The Grinch steals Joe Biden’s Christmas
What happened? Joe Biden finally got the big job. He’d get the great house, get to entertain in the front of the cool plane, (almost) everyone loved him, and he could set up a comfortable retirement. His close friends were gathered around his Christmas tree, expecting all kinds of great gifts, but all they found in their stockings were … lumps of coal. The Grinch had stolen his Christmas.
All of that is a long-winded way of saying that, by far, the most important job in the Biden administration will be director of the Office of Management and Budget (OMB). Over the past year, in response to COVID-19, the spending money is gone. There really is none left, and the next four years will be a period of severe belt-tightening. Adam Smith had it right: If the books don’t balance, sooner or later you’re done.
The problem, of course, is that the spending spree of the past 10 to 15 years — but especially the past year — means that any fancy new plans and strategies must go straight to the waste can. And that bitter medicine must come from OMB.
There is no monetary policy solution. Under President Obama, the Fed kept the interest rate at zero to float his spending. Conditions now are much different. The pandemic and related restrictions have driven official and unofficial (that is, discouraged people no longer looking for work) unemployment through the roof. A monetary policy-driven strategy will only spur an even more destructive inflationary cycle than we already are headed into. That would drive unemployment even higher, creating huge uprisings and converting “Defund the Police” bumper stickers into “Re-fund the Police Quickly.” Beyond that, it is unlikely that this Fed would play that game.
The only answer is OMB and the budget. Once the budget analysts take out their pencils, there’ll be no room for student loan forgiveness, the trillion-dollar demands of the teachers unions, the Green New Deal, precipitous shutting down of the oil and gas industry, health care expansion, state and local government relief, or anything else on the progressives’ list to Santa. The Department of Defense budget will probably need to contract, disappointing the contractors who poured money into Biden, counting on a host of new gadget purchases. OMB and the Senate Budget Committee, under either party, essentially will run the government for the next four years. Expansive fantasy budgets and large increases in the debt ceiling would be self-defeating, if not criminal.
Biden’s dreams of great NATO or G-20 meetings — where he could make friends by doling out billions of dollars to pay off countries to pretend to defend themselves or not to pollute — will be crushed. Ditto for paying Iran or North Korea billions more dollars to pretend to not develop nukes. Won’t happen. No Peace Prize.
OMB may choose to ignore all of this and create nonsense budgets, as with Obama’s administration. Who can forget those heady days when the Democratic-led Senate voted down Obama budgets 99-0 or 98-1? With no Fed to bail them out today, any sensible OMB director and president would create serious budgets to control their own fate. To do otherwise opens an economic cycle that America might not survive: Growing debt that can’t be paid. Gigantic inflation adding a huge “invisible tax” on top of the big tax increase Biden plans for everyone. Capital flight similar to that under Obama, choking any private-sector investment that might create jobs. Destroyed jobs in the energy sector. Rising energy costs, destroying jobs in all sectors. No money in the bank for make-work public works projects. Skyrocketing unemployment.
The only answer will be budget constraint by OMB, the Grinch.
The closest analog to this is the Ford administration. America needed calming and was recovering from the scandal of Watergate and the trauma of Vietnam, not unlike America now recovering from the paroxysm (for many) of President Trump. Inflation was taking off and belt-tightening was the only solution. OMB, led by Deputy Director Paul O’Neill, ran the government. President Ford thought the slogan for his administration was WIN (Whip Inflation Now), but the real slogan was NO (which meant “No!”). Ford set a Guinness Record in vetoing spending bills.
In selling it to the country, OMB modified Nixon’s New Federalism with the framework of block grants. The concept was to bundle programs across various parts of the budget (i.e., human services), reduce the total budget amount, and then distribute it as semi-earmarked cash grants to the states to administer. The concept was to combine the bitter pill (less money) with a little sugar, giving state and local government more control over the money to manage. Whether that sleight of hand will work today is up for debate. What’s not really debatable is that budget control is required at all levels of American government.
Joe Biden comes to the White House having run a campaign without vision or policy imagination. He was destined to be a caretaker president, and his safe but unimaginative vice president and Cabinet choices reflect that. He has shown no skill as a manager; nor does he seem to be aware of any historical context for his presidency. So, the smartest thing he could do would be to have a great OMB director and get out of the way.
Grady Means is a writer (GradyMeans.com) and former corporate strategy consultant. He served in the White House as a policy assistant to Vice President Nelson Rockefeller. Follow him on Twitter @gradymeans1.