A cognitively challenged Biden is pulled in every direction, by left-wing politicos collecting their debts, by his own spite, by his trademark narcissism, and by his hatred of all things Trump.
Almost everything Joe Biden has touched since entering office has turned to dross. None of his blame-gaming, none of his distortions, none of his fantasies and unreality can mask that truth.
Seven months ago, Afghanistan was relatively quiet—with about 10,000 vestigial NATO troops, including 2,500 Americans, anchored by the Bagram Airfield. They were able to provide air superiority for the coalition and Afghan national army. With air power, NATO forces, if and when they so wished, could have very slowly and gradually withdrawn all its remnant troops—but only after a prior departure of all American and European civilians, coalition contractors, and allied Afghans.
The transient calm abruptly imploded as soon as Joe Biden recklessly yanked all U.S. troops out in a matter of days. Many left in the dead of night, leaving no one to protect contractors, dependents, diplomats, and Afghan allies. In Biden’s world, civilians protect the last Western enclave while soldiers flee.
Three weeks ago, Joe Biden and a woke and politicized Pentagon were assuring us that Afghanistan was “stable.” Now the country is reverting to its accustomed premodern, theocratic, and medieval chaos. It will likely soon reopen as the world’s pre-9/11-style terrorist haven—an arms mart of over $50 billion in abandoned U.S. military equipment. Thanks to the president of the United States, terrorists and nation-state enemies can now shop for arms and train there without hindrance.
The NATO coalition-builder Biden also dry-gulched his European allies, whose soldiers outnumbered our own. The humanitarian “good ole Joe from Scranton” deprecated the thousands of Afghan military dead who had helped the Americans. The families of the American fallen and wounded of two decades were all but told by Biden that the catastrophe in Kabul was inevitable—no other way out but chaos and dishonor. Why did he not tell us that earlier, when he was vice president, so many dead and wounded ago?
“Get over it,” was Biden’s messaging subtext. If Americans want to hear the blame game, he told us to scapegoat Barack Obama, or all prior presidents, or especially Donald Trump, or the intelligence services and military, or the Afghan army, or we naïfs who somehow think things are a mess right now in Kabul—or anything and everyone but Joe Biden.
Was Biden’s idea simply to get the United States “officially” out of Afghanistan and let the abandoned 10,000-plus Americans manage as they can?
Was Biden angry over our 20-year presence and thinking the Afghans would deserve what followed? Was he so delusional that he really believed the NATO forces could easily deter the Taliban with sanctimonious lectures from National Security Advisor Jake Sullivan, Secretary of State Antony Blinken, and Deputy Secretary of State Wendy R. Sherman? The latter is a former head of EMILY’s List and an architect of the Iran Deal, so were she and others especially scarifying to naughty theocrats when they warned they might lose their slot in the “rules-based world order”? Or did Biden believe the Taliban would be deterred by Sherman’s exclamations, such as her ominous warning, “This is personal for me!”
In January, Biden inherited a rebounding economy that was fueled by $1 trillion in stimulatory federal red ink. Given natural pent-up consumer demand, why did Biden need to print yet another $1 trillion, seek to green-light another $2 trillion for “infrastructure,” and raise even higher unemployment compensation to the point of discouraging employees from returning to work?
At the same time, he has alarmed employers with braggadocio threats that higher capital gains, income, payroll, and estate taxes are all on the way. More lockdowns only further eroded small businesses. The result was price inflation of all the stuff of life—homes, lumber, gas, food, appliances—as well as historic shortages of everything from cars and houses to the work of contractors and electricians. Any increase in wages due to labor shortages was soon erased by spirals in the consumer price index.
So, what was Biden thinking or, rather, not thinking? By paying workers not to work he would be evening out the ancient score with employers? Did workers need a vacation from the quarantine? Printing money was a way to spread the wealth—and diminish what the rich possessed? Was a $2 trillion deficit and $30 trillion in aggregate debt a way of bragging to Trump that he doubled the Trump red ink in less than a year? Would he pile up more debt than both Barack Obama and George W. Bush in half the time?
Biden took a secure border, along with increasingly legal-only immigration, and then destroyed both. He stopped construction of the border wall, encouraged an expected 2 million illegal entries over the current fiscal year, promised amnesties, and resumed “catch and release.” He did all that at a time of a pandemic, exempting illegal aliens from all the requirements of COVID testing and mass vaccinations that he had hectored his own citizens about getting. With planned mass amnesties and millions more invited to cross illegally in the next three years, was Biden seeking to found a new American nation within the now passé old American nation?
Did he believe that Americans did not deserve their citizenship and newcomers from south of the border were somehow more worthy? Did he see the 2 million new residents as instant voters under new relaxed rules of balloting? Did he think in a labor-deprived economy they would supply nannies, gardeners, and cooks to bicoastal elites? We strain to imagine any explanation because there is no logic to any.
Biden did his best in just seven months to explode the idea of American self-sufficiency in natural gas and oil. He canceled the Keystone Pipeline, froze new federal energy leases, put the Anwar oil field off limits, and warned frackers their end days were near.
So, what drove Biden? Did he object that motorists were saving too many billions of dollars per year in decreased commuting costs? Or was the rub that we had slashed too many imports of oil from the volatile Middle East and no longer would launch preemptive wars? Or perhaps the transition to clean natural gas instead of coal as a fuel for power generation had too radically curtailed carbon emissions? Did Biden feel that Middle East producers, the Russians, or the Venezuelans could better protect the planet while extracting oil and gas than could American drillers?
Biden blew up race relations by greenlighting the new hunt for the mythical “whiteness” monster. Were a few buffoonish white rioters who stormed the Capitol the tip of the spear of a previously unknown massive white supremacy movement, the most dangerous, he swore, since the Civil War?
Biden took affirmative action and the Civil Rights-era “disparate impact” and “proportional representation” ideas and turned them into disproportionate representation and reparations on the cheap. Biden made it acceptable to damn “whiteness,” as if all 230 million white Americans are guilty of something or other in a way that the other 100 million “nonwhite” are not.
So why did Biden kick the sleeping dog of racial polarization? To stir up his left-wing base? To alleviate his own guilt over the Biden family’s long history of racist insults, from “clean” Barack Obama to “put y’all in chains” to the “Corn Pop” sagas to “you ain’t black” and “junkie” to Hunter’s n-word and Asian racism? Did Biden see countries like Iraq, Lebanon, Rwanda, and the former Yugoslavia as positive models for diversity emulation?
After Biden entered office, violent crimes ignited from the embers of the 120 days of mostly unpunished looting, arson, and organized violence in the streets of America’s major cities during summer 2020. Under Biden, jails were emptied. Federal attorneys and emulative local DAs exempted offenders. Police were defamed and defunded. Punishing crime was considered a racist construct.
The result is that Americans now avoid the Dodge City downtowns of most of America’s crime-ridden blue cities. They accept that any urban pedestrian, any driver after hours, any commuter on a bus or subway can be assaulted, robbed, beaten, raped, or shot—without any assurance that the media will fairly report the crime, or that the criminal justice system will punish the perpetrators. In Biden’s America looters prance into drug stores and walk out with shopping bags of stuff, under the terrified gaze of security guards who guesstimate at least they did not steal more than $950 of loot.
Was Biden’s plan to let the people redistribute ill-gotten gains? Or was he convinced that disproportionate criminal activity was karmic payback, or penance for the death of George Floyd? Did he really believe that we were far too overpoliced? Did he believe that the general public should experience, at last, the crime of the inner-city to ensure equity and inclusion?
So why does Biden so willfully exercise this destructive touch that blows up anything he taps?
There are several possible theories:
1) Biden is non compos mentis. He has no idea of what he is doing. But to the degree he is alert, Biden listens—sort of—only to the last person with whom he talks. And then he takes a nap. When Afghanistan blows up or inflation roars or the border becomes an entry door, his eyes open, and he becomes bewildered and snarly—like an irritable and snappy Bruce Dern waking up in “Once Upon a Time in Hollywood.”
Biden has no clue about the actual destructive implementation of his toxic policies, and no concern upon whom these destructive agendas fall. He vaguely assumes a lapdog left-wing media will repackage every Biden incoherence as Periclean, and every daily “lid” as Biden’s escape for presidential research, deep reading, and intensive deliberation. Biden appears to be about where Woodrow Wilson was in November 1919.
2) Or is Biden a rank opportunist and thinking he will ride woke leftism as the country’s new trajectory? He resents his prior subservience to Obama, and now feels he can trump past signature leftist administrations as the one true and only socialist evolutionary. He is not so much the manipulated as the manipulator.
Biden fantasizes himself as a hands-on dynamic leader who bites at reporters, snaps from the podium, and issues his customary interjections. He is therefore “in command” for four or five hours a day. He enjoys acting more radical than Elizabeth Warren, Kamala Harris, Bernie Sanders, or “the squad.”—and especially being far more leftwing than his old and now passé boss Barack Obama. Joe is in control and that explains the dross touch. For the first time in his life, such an incompetent has complete freedom—to be powerfully incompetent. Biden is then not demented as much as delusionally running things.
3) Biden is unfortunately what he always was: a rather mean-spirited plagiarist, liar, and nihilist, from his Clarence Thomas character assassination infamy and Tara Reade groping to his foul racist talk and his monumental habitual grifting. His disasters are the same old, same old Biden trademark, performance-art screw-ups.
Biden likes the idea of conservative outrage, of chaos, of barking at everyone all the time. Biden accepts that no omelets can be made without broken eggs, and sort of enjoys screwing up things, as Robert Gates and Barack Obama both warned. “Wokening” the Joint Chiefs of Staff, encouraging hundreds of thousands to pour across the border, and abandoning our NATO allies in Afghanistan—who cares when tough guy, brash-talking Joe on the move jumbles stuff up? The disasters in the economy, foreign policy, crime, energy, and racial relations? Biden is just shaking things up, stirring the pot, baiting people to watch Mr. “Come On, Man” in action, as he blusters and preens and leaves a trail of destruction in his wake.
4) Biden is nothing much at all. He’s just a cardboard-cut out, a garden-variety Democratic Party hack, who is against anything conservatives are for. He assumes he will undo all that Trump did, on the theory it is simple and easy for him in his lazy, senior moments. And he is tired anyway of thinking much beyond such Pavlovian rejectionism. A closed border is bad; presto, open borders are good. Improving race relations is bad; deteriorating relations must be good. Energy independence bad; dependency good. Biden works on autopilot in his minimalist day job: just cancel anything that Trump did and worry nothing about the effects on the American people.
5) Biden is a hostage of both the Left and Hunter Biden. His task is to ram down a hard Left agenda, in the fashion of a torpedo that itself blows up when it hits the target. The Left ensured the base would not bolt in 2020. So, he owes them. Biden, more or less, signed his presidency over to the squad, Nancy Pelosi, Bernie Sanders, and the Obama holdovers. They hand him a script; he tries to read it; and they follow up with the details. He is the old “Star Trek’s” tottering John Gill.
The Left may hope their own nihilist agenda sort of works. When it inevitably does not, then Joe, the delivery man, is blamed: so much more quickly, then, will be Biden’s necessary exit. They kept their part of the bargain by getting the basement denizen elected. Now he keeps the deal by handing over the presidency. Biden’s utility had about a six-month shelf life.
Now ever so slowly the leaks, the West Wing backstabbing, the furrowed anchor brows, and the unnamed sources will gently ease him out with 25th Amendment worries (e.g., “Perhaps President Biden might find taking the Montreal Cognitive Assessment of some value after all, for his own benefit, of course.”) Kamala Harris is not so inert as we are led to believe.
Hunter Biden, smeared and ruined with scandals of every imaginable sordidness, now embarks on his masterpiece con: peddling his kindergarten art at a half-million dollars per painting to “anonymous” quid pro quo rich foreign grifters. Why does Hunter pose such brazenness and unnecessary danger to his father, the president? Because the former addict can, and just for the f—k of it?
Hunter’s malicious behavior is an implied threat that if Joe’s staff slaps Hunter’s hand, he threatens to spill the “beans” on the “Big Guy” and “Mr. 10 Percent”—given he plays the wounded fawn as the underappreciated bad boy. Hunter was the bad-seed family money man without whose grift none of them would ever have lived in such mordida-generated splendor.
A cognitively challenged Biden then is pulled in every direction, by his own senility, by left-wing politicos collecting their debts, by his own spite, by his trademark narcissism, and by his neanderthal hatred of everything Trump was and did.
The problem for America is that theories one through five are not always mutually exclusive, but more likely force multipliers of the present insanity. At some point, some brave congressional representative or Senator will finally have to say to Biden, in the spirit of Oliver Cromwell and Leo Amery:
“You have sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go!”
With growth so uncertain, it is understandable that central banks would be wary of beginning to taper monthly bond purchases before it is clear that inflation has taken off. But they would do well to recognize that prolonging quantitative easing implies significant risks, too.
Inflation readings in the United States have shot up in recent months. Labor markets are extremely tight. In one recent survey, 46% of small-business owners said they could not find workers to fill open jobs, and a net 39% reported having increased their employees’ compensation. Yet, at the time of this writing, the yield on ten-year Treasury bonds is 1.24%, well below the ten-year breakeven inflation rate of 2.4%. At the same time, stock markets are flirting with all-time highs.
Something in all this does not add up. Perhaps the bond markets believe the US Federal Reserve when it suggests that current inflationary pressures are transitory and that the Fed can hold policy interest rates down for an extended period. If so, growth – bolstered by pent-up savings and the additional government spending currently being negotiated in Congress – should be reasonable, and inflation should remain around the Fed’s target. The breakeven inflation rate also seems to be pointing to this scenario.
But that doesn’t explain why the ten-year Treasury rate is so low, suggesting negative real rates over the next decade. What if it is right? Perhaps the spread of the COVID-19 Delta variant will prompt fresh lockdowns in developed countries and damage emerging markets even more. Perhaps more nasty variants will emerge. And perhaps the negotiations in Congress will break down, with even the bipartisan infrastructure bill failing to pass. In this scenario, however, it would be hard to justify the stock-market buoyancy and breakeven inflation rate.
One common factor driving up both stock and bond prices (thus lowering bond yields) could be asset managers’ search for yield, owing to the conditions created by extremely accommodative monetary policies. This would explain why the prices of stocks (including “meme stocks”), bonds, cryptocurrencies, and housing are all a little frothy at the same time.
To those who care about sound asset prices, Fed Chair Jerome Powell’s announcement last week that the economy had made progress toward the point where the Fed might end its $120 billion monthly bond-buying program was good news. Phasing out quantitative easing (QE) is the first step toward monetary-policy normalization, which itself is necessary to alleviate the pressure on asset managers to produce impossible returns in a low-yield environment.
The beginning of the end of QE would not please everyone, though. Some economists see a significant downside to withdrawing monetary accommodation before it is clear that inflation has taken off. Gone is the old received wisdom that if you are staring inflation in the eyeballs, it is already too late to beat it down without a costly fight. Two decades of persistently low inflation have convinced many central bankers that they can wait.
And yet, even if monetary policymakers are not overly concerned about high asset prices or inflation, they should be worried about another risk that prolonged QE intensifies: the government’s fiscal exposure to future interest-rate hikes.
While government debt has soared, government interest payments remain low, and have even shrunk as a share of GDP in some countries over the last two decades. As such, many economists are not worried that government debt in advanced economies is approaching its post-World War II high. But what if interest rates start moving up as inflation takes hold? If government debt is around 125% of GDP, every percentage-point increase in interest rates translates into a 1.25 percentage-point increase in the annual fiscal deficit as a share of GDP. That is nothing to shrug at. With interest rates normally rising by a few percentage points over the course of a business cycle, government debt can quickly become stressful.
To this, thoughtful economists might respond, “Wait a minute! Not all the debt has to be rolled over quickly. Just look at the United Kingdom, where the average term to maturity is about 15 years.” True, if debt maturities were evenly spread out, only around one-fifteenth of the UK debt would have to be refinanced each year, giving the authorities plenty of time to react to rising interest rates.
But that is no reason for complacency. The average maturity for government debt is much lower in other countries, not least the US, where it is only 5.8 years. Moreover, what matters is not the average debt maturity (which can be skewed by a few long-dated bonds), but rather the amount of debt that will mature quickly and must be rolled over at a higher rate. Median debt maturity (the length of time by which half the existing debt will mature) is therefore a better measure of exposure to interest-rate-rollover risk. Sign up for our weekly newsletter, PS on Sunday
More to the point, one also must account for a major source of effective maturity shortening: QE. When the central bank hoovers up five-year government debt from the market in its monthly bond-buying program, it finances those purchases by borrowing overnight reserves from commercial banks on which it pays interest (also termed “interest on excess reserves”). From the perspective of the consolidated balance sheet of the government and the central bank (which, remember, is a wholly owned subsidiary of the government in many countries), the government has essentially swapped five-year debt for overnight debt. QE thus drives a continuous shortening of effective government debt maturity and a corresponding increase in (consolidated) government and central-bank exposure to rising interest rates.
Does this matter? Consider the 15-year average maturity of UK government debt. The median maturity is shorter, at 11 years, and falls to just four years when one accounts for the QE-driven shortening. A one-percentage-point increase in interest rates would therefore boost the UK government’s debt interest payments by about 0.8% of GDP – which, the UK Office for Budget Responsibility notes, is about two-thirds of the medium-term fiscal tightening proposed over the same period. And, of course, rates could increase much more than one percentage point.
As for the US, not only is the outstanding government debt much shorter in maturity than that of the UK, but the Fed already owns one-quarter of it. Clearly, prolonging QE is not without risks.
Missouri Congressman Blaine Luetkemeyer is taking on the Biden administration over policy moves that have caused higher prices and the return of noticeable inflation.
“Gas, milk, fruit, televisions, furniture, washing machines, car rentals, hotel rooms – what do all of these things have in common? Their prices have gone up under the Biden administration,” Luetkemeyer, the ranking Republican on the House Committee on Small Business wrote in an op-ed published Friday by Fox Business.
Data published by the U.S. Bureau of Labor Statistics showed prices up 5.4 percent last month over June 2020, the highest jump since the economic difficulties that began when the market for sub-prime home mortgages collapsed in 2008. That’s higher than the interest rate setting U.S. Federal Reserve expected and marks the sixth straight month in which prices have risen.
“While Democrats in Washington bulldoze a path for reckless government spending, small businesses and middle class working American families alike are left to pay the bill,” Luetkemeyer wrote, singling out the damaging impact the newest round of inflation is having on family-owned business.
“Small businesses are the backbone of the United States economy, and they were making huge economic strides before the Biden administration took over. Now, small businesses nationwide are facing the consequences of the Democrats’ massive government spending agenda in all sectors,” he wrote.
The U.S. says government nearly half the country’s small businesses were forced to increase prices in May, which Luetkemeyer said was “the largest percentage reported in 40 years.”
“From increased gas prices for delivering goods to rising food costs for restaurants, small business owners are bearing the brunt of Democrat-induced inflation,” he continued. “As more American consumers are spending and patronizing small businesses following the COVID pandemic shutdowns, this increased immediate spending has given our economy a bit of a shock. But rather than acknowledge this problem and correct the course, President Biden and Congressional Democrats are doubling down.”
“Make no mistake – inflation is taxation. Prices of the goods you buy go up, meaning the dollars in your pocket are worth less. It then takes more of those hard-earned dollars to purchase these goods.
“The Democrats’ proposed $3.5 trillion package will severely exacerbate the inflation problem for middle-class families and further crush Main Street U.S.A.
“Simply put, small businesses cannot afford the inflation tax that comes with the Democrats’ failed economic policies.
“As Republican Leader of the House Small Business Committee, my colleagues and I have worked tirelessly to provide much-needed relief for small businesses across the country as they regain their footing and reopen their doors to local communities.
“Unfortunately, there is no single COVID relief package that can simply fix inflation – the Democrats must stop their spending spree. As if the pandemic didn’t create enough of an economic burden for American families and workers, they now face an increased cost of living and consumer prices across the board with no end in sight.”
Luetkemeyer’s criticisms are being echoed by economists and others concerned about the effects ongoing inflation will have on the post-pandemic recovery.
Writing in mid-July for the Carsey School of Public Policy at the University of New Hampshire, Michael Ettlinger and Jordan Hensley observed that “As measured by Real Gross Domestic Product (GDP), 35 states and the District of Columbia have smaller economies, as of the first quarter of this year, than they did before COVID-19, while 14 states have seen a modicum of economic growth. Nationally, GDP remains 0.9 percent lower than it was before the pandemic struck.”
President Biden and others in his administration seem happy to claim credit for the good economic news but are rather cavalier about the impact the bad news is having, saying the spike in inflation is at worst temporary.
Biden himself recently dismissed the issue, saying his multi-trillion-dollar spending initiatives will “reduce inflation, reduce inflation, reduce inflation.” Some economists and business leaders fear, however, it is that very spending that is driving the hike in prices and that they will not stabilize or return to the levels at which they were at before the pandemic struck any time soon.
The Biden Administration serves up complacency in the face of deterioration.
Joe Biden’s handlers and media friends continue to delude nobody but themselves that his legacy will land him in the history books alongside FDR and LBJ as a beloved, era-defining Progressive hero. His supposedly moderate priorities—infrastructure, family policy, and voting “rights”—have readily been exposed as deceitful partisanship and wasteful graft, and laden with power grabs so objectionable a senator of his own party had to distance himself to save face.
Further complicating his aspirational legacy, Biden is beholden to an eye-popping amount of dark money from leftist sources that propelled him to the White House in the first place. A careerist chameleon who knows the ultimate currency of the Washington favor economy is obedience to donors, he is obligated to indulge fringe priorities so repellent to the public that anti-police interest groups begged the White House to dial them back. Even with his public image plummeting from the self-made border crisis—now on pace to allow over 2 million illegal immigrants to enter and stay in the country every year—Biden acquiesced to bullying from activist groups (and NGOs whose lucrative business models depend on the public funding associated with high volumes of immigration) and raised the annual refugee cap.
As Biden’s early months lurched from one failure to stand up for our country to the next, it became clear that he is indeed era-defining, but not in the way his consiglieres would have hoped. Weak and negligent, derelict in the most basic duties a leader has to his people, licking ice cream to delight reporters as his homeland falls apart, Joe Biden is happily at your service as the concierge of decline.
The leader of the Free World routinely confounds with public with gibberish and outlandish assertions that the national press pretends not to notice. Last week, he attributed lower vaccination rates among black Americans to traumatic memories of “the Tuskegee Airmen,” apparently conflating the subjects of an infamous experiment conducted at the Tuskegee Institute with the squadron of World War II Army pilots. One day prior, he delivered a meandering disavowal of the Second Amendment, dismissing it as a gratuitous formality by insinuating the government could simply deploy “nuclear weapons” against rebellious armed citizens. The public, beseeched by the press to view Biden’s regime of managed decline as a return to normalcy, could be forgiven for wondering whether successful stewardship of a nation typically involves overt rationalizations for nuking one’s own citizens.
Essential elements of nationhood, including our borders, rule of law, energy pipelines, and food supply chains are disintegrating. Biden routinely appears apathetic, croaking “no comment” when a cyberattack took 45 percent of the East Coast’s energy supply offline—a response so lethargic it may have emboldened the cybercriminals who downed countless American facilities operated by the world’s largest beef supplier a few weeks later. With a resource as crucial as the food supply at risk, and minimal discussion on how to guarantee protection from such threats in the future, the White House again responded in almost ludicrously diffident fashion, weakly insisting they were “delivering a message” to Russia that if the hackers originated with them, that was very naughty indeed. The diplomatic decorum of managed decline forbids advocating too vociferously for our country’s interests. As its primary practitioner, Biden travelled halfway across the world to meet Vladimir Putin at the G7, handing over a list detailing our critical infrastructure sectors and politely requesting that he be kind enough not to hack those.
Back home, his staff obfuscates the fact that inflation is rising faster than nominal wages—meaning real wages are declining—and dismisses the higher prices burdening small businesses and families as a public relations inconvenience, even releasing a statement instructing the public to stop blaming them for high gas prices. Cities across the country are plagued with stomach-churning random assaults and open-air drug bazaars to such a degree the Democrats’ traditional media apologists are nervously signaling they cannot furnish effective propaganda to stave off a political backlash. Microchip shortages are roiling auto manufacturing and necessitating layoffs. In the face of record drug overdose deaths, his administration is offering subsidized drug paraphernalia to facilitate addicts’ injection of deadly narcotics. As the border crisis continues, the federal government rewards illegal border crossers with taxpayer-funded plane tickets to destinations across the country. Meanwhile, for citizens, the Biden administration is fixated on maximizing extractive, redistributive, and vengeful policies to “address” abstractions such as climate change, systemic racism, and the intelligence community’s latest absurd fiction designed to increase their budget, “terrorism from white supremacy.”
Despite his media portrayal as a great uniter, Biden cynically embraces talking points to divide Americans by race, encouraging citizens to blame each other for difficulties getting ahead instead of the destructive effects of policies he spent half a century voting for and now aims to revive. A long-time proponent of trade policies that dismantled our industrial base—sending millions of working-class jobs abroad—and of unfairly flooding the labor market with foreign workers, he appears committed to the belief that the inevitable decline in economic opportunity afflicting Americans of all races was in fact due to insufficient commitment to those policies instead of the other way around. Deploying theories of “systemic inequities” is a convenient pre-emptive strike for a man whose administration is officially forecasting economic decline.
In a demonstration of the sincerity of his administration’s commitment to black Americans’ success, his appointees congratulate themselves for frivolous interventions such as banning menthol cigarettes, but have little interest in addressing the fact that our public school system graduates a mere 7 percent of black 12th graders proficient in math. In fact, Biden’s most definitive contribution to the pitiful state of public education has been to assert in his State of the Union address that, when it comes to public education, “12 years is no longer enough” and “that’s why my American Families Plan guarantees four additional years of public education for every person in America.” Our concierge of decline does not demand higher-quality education—rather, he instructs Americans to spend four more years of their lives with the government’s educators, devoid of any obligation to the public to improve.
Such complacency in the face of deterioration is not only dysfunctional, but dangerous. Our adversaries are well aware: China’s delegation humiliated Biden’s Secretary of State and National Security Advisor to their faces on our own soil, asserting, “the United States does not have the qualification to say it wants to speak to China from a position of strength.”
To many Americans, the Biden Decline feels distinctly wrong. Do leaders who love their country typically stand idly by while so many urgent problems accumulate for their citizens? A president who supplants his obligations to the people with wildly impractical ideological fixations does not seem motivated to steward our country to success. He seems intent on ushering in an era of weakness that puts our country’s safety, prosperity, and future at risk. The American people are resilient, but the lengths to which our leaders have gone to subvert our country’s strength will require serious course-correction to return to fighting weight.
Policymakers should be cautious about adding more to the national debt and the money supply.
The sharp increase in consumer prices this spring may be a blip but may also be a sign that inflation is returning as a chronic problem. For those of us who can accurately recall the 1970s economy, it is a frightening prospect. Everyone else would benefit from reading contemporaneous news coverage.
Recent events call into question pronouncements of the leading Modern Monetary Theorists who thought that the U.S. could sustain much larger deficits without triggering major hikes in the cost of living. Instead, it appears that the traditional rules of public finance still hold: deficit spending financed by Federal Reserve money creation is inflationary.
Analogies between today’s situation and the 1970s are not quite on target. By the early 70s, inflation was well underway. Instead, we should be drawing lessons from the year 1965, when price inflation began to take off. Prior to that year, inflation seemed to be under control with annual CPI growth ranging from 1.1 percent to 1.5 percent annually between 1960 and 1964 — not unlike the years prior to this one.
Like 2021, the post-election year of 1965 saw the inauguration of an ambitious unified Democratic government. That year, Congress enacted Medicare and Medicaid, began providing federal aid to local school districts, and greatly expanded federal housing programs. At the same time, the Johnson administration was expanding U.S. involvement in Vietnam, increasing the defense budget. The federal budget deficit expanded from $1.6 billion in the 1965 fiscal year (which ended on June 30 in those days) to $27.7 billion, or 3% of GDP, in fiscal 1968.
Although the Federal Reserve made some attempts to ward off inflation, it generally accommodated the government’s fiscal policy according to Allan Meltzer’s detailed history of this period published by the St. Louis Fed. Between calendar years 1965 and 1969, annual CPI growth surged from 1.6 percent to 5.5 percent, setting the stage for the Nixon administration’s closure of the U.S. Treasury’s gold window and imposition of wage and price controls. Inflation reached double digits in 1974 and again between 1979 and 1981. Notably, these were also recession years, refuting the fallacy of the Phillips Curve, which depicted a supposed policy trade-off between inflation and unemployment. By the early 1980s, we had ample evidence that ill-considered policies could give us a combination of high inflation and unemployment, known back then as “stagflation.”
This policy mix was also not great for equity investors. The Dow Jones Industrial Average moved sideways during the inflationary period, closing at the same level in December 1982 as it did in January 1966. One lesson from that period was that high interest rates can be bad for stocks.
That may be one reason the Fed remains reluctant to allow interest rates to rise today. Although messaging from the latest Federal Open Market Committee meeting showed greater willingness to normalize interest rates, action is not expected until 2023.
Rate hikes may bring other worries for the Fed in today’s environment. Given the large volume of variable rate mortgages and corporate loans outstanding in the U.S. today, a rise in interest rates could push highly indebted homeowners and companies into bankruptcy, potentially triggering a recession. The federal government would have to roll over its record stock of short-term debt at higher interest rates, ballooning its interest expense and potentially crowding out more popular spending priorities.
But if private capital is to continue participating in debt capital markets, such as those for corporate bonds and bank loans, interest rates will have to rise to compensate them for the loss of purchasing power on their principal.
Although annual growth in CPI fell sharply after 1982, it is not strictly correct to say that inflation was defeated. Except for a few years around the turn of the century, the federal government continued to run deficits, a portion of which were monetized. Notably, the government began running trillion dollar deficits, and the Fed drove interest rates down to near zero during the Great Recession, but CPI growth remained muted.
But CPI does not tell the whole story. Some sectors of the economy have experienced substantial inflation, but they are not fully incorporated in the consumer price index. Home prices, healthcare costs and college tuition all soared in recent decades. Meanwhile, apparel and consumer electronics remained affordable due to globalization and improved technology.
Back in the 1970s, most of the world was not part of the global economy. Eastern Europe was in the Soviet bloc, while China, Vietnam and India had yet to become major exporters. As more low-cost producers of goods and services came online during the 1980s and 1990s, prices were pushed downward (often and regrettably at the expense of American manufacturing jobs). The trend toward developing countries joining the international trading system and producing inexpensive consumer goods is now over. Indeed, the recent increase in protectionism is, if anything, rolling back the wave of international price competition.
On the other hand, technological improvements may continue to shield us from inflation in certain sectors. For example, the displacement of human cashiers by automated check stands might restrain price hikes at the big box retailers, supermarkets, fast food chains and other establishments that can afford to invest in them. Smaller businesses, facing higher wages, may have to try to pass them through to consumers in the form of higher prices. Already in some parts of the country, restaurants are trying to recoup costs without raising prices on their menus by adding various surcharges ostensibly tied to specific costs.
It is possible that inflation is now moving from assets and human-intensive services to consumer products, but we will need several months of additional data to know for sure. Meanwhile, policymakers should be cautious about adding more to the national debt and the money supply.
The specter of inflation haunts Joe Biden’s presidency
Treasury Secretary Janet Yellen got into trouble Tuesday for telling the truth. That morning, at a conference sponsored by the Atlantic, she raised the possibility that one day the Federal Reserve may raise interest rates “to make sure our economy doesn’t overheat.”
Anyone with a basic understanding of economics knew what she was talking about. The combination of President Joe Biden’s gargantuan spending and the accelerating economic recovery may well lead to a rise in consumer prices and hikes in interest rates. But an end to the Federal Reserve’s program of easy money would hurt asset prices and possibly employment as well.
Which is not what most investors want to hear. When Yellen’s words reached Wall Street, the market tanked. By the afternoon she was in retreat, telling the Wall Street Journal CEO summit that she had been misunderstood. “So let me be clear,” she said. “That’s not something I’m predicting or recommending.”
No, of course not. But it still might happen anyway.
A specter is haunting the Biden administration—the specter of inflation. Past inflations have not only harmed consumers, savers, and people on fixed incomes. They have also brought down politicians. Among the risks to the Democratic congressional majority is a rise in prices that lifts inflation to near the top of voters’ concerns, coupled by the type of Fed rate increase that hits stocks and housing. Inflation is one more signpost on the road to Republican revival, along with illegal immigration, crime, and semi-closed public schools embracing far-left critical race theory.
The classic definition of inflation is too much money chasing too few goods. That might also describe America sometime soon—if not already. The economy has started its post-virus comeback. Jobs and growth are on the upswing. U.S. households sit on a trillion-dollar pile of savings. Over the last year, on top of its regular spending, the federal government has appropriated a mind-boggling amount of money: a $2 trillion CARES Act, a $900 billion COVID-19 relief bill, and a $2 trillion American Rescue Plan. And President Biden wants to spend about $4 trillion more.
Surging this incredible amount of cash into an economy that is rapidly approaching capacity may have unintended and harmful consequences. But the Biden administration is either unconcerned about inflation or afraid of bringing it up in public.
Why? Well, one reason is that earlier warnings, after the global financial crisis in particular, didn’t seem to come true. (The inflation may have shown up in the dramatic ascent in prices of stocks and bonds, as well as in odd places such as the market for high-end art.) Another reason is that some economists think a little bit of inflation would be a good thing. But the main explanation may be related to status-quo bias: Inflation hasn’t been a driving force in our economic and public life for decades, and so we blithely assume it won’t be in the future.
Which is why an experienced leader worries about repeating the mistakes of the past. And yet, for a politician who came to Washington in 1973, Joe Biden has a lackadaisical attitude toward inflationary fiscal and monetary policy. Was he paying attention? It was the great inflation of the ’60s and ’70s, caused in part by high spending, the Arab oil embargo, and spiraling wages and prices in a heavily regulated and unionized economy, that helped ruin the presidencies of Gerald Ford and Jimmy Carter.
Inflation led to bracket creep, with voters propelled into higher income tax brackets by monetary forces over which they had no control. And bracket creep inspired the tax revolt, supply-side economics, and the Reaganite idea that, “In this present crisis, government is not the solution to our problem; government is the problem.” The eventual cure for inflation was the painful “shock therapy” administered by Federal Reserve chairman Paul Volcker and what at the time was the worst recession since the Great Depression.
Why anyone would want to repeat this experiment in the dismal science is a mystery. Biden, however, is fixated not on inflation but on repudiating the legacy of the man known for describing it as “always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
Milton Friedman, whose empiricism led him to embrace free market public policy, was the most influential economist of the second half of the 20th century. But Biden has a weird habit of treating Friedman as a devilish spirit who must be exorcised from the nation’s capital. For Biden, Friedman represents deregulation, low taxes, and the idea that a corporation’s primary responsibility is not to a group of politicized “stakeholders” but to its shareholders. “Milton Friedman isn’t running the show anymore,” Biden told Politico last year. “When did Milton Friedman die and become king?” Biden asked in 2019. The truth is that Friedman, who died in 2006, has held little sway over either Democrats or Republicans for almost two decades. But Biden wants to mark the definitive end of Friedman and the “neoliberal” economics he espoused by unleashing a tsunami of dollars into the global economy and inundating Americans with new entitlements.
The irony is that Biden’s rejection of Friedman’s teachings on money, taxes, and spending may bring about the same circumstances that established Friedman’s preeminence. In a year or two, the American economy and Biden’s political fortunes may look considerably different than when Janet Yellen blurted out the obvious about inflation. Voters won’t like the combination of rising prices and declining assets. Biden’s experts might rediscover that it is difficult to control or stop inflation once it begins. And Milton Friedman will have his revenge.
Today is one hell of a hump day already: New government figures show that the Biden administration is getting it wrong on the border, getting it wrong on the economy and job creation, and getting it wrong on inflation.
No, Mr. President, This Is Not the Usual Seasonal Migration
I told you, back on April 19, that this month’s immigration numbers were going to be high, and represent a blinking red light. On May 4, I reminded Jen Rubin that no, nothing “happened” to the border crisis, the media just stopped discussing it. On Monday, I pointed out that the federal government’s official statistics were undermining Biden’s argument that what Americans were seeing on the border was just a routine seasonal pattern.
“The truth of the matter is, nothing has changed,” President Biden insisted in his press conference on March 25. “It happens every single, solitary year: There is a significant increase in the number of people coming to the border in the winter months of January, February, March. That happens every year.”
I’m sorry, Mr. President, but that is a load of bull. It is not a regular seasonal pattern to break a two-decade-old record two months in a row. In the month of April, U.S. Customs and Border Protection caught 178,622 individuals attempting to cross the U.S.–Mexico border, one month after they had caught an eye-popping 173,348 individuals.
The Biden administration is going to try to take a victory lap over the fact that the number of unaccompanied minors dropped from 159 in March to 134 in April. (That’s what NBC News chose to spotlight in this headline.)
(Over at the Center for Immigration Studies, Andrew Arthur wondered why it took until May 11 to release the numbers for April. No doubt it takes time to check and collate all of the data, and as of now, there’s no indication of any deliberate delay from CBP. But any time that new information that makes the administration look bad takes a while to get released, some people will fairly wonder if someone in the chain of command was dragging his feet.)
On April 30, when asked about March’s numbers, Biden insisted in an interview with NBC News, “Look, it’s way down now. We’ve now gotten control.” But the April numbers are not way down; they’re up a bit over the previous month’s record. At the time of that interview, did Biden genuinely believe that CBP encounters at the border had dramatically declined? (The other day a commenter on our site had a good observation: Biden’s usual reflexive denial of making a mistake and his habitual fuzziness with the facts make it very tough to tell when he’s lying, when he’s misinformed, and when he’s having any memory issues.)
Biden told NBC News that he “inherited a Godawful mess” from Trump at the border, but in January, CBP had only 78,443 encounters at the southern border. The first big jump came in February when it rose to 101,120, and then it continued rising into March. Hey, what happened in late January?
These are cold, hard numbers which prove that Biden’s assessment of the situation in late March was completely wrong. Whether or not Biden wanted to tell Central America that the border is open, his first moves on immigration — halting construction of border fencing, new guidelines to ICE agents to sharply curb arrests and deportations, an attempted moratorium on deportations, proposing a path to citizenship — all sent a signal to migrants and human traffickers that the door was wide open and everyone was welcome.
Recall this anecdote at the border, reported in the New York Times in mid March:
Jenny Contreras, a 19-year-old Guatemalan mother of a 3-year-old girl, collapsed in a seat as Mr. Valenzuela handed out hand sanitizer.
“I did not make it,” she sobbed into the phone as she spoke with her husband, a butcher in Chicago.
“Biden promised us!” wailed another woman.
Many of the migrants said they had spent their life savings and gone into debt to pay coyotes — human smugglers — who had falsely promised them that the border was open after President Biden’s election. [Emphasis added]
There is only one way that people in the poorest and most isolated communities in Central America will disbelieve the false promises of human smugglers and coyotes and understand that the border is not open. It requires the U.S. president to send a clear signal, loudly, frequently, and publicly, that U.S. immigration laws are still enforced, and that those caught crossing the border illegally will be criminally charged and quickly deported. I suspect that deep down, Biden and many other Democrats think those actions are inherently mean and unjust. This is why half the Democratic presidential field supported a repeal of the criminal statute for entering the country without permission. Additionally, almost all Democrats believe illegal immigrants should be covered by a government-run health-care plan, and they’re iffy at best on the use of E-Verify.
Many Biden supporters will insist that a continuing wave of migrants wasn’t the intended consequence of his early actions on immigration, and many Biden foes will insist this was precisely the intended consequence of his early actions on immigration. But that argument is almost moot; the waves of migrants are coming — and still coming.
Usually, a Record Number of Job Openings Would Be Good News
Yesterday, the U.S. Bureau of Labor Statistics reported that the number of job openings across the country had reached 8.1 million, the highest that the agency had ever recorded.
On Monday, President Biden said, “Families — families who are just trying to put food on the table, keep a roof over their head — they aren’t the problem. We need to stay focused on the real problems in front of us: beating this pandemic and creating jobs.”
But the BLS numbers show we’re already doing pretty darn well at creating jobs, or at least creating job openings. An economy in which there are a record number of job openings is not one that is sluggish, or struggling, or that desperately needs another round of stimulus spending. What it needs are the currently nonworking job applicants to walk through the door. Right now, in Massachusetts, the maximum weekly unemployment-benefit amount is $855 per week. In a 40-hour work week, that comes out to $21.37 per hour.
Meanwhile, Prices Keep Going Up . . .
The updated unfilled-jobs numbers released Tuesday morning were bad. The updated immigration numbers released Tuesday evening were bad. Guess how the updated inflation numbers released Wednesday morning look?
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent in April on a seasonally adjusted basis after rising 0.6 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 4.2 percent before seasonal adjustment. This is the largest 12-month increase since a 4.9-percent increase for the period ending September 2008.
The index for used cars and trucks rose 10.0 percent in April. This was the largest 1-month increase since the series began in 1953, and it accounted for over a third of the seasonally adjusted all items increase. The food index increased in April, rising 0.4 percent as the indexes for food at home and food away from home both increased. The energy index decreased slightly, as a decline in the index for gasoline in April more than offset increases in the indexes for electricity and natural gas.
The index for all items less food and energy rose 0.9 percent in April, its largest monthly increase since April 1982. Nearly all major component indexes increased in April. Along with the index for used cars and trucks, the indexes for shelter, airline fares, recreation, motor vehicle insurance, and household furnishings and operations were among the indexes with a large impact on the overall increase.
The all-items index rose 4.2 percent for the 12 months ending April, a larger increase than the 2.6- percent increase for the period ending March.
In other news: Jennifer Granholm, during a press conference yesterday about the hack of the Colonial Pipeline, said, “We have doubled down on ensuring that there’s an ability to truck oil in — gas in. But it’s — the pipe is the best way to go. And so that’s why, hopefully, this company, Colonial, will, in fact, be able to restore operations by the end of the week as they have said.”
Oh, pipe is the best way to go, huh? Safer, more secure, more efficient, less risk of accidents? Then maybe this administration shouldn’t be canceling pipeline projects!
“Pretty soon if a man bought a sick horse or a leaky boat, he’d say it ‘wasn’t worth a continental.’ It was a way of describing something as worthless.”
by Thomas Fleming
“Welcome to the Continental Congress.”
“I’m not sure what you mean by that, Mr. President.”
“I mean we’re on our way to a visit to the people who almost lost the American Revolution — if we continue to try to maintain the illusion that our money has any value when the interest rate for borrowing it is zero and we try to solve our mounting debt problems by printing it by the billions.” Continue reading
“I am not frightened by what lies ahead and I don’t believe the American people are frightened by what lies ahead. Together, we’re going to do what has to be done.”
by Scott L. Vanatter
On election night November 4, 1980 Ronald Reagan revealed that he had expected “a cliffhanger.” Perhaps the fact that he had previously worked as an actor colored the language he used that night.
He said he was humbled not just because of the large margin of victory, but also the mere fact of being elected. “Even if it had been the cliffhanger that all of us, I think, were expecting, it would have been the same way.”
Reagan said he would keep “the trust you have placed in me sacred and I give you my sacred oath that I will do my utmost to justify your faith.” Continue reading