordingly, Republicans in Congress must exorcise caricature and instead be media-savvy, and able to walk (legislate against inflation?) and chew gum (investigate credibly?) at the same time; now, they do neither.

That brings us to last week’s failure of the nation’s 16th largest bank, the Silicon Valley Bank (SVB), a consequence ostensibly of that bank’s trendy, irresponsible management. Yet, without the Federal Reserve’s abrupt switch from reckless easy money (zero Fed rates that for too long enriched wealthy speculators with supercharged asset valuation) to frenzied interest hikes (wreaking havoc now and yet to come), SVB (which imprudently invested in low-yield, long-term U.S. treasury securities that soured) would still be solvent.

In sum, ramifications go beyond the run on SVB by its high-tech corporate clients to the tune of a million dollars a second, and rather portend generic economic instability, arising from the Fed wildly swinging from monetary promiscuity to asset mutilation. The current “high” interest rates are not a historical anomaly, but the whiplash is economic manslaughter.

To paraphrase the late Lloyd Bentsen, I say to Obama/Trump/Biden appointee Fed Chair Jerome Powell: “I knew Milton Friedman, and you’re no Milton Friedman.” That is, Nobel Laureate Milton Friedman, the legendary free market economist and monetary guru who proved that (a) government, not the free market, is the source of, or exacerbates, economic instability — recessions and depressions, even the Great Depression. Friedman explained that (b) central banks like the Fed can be the cure worse than the disease. And (c) the Fed and its chairmen are inherently fallible, so that (d) Fed policies inevitably oversteer a roller coaster.

Friedman concluded that only a known, non-discretionary modest annualized increase in the money supply can reliably support a free market economy, without otherwise inevitable government-induced chaos. Such statist inspired boom-and-bust cycles and central bank pendulums led the “Austrian school” of economists (notably Ludwig von Mises) to question whether central banks should even exist!

Oil companies, insurance companies, Big Pharma, polluters and Norfolk Southern Railway are not popular. But neither are banks, and surely not the scarcely known and mystery-shrouded, privileged, and luxury-indulged, elitist Fed. The clichés apply: it’s time for Republican leaders to stop looking in the rearview mirror and think outside the box. That is, extol free market economics relentlessly along with a nonstop populist attack on the Fed and its monetary policy. And make Biden own the unpopular high interest rates, as well as Inflation, inextricably linked with his regulatory web, disastrous fiscal policy, and now his preposterous new budget. Pursue Hunter Biden, Anthony Fauci, Pete Buttigieg, et al., but at intermission or halftime.

As James Carville famously observed in 1992, “It’s the economy stupid.” Biden cannot unring the bell. He and he alone did something no one else has done in four decades: he unleashed the inflation genie, an inflationary neurosis, if not psychosis — the reinforcing expectation of higher prices, so everyone tries to stay ahead of the game, and cause-to-effect-to-cause. A Fed-induced recession will only reduce the rate of inflation, not return prices to the status quo ante. In other words, the cost of living in 2024 will remain significantly higher than when Biden took office. Get it?

It’s time for Republicans to get off defense, especially on Social Security. Why accept the terms of engagement dictated by the Democrats and complicit media? President Donald Trump should have done what President Ronald Reagan did and appointed a nonpartisan commission to “save” Social Security and Medicare. Republicans should propose this now. Republicans still can get off the hook by coalescing with Democrats to take Social Security and Medicare “out of politics.” Nor should Republicans keep debating the absurdity that they support billionaires paying little or no taxes. Why not alert voters that Biden’s tax hikes, especially corporate, will not only crash the stock market, reduce corporate investment in new jobs, make American industry less competitive in the world, but also increase the cost of goods and services to Americans — “inflation” as they understand it?

This economic matrix is not a one-time news conference, gone in a single news cycle. This is a unified, consistent, multimedia, war-room strategy that saddles Joe Biden “and the Democrats” with the albatross of inflation, high interest rates, and now, with his preposterous budgetary proposal for economic stagnation. It’s time to revisit Biden’s nonsensical, falsely labeled Inflation Reduction Act. Note that “and the Democrats” is profoundly necessarily dispositive, because Biden will not be the nominee.

All this is no easy task. The Senate and House Republicans include many Beltway icons who confuse the free market with the Chamber of Commerce and National Association of Manufacturers, and who cater to trade association lobbyists. And on the other side are some so-called MAGA Republicans who are solid on many important issues including border security and a strong economy at home, yet are clueless about the need for legal immigration and the benefits of international trade, and they even call for a Biden-like national economic policy that is alien to a free market.

And, as many voters who also must be educated, some Capitol Hill Republicans do not understand the difference between the specific price hikes in the store, at the gas pump, and for certain products, all resulting from Biden incompetence, especially involving supply-side bumbling, destructive energy prices, and more regulations, versus the general monetary and fiscal policies that cause general inflation, meaning to inflate or blow up the money supply — more dollars chasing goods and services.

The Biden Administration must be confronted again and again with its overall fiscal policies that have caused general inflation, as well as its particular screw-ups and regulatory policies that cause specific higher prices.

Here are the examples of an approach that needs elaboration going forward. But remember that details and nuance, and staying on message, and persistence, all matter.

  1. The Federal Reserve is independent, and we respect its independence. But the Fed is part of the problem and not the solution. And the Fed’s big footprint, heavy-handed policy is being used to cover up the awful fiscal policies of the Biden Administration.
  2. We call for the Fed to halt its destructive interest hikes now. The alternative is fiscal policy and fiscal discipline. We’re not asking at this point to roll back interest rates, just stop the carnage. The Fed needs to come clean and tell the public the Biden Administration fiscal policy led to inflation and is sabotaging the economy.
  3. The Fed’s hikes raise the high cost of borrowing on credit cards for consumers, many of limited means, who are borrowing to cope with the inflation caused by the fiscal policies of Biden and the Democrats. The Fed has raised the costs of virtually all borrowing — mortgages, personal loans, car loans, business loans, etc.
  4. Home prices remain high, and these rate hikes make it even harder for home buyers, especially first-time home buyers, to afford a home. Builders are reluctant to borrow at these rates to build more homes or apartments.
  5. After Biden’s record prices for gasoline, these rate hikes make it harder for people to afford to buy or lease a car.
  6. These rate hikes raise the cost of doing business, and those costs are passed on to consumers in the form of higher prices, a result the Fed supposedly doesn’t want.
  7. While the Fed gave Biden a pass, Biden’s reckless fiscal policies pumped money into the economy and caused inflation, and he won’t stop now. But it’s a double whammy, because higher interest rates make it difficult for new businesses to start, or for existing businesses to expand —thus limiting supply, and keeping prices high.
  8. Fed policy has drastically raised the cost of federal government borrowing — thus increasing the cost of funding the federal deficit. Higher interest rates on U.S. government securities may be good for Communist China and other foreign buyers of U.S. debt and wealthy U.S. investors who don’t have to pay state taxes on obligations of the U.S. government, but why are we increasing substantially the cost of servicing the federal debt and thus enlarging the deficit?
  9. Fed policy is raising the cost of state and local government borrowing, thus increasing their debt and likely cutting back essential government services.
  10. Corporate debt has to be issued at higher rates, thus inhibiting investment decisions — since the break-even point for investment is affected by the higher interest rates, so corporations reduce employment and also supply fewer goods and services.
  11. Fed policy is failing; that’s because the Biden fiscal policy remains inflationary. What ever happened to Truth in Labeling? The mislabeled “Inflation Reduction Act” should be modified, or preferably repealed, and Biden is the gift for Republicans that keeps on giving: his proposed budget should be rejected loudly and repeatedly.
  12. The Fed wants a recession, which will hurt most the people at the lower end, and a recession will increase federal, state, and local spending for food stamps, welfare, unemployment, etc.
  13. We already know of the tech drawdown, and lesser job opportunities for new college graduates. Much of this relates to business drawdowns anticipating a Fed recession.
  14. More people already are living paycheck to paycheck, some withdrawing IRA money prematurely, others borrowing on credit cards, all this due to Biden inflation. Now adding insult to injury, they are penalized with higher interest rates.
  15. IRAs and pension funds depend on a stable stock market, but the Fed is jeopardizing that stability rather than insisting that the Biden Administration limit spending and the deficit, and put a moratorium on new spending and programs. Past Fed chairmen openly discussed in real time the perils of increased federal spending and budget deficits. Fed Chair Powell in his silence seems almost complicit.
  16. The Fed is entirely inconsistent and lacks credibility; only one month after denying inflation, it raised interest rates by 0.75 (75 basic points) repeatedly. It would rather do this than publicly hold Biden accountable for inflation and call for fiscal sanity. The reason why the Fed’s draconian interest hikes have had only a limited impact is not simply the lag in effect. It’s that Biden’s fiscal policy sabotages the Fed’s monetary policy. Biden’s federal spending inflated the economy and continues to do so.
  17. Social Security, already with projected shortfalls, will be further in the red because of rising benefits, as required by law, to track the inflation that Biden created.
  18. We propose a freeze on federal spending, and then planned cuts and finally, adoption of a permanent plan for fiscal responsibility. This will send a message to the financial markets to restore confidence that the nation will fight inflation, not with interest rate hikes, but fiscal discipline. We also call for the Biden Administration to repudiate and stop energy and regulatory policies that increase prices.
  19. The only way to build and restore confidence is not only an urgent, short-term retrenchment of government spending and regulation, but a medium-term policy, and long-term reform.

Let the House Republicans do their Hunter Biden investigation, perhaps they can find a competent committee counsel who can find the proverbial smoking gun and bring closure. But what Republicans really need to pursue is the crony socialism of the Biden Administration, the horror stories of taxpayer money going to subsidize and bail out favored industries, companies, and donors. We need hearings outside Washington to spotlight how Joe Biden and the Biden Administration are the main cause of inflation, through runaway spending, deficits, and regulatory policies.

Witnesses need to come forward with how they cannot afford groceries, pay rent, buy a home, buy or lease a car, how they are in more debt at ever-rising interest rates, and witnesses testifying about the effects of job-killing regulations, energy policies that raise the cost of gas at the pumps and heating a home.

And all of this starts now with declaring war on the sacred, independent Fed that is doing Joe Biden’s dirty work. Remember, a truly independent Fed would cite the inflationary effects of Biden’s fiscal policy and the need for him to reverse course, not double-down as he is doing. The Fed’s silence shows it is not independent, but political!

Some say President Biden’s preposterous new budget proposal is dead on arrival. But that death should be slow and prolonged, painful and humiliating, as a national debate that starts now and keeps going. Let Biden twist in the wind, while the electorate realizes 2024 is a time for choosing — economic growth without inflation versus a sluggish economy with inflation.

Biden and the Democrats equal stagflation.

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