Global economies are in free fall even as inflation flows unchecked. The Western world looks to the president of the United States for leadership; they search in vain.
President Biden did not undertake the two things that could help the economy here at home and others around the world regain their balance: stopping the influx of money from the federal government and helping the U.S. oil and gas industries to increase production to lower energy prices.
Determining to cut our deficits and increase energy production, Biden could immediately signal that he is serious about helping the Federal Reserve fight inflation and willing to tackle the climate-obsessed progressives in his party in the face of a global emergency. .
He is currently reporting the exact opposite. While Federal Reserve Chairman Jerome Powell has (finally) taken tough measures to curb the growth of the money supply, the White House reverses its efforts by continuing to pump money into the economy as fast as possible.
Biden’s latest spending spree is his plan to cancel student debt, a regressive program estimated by the Congressional Budget Office (CBO) to cost $ 400 billion. Given that the CBO neglected to pay off parts of the program that could increase the tally, the Responsible Government Budget Committee estimates spending closer to $ 600 billion.
In other words, in addition to the $ 1.9 trillion American Rescue Plan, the $ 1.2 trillion Infrastructure Act and the $ 280 billion Chips Act, we now have the half trillion dollar student loan of Biden, which may not even be legal. Congress, not the president, is meant to control the power of the stock exchange. A program of this magnitude initiated by executive order is unprecedented and will surely be challenged in court.
Overall, Biden added $ 4.8 trillion to our net debt, according to the Federal Responsible Budget Committee.
All this spending is reckless and has no doubt fostered inflation. Even the White House acknowledged this, complaining about how the minor (and questionable) deficit reduction measures contained in the Inflation Reduction Act could help reduce price increases. If lowering deficits lowers inflation, won’t raising deficits stimulate higher prices? You can’t have it both ways.
In any case, the cancellation of Biden’s student loan will cancel any deficit cuts contained in the law on reducing inflation, and then some.
Powell once urged Congress to increase spending, arguing that the Fed could not avert a COVID-19-induced recession on its own. Now, it should shout the opposite alarms: it can’t even bring inflation to the heel alone. Fiscal and monetary policy should be linked, not in opposition.
Meanwhile, the other inflation-fighting measure Biden should take is to increase energy production, full stop. Not only is rising global oil and natural gas prices pushing inflation up, but Europe faces shortages that could turn into a humanitarian disaster.
Consider: England has opened heating centers to prevent people from freezing to death this winter. Libraries and museums are among the organizations that have been enlisted to offer shelter to people who cannot afford their energy bills. The only drawback: some of the public buildings are struggling to pay their heating bills.
The Guardian reports: “The Catalyst Science Discovery Center and Museum in Widnes, Cheshire said last week that the price for the renewal of the annual gas contract has increased from £ 9,700 to £ 54,362.”
Such excursions are not uncommon in Britain. Like Biden, politicians blame Russian President Vladimir Putin and the war in Ukraine for huge increases in energy costs, but that’s not the whole story.
Long before Russia invaded its western neighbor, electricity prices in the UK skyrocketed. How come? Because the country had become dependent on wind towers in the North Sea for a quarter of its electricity. Towers that stopped shooting for six weeks in August 2021, when the wind calmed down, as sometimes happens.
Faced with the sudden shortage of wind power, the UK was quick to replace the missing fuel with natural gas, resulting in a sixfold increase in the price. Electricity prices in England doubled overnight.
As in Germany and elsewhere, the push to switch to renewables in the UK came without a back-up plan. The wind sometimes stops blowing, the sun sometimes sets. Politicians pandering to climate alarmists pay no attention to such annoying details.
Governor Gavin Newsom (D-California) is following the same path, calling for the total electrification of his state even as the grid becomes dangerously overloaded. Higher prices and less reliable deliveries are the unfortunate results.
Biden wants to take the national Newsom program and has made a hefty down payment under the Inflation Reduction Act. But a leader would tell the country that while this is still the long-term ambition, we face a global emergency that requires maximum utilization. of all energy sources.
A leader would sit down with the country’s major oil and gas producers (which Biden refused to do) and plan a plan to increase production here at home. Increased oil and natural gas production would lower home heating costs this winter in the United States and help our allies cope with shortages exacerbated by the war in Ukraine. Strengthening the European economies, our main trading partners, would also help the US economy.
The world is facing an economic crisis. The United States should do everything it can to help crush inflation, here and abroad. Unfortunately, this would require bold measures from a president who is underwater in the polls and who, incredibly, seems to think things are going well.
Liz Peek is a former partner of Wertheim & Company, a major Wall Street firm. Follow her on Twitter @lizpeek.