The West needs leadership: Biden has failed the test
Global economies are in free fall even as inflation runs unchecked. The Western world looks to the president of the United States for leadership; they look in vain.
President Biden has not undertaken the two things that might help the economy here at home and others around the world regain their footing: stop the gusher of cash coming from the federal government and help U.S. oil and gas industries ramp up production to bring down energy prices.
By determining to cut our deficits and drive energy production higher, Biden could immediately signal that he is serious about helping the Federal Reserve fight inflation and willing to buck climate-obsessed progressives in his party in the face of a global emergency.
Currently, he is signaling the exact opposite. While Federal Reserve Chairman Jerome Powell has (finally) undertaken stiff measures to rein in money supply growth, the White House nullifies his efforts by continuing to pump money into the economy as fast as possible.
The latest spending spree from Biden 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 cost out parts of the program that could add to the tally, the Committee for a Responsible Government Budget puts the expense at closer to $600 billion.
In other words, on top of the $1.9 trillion American Rescue Plan, the $1.2 trillion Infrastructure Act and the $280 billion Chips Act, we now have Biden’s half-trillion-dollar student loan give-away, which may not even be legal. Congress, not the president, is meant to control the power of the purse. A program of this magnitude initiated by executive order is unprecedented and will certainly be challenged in court.
Overall, according to the Committee for a Responsible Federal Budget, Biden has added $4.8 trillion to our net borrowings.
All this spending is reckless and has without a doubt fostered inflation. Even the White House has acknowledged as much, crowing about how the minor (and questionable) deficit reduction measures contained in the Inflation Reduction Act could help reduce rising prices. If lowering deficits reduces inflation, doesn’t increasing deficits spur higher prices? You can’t have it both ways.
In any event, Biden’s student loan cancellation will wipe out any deficit reduction contained in the Inflation Reduction Act, and then some.
Powell once exhorted Congress to increase spending, arguing that the Fed could not stave off a COVID-19-induced recession on its own. Now, he should be shouting the opposite alarms: He cannot bring inflation to heel all on his own, either. Fiscal and monetary policy should be linked, not working in opposition.
Meanwhile, the other inflation-fighting measure that Biden should undertake is to increase energy production, full-stop. Not only is the rise in global oil and natural gas prices pushing up inflation, Europe faces shortages that could become a humanitarian disaster.
Consider: England has opened warming centers to prevent people from freezing to death this winter. Libraries and museums are among the organizations that have been conscripted into offering shelter to people who cannot afford their energy bills. The only glitch: Some of the public buildings are struggling to pay their own heating bills.
The Guardian reports: “Catalyst Science Discovery Centre and Museum in Widnes, Cheshire, said last week that the quote for renewing its annual gas contract had risen from £9,700 to £54,362.”
Such hikes are not unusual in Britain. Like Biden, policymakers there blame Russian President Vladimir Putin and the war in Ukraine for enormous energy cost increases, but that is not the entire story.
Well before Russia invaded its western neighbor, electricity prices in the UK skyrocketed. Why? Because the country had become dependent on wind towers in the North Sea for one-fourth of its electricity. Towers which stopped turning for six weeks in August 2021, when the wind died down, as it sometimes does.
Faced with the sudden shortfall of wind energy, the UK scrambled to replace the missing fuel with natural gas, driving a six-fold increase in price. England’s electricity prices doubled overnight.
As in Germany and elsewhere, the push to change over to renewable energy in the UK came with no back-up plan. The wind sometimes stops blowing, the sun occasionally goes under. Politicians pandering to the climate alarmists pay no attention to such pesky details.
Gov. Gavin Newsom (D-Calif.) is following the same path — demanding all-out electrification of his state even as the grid gets dangerously overburdened. Higher prices and less reliable deliveries are the unfortunate results.
Biden wants to take the Newsom program national, and made a hefty down payment with the Inflation Reduction Act. But a leader would tell the country that, while that is still the long-term ambition, we face a global emergency that requires maximum use of all energy sources.
A leader would sit down with the country’s leading oil and gas producers (which Biden has refused to do) and map out a plan to ramp up output here at home. Increased production of oil and natural gas would lower home heating costs this winter in the U.S. and help our allies deal with shortages worsened by the war in Ukraine. Bucking up European economies, our major trading partners, would also help the U.S. economy.
The world is facing an economic crisis. The United States should do everything possible to help squash inflation, here and overseas. Unfortunately, that would require gutsy measures from a president who is underwater in the polls and who, incredibly, appears to think things are going just fine.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.