Biden’s Very Bad Trumpian Trade Policy

At the start of 2021, shortly before Biden was inaugurated, I expressed hope that he would reverse Trump’s self-destructive protectionism.

Alas, I’ve been disappointed.

On trade issues, Biden has been just about as bad as his predecessor, (he’s also been as bad as Trump with regards to spending, but that’s a topic for another day).

The Wall Street Journal editorialized last month about this unfortunate similarity. Here are some of the highlights…or lowlights would be a better term since the net result of protectionism is to hurt taxpayers and consumer.

President Biden has rolled back some of Donald Trump’s destructive tariffs, but not enough, and they’re still doing economic harm. New analyses of Mr. Trump’s Section 232 steel and aluminum tariffs show how consumers and manufacturers are still paying for the border taxes that benefit only a few companies. A study by Harbor Aluminum for the Beer Institute finds that the 10% tariff on imported aluminum cost U.S. beverage manufacturers $1.7 billion from March 2018 through August 2022. About 93% of the $1.7 billion has been pocketed by domestic aluminum producers and smelters in the U.S. and Canada. …By raising the cost of production, tariffs constrain manufacturers, who cut jobs and pass costs to consumers. …Repealing the Trump Section 232 tariffs could reduce prices at the margin. The longer they stay in place the more they deserve to be called the Biden-Trump tariffs.

Since the above column mentioned the Section 232 tariffs, this would be an opportune moment to cite the Tax Foundation’s research on the topic.

…economists have reached…negative conclusions regarding the impacts of the recent Section 232 tariffs on the economy. Lydia Cox and Kadee Russ, using an estimate derived from a Federal Reserve Board paper, calculated that the Section 232 tariffs reduced manufacturing employment by about 75,000 jobs. Kyle Handley and other economists looked at the impacts of the import tariffs on export growth in the U.S. and found that companies exposed to the Section 232 tariffs experienced reduced export growth. This occurred because the cost of their inputs rose due to the tariffs, which hindered firms’ ability to increase their exports. For each 1 percent increase in the tariffs on steel and aluminum, export growth fell by 0.11 percent. …The aluminum tariffs in particular have disproportionately harmed certain industries. …Ford and General Motors estimated that the tariffs cost them about $1 billion each the first year they were in effect—roughly $700 per vehicle produced.

And here’s the Tax Foundation’s estimate of how the economy would benefit if these taxes on trade were repealed.

Since I’ve been criticizing Biden for being a protectionist, I’ll close by speculating whether Republicans have learned from Trump’s protectionist mistakes.

Here are some excerpts from a column in the Wall Street Journal by former Congressman Jeb Hensarling.

Numerous studies have shown that almost all the costs of tariffs initiated under the Trump administration were paid by American consumers and businesses. …According to the American Action Forum, Mr. Trump’s tariffs combined have increased consumer costs by approximately $51 billion a year. …Republicans love to talk about “draining the swamp” in Washington. But the tariffs imposed by the Trump administration empowered hundreds of bureaucrats at the Commerce Department and the Office of the U.S. Trade Representative to grant waivers under what can at best be described as an opaque process with discretionary standards. …A schedule of tariffs doesn’t drain the swamp. It fills it with well-connected lawyers and lobbyists who know how to work the system.

The bottom line is that protectionism does not work if Republicans do it, and protectionism does not work if Democrats do it.

Both parties should have learned from Hoover’s horrible mistake.

P.S. A big problem is that politicians genuinely don’t understand that a “trade deficit” is automatically and necessarily offset by a capital surplus. Helping them to understand this fact is key to renewing support for free trade.

Read Full Post »

Is Biden a Socialist?

As explained in my three-part series (here, here, and here), socialism is a poisonous ideology. With poisonous results.

It is morally corrupt, elevating government over the individual and the family.

And it is economically nonsensical since it punishes success and subsidizes sloth.

But not every leftist is a socialist (and you can argue that not every socialist is a leftist).

So how should we classify Joe Biden?

As reported by Alex Gangitano for the Hill, the president asserted that only “idiots” thought he was a socialist.

President Biden on Saturday said people holding signs calling him a socialist were idiots…he said in remarks at Jones Elementary in Joliet, Ill…“I love those signs when I came in — socialism. Give me a break, what idiots,” the president added. …The Illinois stop is another on a list of typically blue strongholds the president is visiting in the days before Election Day on Tuesday. He also traveled to New Mexico and California this week and will make stops in New York on Sunday and Maryland on Monday.

If you read the entire article, at no point does Biden explain why the signs were wrong. Or idiotic. Instead, he did his usual political routine, attacking Republicans for wanting to make changes to Social Security and Medicare (I wish!).

Since Biden dodged the issue, let’s look at whether the critics are right.

Is the president a socialist?

The answer depends on who is answering. For economists, socialism has a very specific definition. It does not simply mean big government.

Socialists are people who want government ownership, central planning, and price controls. Sort of like Cuba, North Korea, or the former Soviet Union.

At the risk of sounding like a softie, I don’t think Biden qualifies if we use this strict definition. Just like I didn’t think Obama was a genuine socialist when I addressed accusations against him back in 2010.

Though maybe it’s fair to say Biden leans in that direction.

• He wants the government to own and control things, like the postal service and the Social Security system. But so do most Republicans.
• He likes industrial policy so that government can tilt the playing field in favor of political contributors. But so do many Republicans.
• He likes price controls, at least indirectly, for items such as prescription drugs. But so do some Republicans.

I’ll close by acknowledging that many people – including self-described democratic socialists – don’t use the technical definition of socialist.

Indeed, most people probably think socialism is just a way of describing a system with high tax rates and lots of redistribution. Sort of like Sweden or Denmark.

I think they’re wrong, but Biden definitely would qualify as a socialist based on that casual definition.

Read Full Post »

Astounding Example of White House Chutzpah

While Donald Trump issued some inanely illiterate tweets to promote protectionism, Joe Biden has made a fool of himself with tweets on a wider range of issues.

• Jaw-dropping economic illiteracy about gas prices.
• Using make-believe numbers to promote class warfare.
• Adding to the debt while claiming to do the opposite.
• Once again using make-believe numbers on taxation.

The easy response to all this nonsense is to jump on the Biden-is-a-befuddled-old-man bandwagon.

That may be good for a few laughs, and I’m a big fan of political humor (even when it targets my side).

But the more accurate assessment is that Biden is a politician and he’s doing what comes naturally to politicians – which is to spin, lie, dissemble, and prevaricate.

And if you think I’m being too critical, we have a new tweet from the White House that breaks all records for chutzpah.

I don’t know what’s most galling about this tweet.

• Is it that the White House is taking credit for Social Security’s automatic COLAs (cost of living adjustments) even though that’s been part of the law for 50 years?
• Is is that the White House is trying to make it seem like good news that we’ve had very high inflation, which is the only reason why the COLAs are so large?

In either case, the only thing Biden actually did was to preside over a period of rising prices (which, in the interest of fairness, is mostly not his fault).

I’ll close with the observation that I would be happy if politicians basically did nothing other than make false claims of “leadership.” It’s when they start enacting new laws that things usually get worse (and that’s definitely been true during the Biden years).

P.S. We’ve also seen brassy tweets from the campaign arm for Democratic members of the House of Representatives.

Read Full Post »

Understanding Inflation and the Federal Reserve

Today’s column is about inflation and I want to start by recycling this clip from an interview back in April.

The main message is that the Federal Reserve deserves the blame for inflation.

America’s central bank created dramatically expanded its balance sheet starting in early 2020. This meant lots of extra liquidity sloshing around the economy and that inevitably led to rising prices.

As Milton Friedman explained, inflation is “always and everywhere on monetary phenomenon.”

So why am I regurgitating this type of analysis? Because someone sent me a PolitiFact article from April that supposedly does a “fact check” on the claim that Biden’s spending contributed to inflation.

What shocked me is that the article never mentions the Federal Reserve or monetary policy. I’m not joking.

We decided to look at how much of an impact Biden’s spending had on prices. …some economists, including Larry Summers, a top official under President Barack Obama, warned that the bill would lead to inflation. Fiscal conservatives joined in the warning. …How much of this can be put at Biden’s feet? Some, but not all of it, experts say. …The post-COVID-19 inflation story is more complicated than just federal spending. Other forces, including changes in the labor market, rising global energy and commodity prices, supply chain dysfunction and the war in Ukraine have all contributed to higher prices. …Russia’s attack on Ukraine disrupted a world economy that was still sorting itself out after COVID. Sanctions aimed at cutting Russia’s energy revenues sent oil and gas prices soaring. The war’s crippling hit on Ukraine’s agricultural sector, combined with sanctions (Russia is a major wheat producer), has raised the prices of basic goods like wheat and sunflower oil. …none of the experts we reached, liberal and conservative, said Biden’s actions were responsible for all of the inflation. Past government spending, COVID’s disruptions to labor markets, energy prices and supply-chains also played significant roles. Most recently, the war in Ukraine has made a challenging situation worse.

This is nonsense. At the risk of being boring and wonky, the factors mentioned in the article are important, but they will only change relative prices in the absence of bad monetary policy.

In other words, energy prices may increase, but that will be offset by declines in other prices. Unless, of course, the central bank is creating too much liquidity, thus enabling an increase in the overall price level.

I’ll close with a caveat. Bad monetary policy sometimes will cause rising asset prices (a bubble) rather than rising consumer prices. Both outcomes are examples of inflation, but only the latter shows up when the government releases monthly data on the consumer price index.

That being said, is it possible that some of Biden’s (and Trump’s) spending policies led to more price inflation rather than more asset inflation?

Yes, but that’s merely shifting the deck chairs on the monetary Titanic. And it doesn’t change the fact that it is gross economic malpractice for PolitiFact to write about inflation without mentioning the Federal Reserve or monetary policy.

P.S. Here’s a humorous video about the Federal Reserve and here’s a serious tutorial video about the Federal Reserve.

Read Full Post »

Assessing the Biden Economy

According to polling data, President Biden is not getting good grades for economic policy.

Part of that is because of inflation, though I’ve repeatedly pointed out that the blame belongs with the Federal Reserve rather than Biden. And the big mistake from the Fed took place before Biden even took office.

Unfortunately, the President is not trying to make things better. His appointments to the Fed suggest he doesn’t understand the need for good monetary policy.

And all of his major legislative initiatives (the so-called stimulus, the misnamed Inflation Reduction Act, the pork-filled infrastructure legislation, and the cronyist handouts to the semiconductor industry) have increased the size and scope of government.

For what it’s worth, I think Biden’s big challenge – both politically and economically – is that Americans are losing ground. Simply stated, prices are increasing faster than incomes.

But that isn’t stopping the Administration from trying to turn a sow’s ear into a silk purse.

Alan Rappeport of the New York Times reported a few days ago that the Biden’s Treasury Secretary, Janet Yellen, is claiming that Bdenomics is a big success.

…the Biden administration is pivoting to recast its stewardship of the U.S. economy as a singular achievement. …The case was reinforced on Thursday by Treasury Secretary Janet L. Yellen… Ms. Yellen said the legislation that Mr. Biden signed this year to promote infrastructure investment, expand the domestic semiconductor industry and support the transition to electric vehicles represented what she called “modern supply-side economics.” …After months of being on the defensive in the face of criticism from Republicans who say Democrats fueled inflation by overstimulating the economy, the Biden administration is fully embracing the fruits of initiatives such as the $1.9 trillion American Rescue Plan of 2021.

The editors at the Wall Street Journal are not impressed.

Janet Yellen…tenure as Treasury Secretary hasn’t enhanced her reputation. …the White House is rolling her out in election season to portray the U.S. economy as a Valhalla of growth, fairness and optimism. …If you’re in a green business the White House likes, you’re in clover. If not, you’ll endure the costs of more regulation and taxes. In the Biden era, big government and big business are in political business together. …Ms. Yellen’s whoppers, …including a claim that “the causes of inflation are largely global.” …U.S. inflation has been substantially home-grown. …The Federal Reserve kept the money spigots open for too long, in part to finance the borrowing needed for all of the spending. …Ms. Yellen is also at pains to stress how much fairer the economy is since Mr. Biden took office… She fails to mention that the U.S. economy contracted by about 1% of GDP in the first six months of this year, even as real wages were falling. Real average hourly earnings declined 3% over the 12 months through July, and average weekly earnings by 3.6%. They’ve fallen 4.2% since Mr. Biden took office.

Meanwhile, the latest inflation data has not strengthened Biden’s case.

Jim Tankersley of the New York Times wrote about the issue yesterday.

Hotter-than-expected inflation in August was unwelcome news for President Biden, who has sought to defuse Republican attacks over rising prices in the run-up to November’s midterm elections. …Mr. Biden has claimed progress in the fight against inflation, including with the signing last month of an energy, health care and tax bill that Democrats called the Inflation Reduction Act. …But polls continue to show inflation is hurting Mr. Biden and his party… Mr. Biden threw a belated celebration at the White House on Tuesday to mark his signing of the Inflation Reduction Act. …But the country’s economic reality remains more muddled, as the inflation report underscored. Food prices are continuing to spike, straining lower-income families in particular. …Most importantly — and perhaps most damaging for Mr. Biden and Democrats — Americans’ wages have struggled to keep pace with fast-rising prices, an uncomfortable truth for a president who promised to make real wage gains a centerpiece of his economic program.

Let’s close with this chart, which shows what has happened to inflation-adjusted weekly earnings since Biden took office.

Yes, there was one recent month with good data, but that doesn’t seem like a big cause for celebration.

P.S. Paul Krugman’s defense of Bidenomics is just as weak as Janet Yellen’s (and his criticisms of good presidents are equally weak).

Read Full Post »

Krugman’s Anemic Defense of Bidenomics

Over the past few months, I’ve written a 7-part series on Bidenomics, reviewing the president’s record on issues such as subsidies, inflation, protectionism, household income, fiscal policy, red tape, and employment.

Regarding the last item, a big problem is that the share of the population with jobs (measured by either the labor-force participation rate or the employment-population ratio) has not recovered.

It hasn’t recovered to where it was before the pandemic and it hasn’t recovered to where it was before Obama took office.

That’s bad news. Our economy’s output (and our national income) depends on the quantity and quality of both labor and capital.

This does not reflect well on Biden.

But not everyone agrees. Paul Krugman has leapt to the President’s defense. He even claims that American workers are enjoying a “Biden boom.”

President Biden has presided over a huge employment boom… Bidenomics has been good for American workers, whether they know it or not. …Haven’t they seen the purchasing power of their wages fall, thanks to inflation? The answer is yes, but. …that decline was entirely caused by rising prices for food and energy, which have a lot to do with global forces and little, if anything, to do with U.S. policy… If you want to assess the impacts of Bidenomics on wages, you should probably compare wages with prices excluding food and energy. And on that basis, real wages have basically been flat since Biden took office. …So, yes, the Biden boom has been good for workers.

The most shocking part of the column is that Krugman never addresses the problem of missing workers.

I’m not joking. You can read his entire article and you won’t find anything about the labor-force participation rate or the employment-population ratio.

He does mention the number of people working and wants us to believe those numbers are a cause for celebration, but even he felt the need to acknowledge that, “the job gains under Biden probably reflected a natural recovery from lockdowns.”

And I think it’s worth noting that we have 4 million fewer jobs than Biden claimed we would have if his so-called stimulus scheme was approved.

In other words, the president’s policies almost certainly have hindered the natural recovery that should have occurred.

Now let’s tackle the issue of inflation-adjusted wages for the people who do have jobs.

Krugman claims that workers have enjoyed a “boom” because “real wages have basically been flat.”

But even that claim is only possible if you ignore what’s happened to prices for food and energy.

Call me crazy, but this is the economic equivalent of “Other than that, Mrs. Lincoln, how was the play?”

The bottom line if that inflation-adjusted wages have been falling during Biden’s tenure.

I’ll conclude by noting that Krugman could have written a column blaming the Fed for the weak employment data. That would have been legitimate.

And he could have written a column arguing that Trump had the same big-spending policies when he was in office. That also would have been legitimate.

Instead, he wrote a column that may be even more of a joke than his “exploding cigar” about Estonia.

Read Full Post »

The Failure of Bidenomics, Part VII

Let’s revisit the issues of Bidenomics.

Previous editions of this series have focused on Biden’s dismal record with regards to subsidies, inflation, protectionism, household income, fiscal policy, and red tape.

The assessment has not been positive, which shouldn’t be very surprising since Biden is basically a slow-motion version of Bernie Sanders.

Today, we’re going to look at Biden’s record on jobs…and that’s not going to improve the assessment.

The problem is employment rather than unemployment.

In a column for the Wall Street Journal, Nicholas Eberstadt writes about the millions of Americans who have disappeared from the labor force.

Never has work been so readily available in modern America; never have so many been uninterested in taking it. …For every unemployed person in the U.S. today, there are nearly two open jobs, and the labor shortage affects every region of the country. …Why the bizarre imbalance between the demand for work and the supply of it? One critical piece of the puzzle was the policy response to the pandemic. …Washington pulled out all the monetary and fiscal stops….created disincentives for work as never before. …In 2020 and 2021, a windfall of more than $2.5 trillion in extra savings was bestowed by Washington on private households through borrowed public funds. …With pre-Covid rates of workforce participation, almost three million more men and women would be in our labor force today.

To be fair, bad pandemic policies began with Trump.

But Biden promised changes yet has delivered more of the same.

Why does this matter?

It’s not just a numbers issue. When people drop out of the labor force, that translates into a weakening of America’s societal capital.

Mr. Eberstadt explains.

The signs that growing numbers of citizens are ambivalent about working shouldn’t be ignored. Success through work, no matter one’s station, is a key to self-esteem, independence and belonging. A can-do, pro-work ethos has served our nation well. America’s future will depend in no small part on how—and whether—her people choose to work.

Thanks to a stronger work ethic and spirit of self reliance, the United States historically has had an advantage over other nations.

But it’s increasingly difficult to feel optimistic about the long-run outlook for America’s societal capital.

Ironically, Joe Biden seemed to understand this in the not-too-distant past.

Read Full Post »

Student Loan Humor

There are many serious objections to Biden’s unilateral student loan bailout (I included a poll with six potential answers in this column).

And I’m sure I’ll write more serious columns about the issue, whether focused on the specific problem of the bailout or the broader issue of how student loans enable colleges to increase tuition (the third-party payer problem).

Today, though, let’s enjoy some gallows humor.

We’ll start with some satire directed at the people who think others should pay for their mistakes.

Here’s another meme with the same message.

Next, we have a couple well-to-do college graduates explaining the benefits of the bailout to someone who only finished high school.

As you might expect, the satirists at Babylon Bee have weighed in.

One local plumbing contractor, Sam Caughorn, is really looking forward to paying the tab on his neighbor’s $89,000 gender studies degree. “Listen, I’m just a plumber,” he said. “I didn’t go to college, but I work hard and support my family. I don’t know about all that high-falutin gender stuff they teach in college, but I’m sure it must be important since it’s so expensive! Happy to help out another person in need.” According to studies, there are millions of white girls working at coffee shops across the country while struggling under the crushing student debt they acquired by irresponsibly obtaining college degrees that gave them no marketable job skills. …Local gender studies major Amber White is looking forward to having all her debt forgiven, thanks in part to the contributions of plumbers like Sam Caughorn. “I’m so thankful for the generosity of our Democrat leaders!” she said. “They really look out for the little folx. Also, down with capitalism and white men!”

One of my oft-repeated jokes is that I’m a lesbian trapped in a man’s body.

Well, here’s a bailout version of that sophomoric humor.

But why stop with mortgage? Surely other types of debt deserve forgiveness?

There are many villains connected to this issue, most notably callow politicians such as Biden.

But colleges and universities must be thanking their lucky stars that so few people are focusing on their role.

As is my tradition, I’ve saved the best for last.

Here’s an updated look at the oft-used equality-equity meme.

I’ll close with one serious point.

As a general principle, redistribution is economically harmful since it penalizes work and subsidizes idleness.

But it becomes disgusting and morally offensive when it takes money from the less fortunate and gives it to those with more wealth and income. And that’s the net effect of Biden’s student loan bailout.

Read Full Post »

Biden’s Student Loan Scheme: The Party of the Rich Redistributes Money Upwards

As a general rule, some of the worst people are attracted to the wold of politics.

As such, we should never be surprised when politicians push bad policy.

But there are bad ideas…and there are really bad ideas.

At the risk of understatement, Biden’s proposed scheme to “forgive” a big chunk of student debt is spectacularly misguided.

The challenge is identifying why it’s wrong. There are so many possible answers.

Let’s review some of the ways this is bad for the United States (you get to make your choice in a poll at the end of the column).

• Redistributes from poor to rich
• Subsidizes irresponsibility and penalizes responsibility
• Abuse of power
• More red ink
• Higher tuition price
• Awful precedent

To help determine which answer is best, let’s review some recent analysis.

National Review editorialized on the topic. Here are some of the highlights.

Biden’s student-loan plan will cost about $2,000 per taxpayer. …Biden is effectively telling all the people who didn’t go to college, those who went to college but didn’t borrow money, and those who went to college and already paid off their loans that they are suckers. …Federal student loans are already issued on very favorable terms. …The order caps those eligible for loan forgiveness at $125,000 in individual income, which is approximately double the median household income and hardly excludes anyone. …the president has…abused emergency powers to pursue a reckless and senseless policy.

In her Washington Post column, Megan McArdle savages the president’s giveaway.

…the Biden administration announced that it would forgive up to $10,000 in student loan debt (up to $20,000 for Pell Grant recipients)… How many ways can a single policy be bad? This one could cost the federal government somewhere between $400 billion and $600 billion, completely unpaid for. Its legality is at best an abuse of the law to address the “national emergency” of upcoming midterm elections. …an extremely regressive policy, heaping benefits on the most affluent demographics, while leaving everyone else to pay the cost through some combination of higher taxes, lower benefits, or higher inflation and interest rates. Worst of all: What do Democrats do for an encore? …This first action will beget demands for a second and a third. …like trying to quit smoking by switching to unfiltered cigarettes. 

Honest folks on the left are equally upset about Biden’s reverse redistribution.

President Obama’s former top economic aide, Jason Furman, didn’t mince his words.

Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless. Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse.

— Jason Furman (@jasonfurman) August 24, 2022

And the editors at the left-of-center Washington Post were equally scathing.

The unemployment rate for people with bachelor’s degrees and higher is just 2 percent. It’s hard to make the case that college graduates are…facing an unprecedented crisis. …canceling student loan debt is regressive. It takes money from the broader tax base, mostly made up of workers who did not go to college, to subsidize the education debt of people with valuable degrees. …Mr. Biden’s plan is also expensive — and likely inflationary. …Mr. Biden’s student loan decision will…provide a windfall for those who don’t need it — with American taxpayers footing the bill.

From a libertarian perspective, Elizabeth Nolan Brown of Reason denounced Biden’s scheme.

Biden’s basis for saying that the executive branch has the right to simply declare student loans forgiven is both egregious in its own right and troubling for the future of executive power plays. …The program amounts to a massive subsidy for middle-class Americans, as opposed to benefiting the most economically downtrodden or financially strapped. …the program “consumes resources that could be better used helping those who did not, for whatever reason, have a chance to attend college,” as economist Larry Summers put it …there are many people for whom avoiding student loan debt or paying it off promptly meant making all sorts of sacrifices. Biden’s loan forgiveness program says to them that this thrift, practicality, etc. may have been for nought.

By the way, Larry Summers was Bill Clinton’s Treasury Secretary and also head of Obama’s National Economic Council, so hardly a libertarian fellow traveler.

Here’s more of his analysis.

Student loan debt relief is spending that raises demand and increases inflation. It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.

— Lawrence H. Summers (@LHSummers) August 22, 2022

Returning to libertarian commentary, Brad Polumbo of the Foundation for Economic Education adds his two cents.

…forcing taxpayers to pay down the roughly $1.5 trillion in government-held student debt is not a “progressive” policy by any stretch. …just one in three American adults over age 25 actually has a bachelor’s degree. …college graduates typically make 85 percent more than those with only a high school diploma and earn roughly $1 million more over a lifetime. So any government policy that forces taxpayers to pay off loans held by a relatively well-off slice of society is actually regressive… Economists Sylvain Catherine and Constantine Yannelis crunched the numbers to conclude that full student debt cancellation would be a “highly regressive policy” and award $192 billion to the top 20 percent of income earners, yet just $29 billion to the bottom 20 percent. …other research from left-leaning institutions like the Urban Institute has reached the same conclusion. So, we’re left with the simple fact that one of the Democratic Party’s top agenda items is a taxpayer-financed handout to the wealthy. 

Charles Cooke of National Review also is not impressed.

Congress has passed no rules that allow down-on-their-luck presidents to throw money at people for political gain. As of yet, Congress has given no instruction that if the president’s friends might like a little more cash, he can raid the Treasury to give it to them. Certainly, Congress has set up a loan program. But the deal there is rather simple, all told: First you borrow, and then you pay back what you borrowed. There is no mention of “forgiveness” days or of “help” or of rolling Chekhovian jubilees, and by pretending otherwise, President Biden is making a mockery of his oath to uphold the Constitution. …This isn’t a reform. It’s not even pretending to be reform. It’s a contemptuous, abusive, unbelievably expensive shot in the dark… Joe Biden and his party prefer college students to you, and they think that those students ought to be rewarded for that by being handed enormous gobs of your money. Electricians, store managers, deli workers, landscapers, waitresses, mechanics, entrepreneurs? Screw ’em.

Robby Soave of Reason also is disgusted.

Biden’s debt forgiveness plan will do nothing—absolutely nothing—to fundamentally change the incentive system that created the doom spiral in the first place. Degree-seekers will continue to borrow large amounts of money to buy useless educations; indeed, they might feel even more encouraged to do so now that this precedent has been set. Meanwhile, colleges and universities will have even less incentive to lower costs. …Forgiving student loan debt exacerbates this problem since it encourages more reckless borrowing. …It is a slap in the face to everyone who either paid down their college debt or made different educational choices to avoid accruing it. …Biden…simply engaged in a vast transfer of wealth, taking hard-earned money from those who did not fall prey to the federal government’s scam and awarding it to those who did.

So what’s the bottom line?

One obvious takeaway is that the party of the rich has provided another giveaway to their rich constituents. Think of it as the bailout version of the state-and-local tax deduction.

But I think this message might be the real moral of the story.

P.S. At the risk of influencing the poll, Biden’s student loan bailout will give colleges and universities the leeway to further increase tuition, but you need bad monetary policy to get a sustained increase in the overall price level.

P.P.S. Cast your vote.

Read Full Post »

Big Government, Biden, and Big Corruption: Part II

Yesterday’s column explained that lobbyists are big winners when the size and scope of government increases.

• For instance, a bigger budget means special interests hire lobbyists to obtain ever-larger slices of pork.
• Moreover, added red tape means lobbyists get more clients seeking to manipulate the regulatory process.

And Biden’s grossly misnamed Inflation Reduction Act will make both of those problems worse, enabling more corruption.

But there’s a third problem to consider. Biden’s agenda also calls for a massive expansion of special tax privileges.

From a libertarian perspective, I like when the law allows people to keep more of their money.

As an economist, however, I don’t like when people are lured into make inefficient choices simply because of a convoluted tax system.

And, as a decent human being, I despise a process that enriches lobbyists, politicians, and other insiders. This corrupt process is succinctly captured in this flowchart put together by my former colleague Chris Edwards.

Chris’ main point is that we should be reforming and simplifying the tax code rather than dramatically expanding the budget of a corrupt Internal Revenue Service.

You can’t argue with that goal (assuming you want what’s best for the nation). Even folks on the left should agree.

The bottom line is that a complicated and convoluted tax code is great for lobbyists and a boon for corruption.

P.S. If you want to know the world’s most surprising loophole, click here.

P.P.S. Assuming loopholes are properly defined, the ideal policy is to eliminate them in tandem with enactment of lower tax rates.

Read Full Post »

Big Government, Biden, and Big Corruption: Part I

Since I went to the archives for a video yesterday, let’s do the same thing today. Here’s my 2009 video about the close link between the size of government and the level of corruption.

I’m recycling this video because President Biden and his allies in Congress are poised to enact a revised version of the “Build Back Better” plan to expand the burden of government.

The legislation has all sorts of awful provisions, such as shoveling more money at a corrupt IRS, hurting jobs with higher taxes on “book income,” price controls on prescription drugs, and green-energy pork.

But today’s column will focus on process rather than policy.

To be more specific, I want to emphasize the video’s message about bigger government leading to more corruption.

And I’m going to cite an unexpected source – a left-leaning news outlet – to make my point.

In an article for the Washington Post, Yeganeh Torbati and Jeff Stein share various examples of how Biden’s misnamed Inflation Reduction Act is fattening bank accounts of lobbyists.

As Democrats hurry to finalize $739 billion climate, health-care and tax legislation…, business lobbyists and issue advocates are…using television and newspaper ads and personal outreach to try to sway Democrats to their side before the Senate votes. Much of the fiercest lobbying has focused on the bill’s health-care provisions. …The bill also provides hundreds of billions…to fight climate change… The Zero Emission Transportation Association…is asking senators to consider extending the deadlines by a year or more… Small businesses successfully stripped higher taxes on pass-through entities, while bigger firms succeeded in keeping the corporate rate at 21 percent.

The story focuses on the battle over the legislation, so allow me to add two points.

• First, fighting over what is in the package is just the tip of the iceberg. Assuming the bill becomes law, there will then be countless opportunities for lobbyists to get rich by manipulating the regulations that will define how the law is implemented, as well as yearly opportunities for lobbyists to cash in by influencing how money is spent.
• Second, not all lobbyists are bad. If a group of people hire lobbyists to get money or favors from the government, that is obviously immoral. But if a group of people hire lobbyists in hopes of protecting themselves (i.e., they don’t want to be taxed or burdened with more red tape), that is completely legitimate.

I’ll close by reiterating a point in the video.

Whether lobbyists are on the right side or wrong side, the ideal scenario is to shrink government. For instance, a simple and fair flat tax would radically reduce the incentive for influence-peddling.

Getting rid of various needless departments (Education, Transportation, Agriculture, Energy, Housing and Urban Development, etc) also would diminish opportunities for graft and sleaze.

P.S. If you want some lobbyist-themed humor, click here and here.

Read Full Post »

The Depressing Reincarnation of Build Back Better

One of the best things about 2021 was the fact that Congress did not approve Joe Biden’s economically debilitating plan to raise taxes and expand the welfare state.

His so-called Build Back Better plan was a very bad mix of class-warfare tax policy and redistributionist spending policy.

But one of the worst things about 2022 may be the reincarnation of a slimmed-down version of Biden’s plan.

Simply stated, the “slimmed-down version” of a terrible piece of legislation is bad news – even if it is possible to envision something even worse.

The Wall Street Journal‘s editorial on the package illustrates why it is bad news that Senator Joe Manchin is trying to rescue Biden’s statist agenda.

As the economy slouches near recession, Majority Leader Chuck Schumer and West Virginia Sen. Joe Manchin…unveiled a tax-and-spending deal that they call the Inflation Reduction Act. Is their aim to reduce inflation by chilling business investment and the economy? …A more accurate name would be the Business Investment Reduction and Distortion Act since that will be the result of its $433 billion in climate and healthcare spending, and $615 billion in new taxes and drug price-control “savings.”

The editorial highlights four terrible provisions.

First, there’s a big tax hike on American companies, with the biggest tax hike on firms that make new investments.

…the 15% minimum tax on corporate book income…will slam businesses whose taxable income is lower than the profits on their financial statements owing to the likes of investment expensing.

For all intents and purposes, politicians would be creating a second type of corporate income tax.

Heavy compliance costs for the business community, of course, but the rest of us probably care more about the estimated loss of 218,000 jobs according to the National Association of Manufacturers.

Second, there are corrupt “green energy” provisions that will degrade America’s energy efficiency and security.

…the bill’s $369 billion in climate spending, most of which is corporate welfare. …All of this will steer private investment into green energy at the cost of reduced investment in fossil fuels. Wind and solar subsidies are already creating distortions in power markets that make the electric grid less reliable and energy more expensive. The expansion of subsidies will compound these problems.

If you want to know why this is bad, just remember Solyndra.

Third, the legislation imposes back-door price controls on the pharmaceutical industry.

The bill will require the Health and Human Services Secretary to “negotiate” Medicare prices—i.e., impose price controls—for dozens of drugs. But the $288 billion in putative savings are fanciful. Manufacturers will hedge potential future losses by launching drugs at higher prices. …The bill will also discourage investment in innovative treatments that could reduce future healthcare spending.

For those of us who value the development of new drugs to fight problems like cancer and Alzheimer’s, this is very bad news.

Fourth, a very corrupt internal revenue service is rewarded for its bad behavior.

Speculative revenue of $124 billion will also come from an $80 billion boost for the IRS. Most of this will finance more audits. The rich can afford more tax lawyers, but middle and upper-middle class Americans will be inclined to settle IRS claims, however meritless, lest they spend even more to defend themselves.

P.S. I can’t resist sharing one final bit of information.

If you peruse the Joint Committee on Taxation’s analysis of the bill, you’ll find that Joe Biden is breaking his promise not to raise taxes on people making less than $400,000 per year.

Not that anyone should be shocked. I have repeatedly explained that the big spenders need to pillage lower-income and middle-class household if they want to finance bigger government.

Read Full Post »

Biden’s Main Economic (Political) Problem

There has been plenty of bad economic news for Joe Biden, most notably rising levels of inflation.

He also is being criticized for his tax-and-spend fiscal agenda. And mocked for his assertions about red ink.

But I think his main problem is this chart, courtesy of the Atlantic‘s Derek Thompson, which shows that prices are rising faster than earnings for the average American

The bottom line is that people don’t like inflation, but they probably would not be nearly as upset if their income was rising at least as quickly as prices.

But that’s not happening. And this means the average family is enduring a pay cut, when measured in actual purchasing power.

I shared a version of these numbers back in March as part of a six-part series on Biden’s economic mistakes (the other five columns can be found here, here, here, here, and here).

That data also shows that inflation is rising faster than earnings. And that’s true even if fringe benefits are included.

What’s ironic about this data is that Joe Biden doesn’t deserve blame for the outbreak of inflation. Today’s rising prices are a consequence of mistakes by the Federal Reserve that took place before Biden was in the White House.

Though Biden’s subsequent appointments to the Fed suggest he either does not understand the problem of inflation or doesn’t care. So it’s not as if he deserves much sympathy.

Read Full Post »

Biden’s Deficit Malarkey

Back in May, I pointed out that it is absurd for Joe Biden to claim credit for lower deficits. This Reason video elaborates, noting that red ink is (temporarily) falling solely because the orgy of pandemic spending is ending.

Serious budget people, regardless of their ideology, know this is true.

Almost everything Biden has done since taking office has expanded the burden of government.

For instance, he pushed through a so-called stimulus scheme, followed by a boondoggle-filled infrastructure plan.

Both of which are captured in this chart from Brian Riedl.

By the way, it would be better if the chart focused on how the spending burden has increased. After all, deficits should be viewed as the symptom. The real disease is excessive government.

That being said, either type of chart would look far worse if Biden had been able to convince Congress to approve $trillions of additional spending as part of his “build back better” proposal.

One final point is that Biden also has added to the fiscal burden of government with the pen-and-phone approach.

The Congressional Budget Office estimates that Biden has added $532 billion of extra spending via executive orders and other unilateral decisions.

P.S. I have no doubt Trump and many other politicians of both parties also would be taking credit for falling deficits if they were in Biden’s position. After all, politicians are probably the least ethical people in the nation. And Washington brings out the worst of the worst.

P.P.S. There is a risk that a slimmed-down version of Biden’s “build back better” plan is being resuscitated. That would be bad news for the economy. Not as bad as the original version, to be sure, but it’s crazy to enact anti-growth proposals with the economy teetering on the edge of recession (especially since some of the specific provisions are so misguided).

Read Full Post »

Biden’s Anemic Jobs Market

I’ve long argued that it’s generally better to focus on employment rather than unemployment when assessing the health of the job market, and I had a chance to pontificate on that topic for Labor Relations Radio.

Sadly, labor force participation numbers weren’t good under Obama and they improved only marginally under Trump.

And, as you might expect, the numbers are not good under Biden.

Courtesy of the Bureau of Labor Statistics, here is the data on the labor force participation rate.

As you can see, the numbers were declining for much of this century, but then began to improve before falling off a cliff because of the pandemic.

For purposes of today’s column, it’s rather troubling that the labor market has not bounced back to where it was before coronavirus wreaked so much havoc.

The Employment-Population Ratio, also from the Bureau of Labor Statistics, tells a similar story.

There was a big drop at the end of the Bush years and start of the Obama years, followed by a gradual recovery that was short-circuited by the pandemic.

Sadly, we have not come close to recouping those losses.

By the way, there are some folks on the left who recognize this problem.

Andrew Yang recently tweeted about the drop in labor force participation.

And he had a follow-up tweet pointing out that every one-percentage-point drop in labor force participation translates into 2.5 million fewer people being employed.

Is he right?

Well, let’s look at another chart from the Bureau of Labor Statistics.

As you can see, total employment today (158.4 million people) is not even back to where it was before the pandemic (158.9 million people).

And we would need a couple of million more jobs simply to get back on the pre-pandemic trendline.

To be fair, I don’t think Biden is fully responsible for the sub-par numbers. We probably would not be back to the pre-pandemic trendline even if we had good policy from Washington.

That being said, Biden is making a bad situation worse. His so-called stimulus was a net-job destroyer.

I’m sure additional red tape also is hindering job growth. Moreover, the threat of higher taxes surely isn’t helping.

The bottom line is that we need more people working, but that probably won’t happen unless we get government out of the way.

P.S. If you want technical definitions, here’s how the BLS defines the above terms.

• The labor force participation rate. This measure is the number of people in the labor force as a percentage of the civilian noninstitutional population 16 years old and over. In other words, it is the percentage of the population that is either working or actively seeking work.
• The employment-population ratio. This measure is the number of employed as a percentage of the civilian noninstitutional population 16 years old and over. In other words, it is the percentage of the population that is currently working.

P.S. If you want a humorous take on labor economics, I recommend this Wizard-of-Id parody, as well as this Chuck Asay cartoon and this Robert Gorrell cartoon.

Read Full Post »

Deconstructing Biden’s Corporate Tax Cartel, Part III

As part of my continuing efforts to derail Biden’s global minimum tax on businesses (here’s Part I and Part II), I explain the downsides of the president’s plan in this clip from a recent interview.

If you don’t want to spend three minutes to watch the above video, my views are summarized by this excerpt from an interview with the BBC.

Simply stated, politicians want to grab more money from businesses.

But let’s not forget that taxes on companies are actually paid by workers, consumers, and shareholders.

We do have some good news. Hungary is stopping, at least temporarily, the European Union from embracing its version of a minimum tax.

In a column for the Wall Street Journal, a member of that nation’s parliament explains his government’s position.

Adopting the European Commission’s minimum-tax directive now would be a profound mistake. …The EU directive, proposed by the European Commission in December 2021, aims to introduce a 15% minimum tax rate, effective Jan. 1, 2023…the current proposal would increase the tax burden on European manufacturers, which drive economic growth. The directive would need to be unanimously agreed by 27 EU member states to take effect. Hungary can’t support a proposal that would hurt the weakened European economy… Adopting the directive would hit Central European economies the hardest by damaging their favorable tax systems, a key competitive advantage over their Western European counterparts. …Hungary’s ability to set its own fiscal policies in this crisis is indispensable. To protect our competitiveness and sovereignty, the Hungarian National Assembly passed a resolution prohibiting the government from agreeing to implement a global minimum tax.

Let’s be thankful that Hungary said no.

But I’m still very worried, for two reasons.

• First, the column focuses on why it would be a very bad idea to impose a global tax cartel during the current period of economic turmoil. That’s true, but it implies that it might be acceptable to impose a global minimum tax at some other point. That’s definitely not the case.
• Second, it’s bad news that other nations – such as Ireland, Estonia, and Luxembourg – didn’t side with Hungary (Ireland’s capitulation is particularly disappointing).

Since we’re discussing the merits (or lack thereof) of a global minimum tax, let’s look at what others have written about the idea.

Aharon Friedman and Joshua Rauh opined against the concept of a global minimum corporate tax in an article for Fox News.

…the administration is conspiring at the OECD to stifle tax competition across the globe by effectively requiring all countries to impose similarly high tax rates. …teaming up with the OECD to be the world’s tax policeman would be disastrous for many reasons. …a global minimum tax would have to feature very detailed rules over every aspect of taxation, from cost recovery, losses, and interest deductibility, to tax incentives such as R&D and what kinds of businesses must be subject to the tax in the first place. The scheme would shift enormous power to the OECD Secretariat, which would start to look like the world’s IRS Commissioner. This would also be a backdoor through which to further strip tax lawmaking from Congress and place it in the hands of Treasury and its foreign counterparts. …The Biden administration is trying force countries across the world to adopt its own preference for high taxes on corporate income regardless of the effect on employment and wages.

The Wall Street Journal editorialized against this scheme last year.

Ignore the back-slapping about revenues and “fairness.” This deal is bad news for economies recovering from the pandemic, and especially the U.S. …Officials and progressive activists say they’re halting a global “race to the bottom” on corporate taxes. We’re glad they finally concede that tax rates matter to decisions about investment and job creation, since the left has denied this for decades. But the real action has been on tax policy competition, which has been instrumental to economic growth, innovation and job creation since the 1980s. The OECD plan will throttle that competition. That’s because, while the G-7 agreement focuses on the headline rate for the new minimum tax, the OECD plan comes with reams of harmonized fine print… Suppressing tax competition is the main reason the Biden Administration broke with Washington’s long, bipartisan tradition of opposing a global minimum tax. …American workers, consumers and shareholders will pay the price.

Writing for CapX, Kai Weiss warns that a global minimum tax is a cartel to benefit governments with uncompetitive tax systems.

…there’s a real danger that these proposals will damage the prosperity of competitiveness of the world’s major economies, while trampling on nation states’ freedom and sovereignty. …The likes of France and Germany have long taken umbrage that smaller member states like Ireland and Luxembourg have used low corporate tax rates… Rather than reconsider their own counterproductive policies, the EU’s two biggest economies have simply decided to try forcing everyone else to play by their rules. …It’s hard to avoid the conclusion that this is another bout of protectionism from countries such as Germany, France, and Italy which have long pursued counter-productive, draconian tax policies. The big difference now is that they have a willing ally in the shape of Joe Biden. …there’s a word for this kind of behaviour. If businesses were following such a strategy instead of governments “we would call this a cartel”.

Last year, Thomas Duesterberg wrote critically about the implications for national sovereignty in a column for the Wall Street Journal.

Treasury Secretary Janet Yellen has a grand idea: a global tax regime. …Together with the Biden administration’s plan to raise the U.S. corporate tax rate to 28% and eliminate preferences, it would return the U.S. to its pre-2017 status as a high-tax jurisdiction, discouraging domestic capital investment and production. More insidious, it would cede authority over taxation, one of the pillars of democratic governance… This approach would transfer significant national sovereignty over corporate taxation, key to overall economic policy, to some yet-to-be-defined international regime under the guidance of the OECD… The Biden team should understand the road it is heading down. …Ceding corporate-taxation authority to an undefined international authority that will inevitably be controlled by an unelected technocratic elite would erode Madisonian principles even further. It would move America closer to the EU model of governance.

Needless to say, the EU model of governance (centralization, harmonization, and bureaucratization) is not a good idea.

I’m not optimistic, but my fingers are crossed that this awful idea of a global minimum tax will fall apart.

If the politicians prevail, the rest of us will lose. We’ll have a system that produces ever-higher tax burdens.

P.S. If you want to understand the case for tax competition, click here, here, and here.

Read Full Post »

Will the Real Oil Profiteer Please Stand Up?

At the risk of understatement, big government has a dismal track record of imposing higher costs on the private sector, both directly and indirectly.

Which is why this cartoon definitely belongs in my mock-government collection (along with this one and this one).

Simply stated, free markets produce efficiency and lower costs while government produces inefficiency and higher costs.

So it was particularly galling that President Biden is engaging in demagoguery against oil companies. Peter Baker and Clifford Krauss of the New York Times report on a letter that he sent to some of their CEOs.

President Biden chastised some of the largest oil companies for profiteering off surging energy prices and “worsening that pain” for consumers… With the average price of gas in the United States topping $5 a gallon for the first time, Mr. Biden pointed the finger at energy firms in a letter to seven top executives… “At a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable,” Mr. Biden said in the letter.

The trade association for the oil industry got the chance to respond and noted that the federal government is hindering energy development.

Mike Sommers, president of the American Petroleum Institute, countered that the administration shared the blame for higher energy prices and called for approval of new drilling leases and approval of “critical energy infrastructure” like pipelines.

I’m sure the Biden Administration has not been helpful, but I want to make a bigger point.

If the President wants to know who “profiteers” from the energy industry, he should look in the mirror.

Courtesy of Wikipedia, here’s a chart of federal gas taxes over time.

But Uncle Sam is not the biggest profiteer.

Almost every state government grabs even more every time we fill up. Here’s a map from the Tax Foundation.

Let’s close by acknowledging that the official position of both the Democratic Party and the International Monetary Fund is that higher energy prices are a good thing.

P.S. From the archives, here’s some gallows humor about energy prices.

Read Full Post »

Sloppy Economics from the New York Times

Some of my Republican friends get irked when I point out that President Biden should not be blamed for surging prices.

As I explained in March, we should instead blame the Federal Reserve for inflation.

Moreover, the Fed’s big mistake started in early 2020 when the central bank dramatically expanded its balance sheet (see chart). And that error took place well before Joe Biden entered the White House.

Unfortunately, instead of pointing a finger of blame at the Fed, some of our friends on the left have decided to assert that inflation is caused by greedy companies.

A recent New York Times column by German Lopez addressed this claim.

The good news is that Mr. Lopez’s column pours cold water on the “greedflation” theory.

The bad news is that the column completely overlooks the role of the Federal Reserve.

As prices have increased faster than at any other point in four decades, lawmakers have scrambled for explanations. In recent months, some Democrats have landed on a new culprit: price gouging. …”greedflation.” For Democrats, it is a convenient explanation as inflation turns voters against President Biden. …And it lets them recast inflation as the fault of monopolistic corporations — which progressives have long railed against. …there are other, more widely accepted explanations… Covid disrupted supply chains globally. Russia’s invasion of Ukraine caused another wave of disruptions, particularly in food and energy. The stimulus bills left people with a lot of extra cash, and many Americans spent it. That prompted too much demand for too little supply, so prices increased.

Just in case you suspect I’m not being fair, the words “federal reserve” or “central bank” do not appear in the article. Anywhere.

Needless to say, writing a column about rising price levels without mentioning the Fed is like writing the history of World War II and not mentioning Germany.

Why did the reporter make this mistake? If I had to guess, he probably noticed there was a debate inside the Democratic Party between the “crazy left” and the “rational left.” So he wrote about that conflict without noting (or perhaps even realizing) that there are other points of view.

Such as the late, great Milton Friedman.

P.S. For those who want more background, the crazy left are economic illiterates such as Robert Reich, Bernie Sanders, and Elizabeth Warren (and some guy named Lindsay Owens, who was cited in the article).

The rational left are people like Larry Summers, Bill Clinton, and Arthur Okun (and Jason Furman, who also was cited in the article).

I disagree with folks who are part of rational left, but at least they are tethered to reality.

P.P.S. Biden did not cause inflation, but (unlike a former president) he does not seem to understand how to solve the problem.

Read Full Post »

Jimmy Carter and Joe Biden

Even though I recently praised him for his support of transportation deregulation, Jimmy Carter is widely considered to be a failed, one-term president.

Most people think his reelection prospects were doomed because of high inflation.

I suspect, however, that he was most hurt by falling levels of real income. And when I write “real income,” I’m referring to income after adjusting for inflation.

If you peruse the historical data from Table A-2 in the Census Bureau’s most recent report on income and poverty, you’ll notice that median household income (in 2020 dollars) dropped by nearly $2,000 between 1978 and 1980.

In other words, Carter may have survived double-digit inflation if incomes rose even faster than prices.

But that’s not what happened. Instead, we got rising prices and falling real income. This “stagflation” is probably the reason Ronald Reagan was elected, and the rest is history.

Moreover, history may be repeating itself.

Here’s a recent story from the Washington Post. I’ve excerpted the key passages, but all you really need to do is read the headline.

…the World Bank warned… Not since the 1970s — when twin oil shocks sapped growth and lifted prices, giving rise to the malady known as “stagflation” — has the global economy faced such a challenge. …“The risk from stagflation is considerable…,” said David Malpass, president of the multilateral development institution in Washington… Investors also could take a beating from a repeat of ‘70s-style stagflation. The S&P 500 stock index, already down more than 13 percent this year, could lose an additional 20 percent or more, according to a recent client note from Bank of America.

The World Bank mostly focused on the risks for the global economy.

But we are already suffering from stagflation in the United States, according to the Bureau of Labor Statistics.

Simply stated, 2021 was a terrible year for household incomes and the first half of 2022 has been even worse.

And I strongly suspect this is why Joe Biden has terrible poll numbers.

Ironically, The big uptick in inflation isn’t even Joe Biden’s fault. The Federal Reserve deserves the blame, mostly for what it did in 2020 before Biden became president.

That being said, Biden reappointed Jerome Powell, the Chairman of the Fed’s Board of Governors. By rewarding Powell’s failure, Biden is now in no position to deflect blame.

P.S. Rising prices and falling income under Jimmy Carter gave us Ronald Reagan, so bad policy indirectly led to a good outcome. As of now, it’s unclear if there’s a new version of Reagan to rescue us from today’s version of stagflation.

P.P.S. For readers who are not old enough to have experienced America’s national rejuvenation under Reagan, you can click here, here, and here to see “the Gipper” in action.

Read Full Post »

Biden Wants America to be #1…in a Bad Way

Based on research from the Congressional Budget Office, I’ve shared estimates of the potential economic damage from the fiscal plan Joe Biden unveiled last year.

But now he has a new budget. So what if we simply focus on the tax portion of that plan and ignore all the new spending?

The Tax Foundation has crunched the numbers from Biden’s tax agenda and has published some very sobering numbers about this latest version of the President’s class-warfare proposals.

What caught my attention was this chart showing the United States (light-blue bars) already is out of whack with major competitors and trading partners (green bars) – and Joe Biden wants to make a bad situation much worse (red bars).

And when I write “out of whack,” that’s not an idle statement.

it turns out that the United States would have the highest income tax rates in the world.

Higher than Greece. Higher than France. Higher than Italy. Here are some of the grim details.

…the tax increases in the Build Back Better Act (BBBA)…would raise revenues by $4 trillion on a gross basis over the next decade. The Biden tax increases in the budget and BBBA would come at the cost of economic growth, harming investment incentives and productive capacity… The budget proposes several new tax increases on high-income individuals and businesses, which combined with the BBBA would give the U.S. the highest top tax rates on individual and corporate income in the developed world… Taxing capital gains at ordinary income tax rates would bring the combined top marginal rate in the U.S. to 48.9 percent, up from 29.2 percent under current law and well-above the OECD average of 18.9 percent. …Raising the corporate income tax rate to 28 percent would once again bring the U.S. near the top of the OECD at a combined rate of 32.3 percent, versus 25.8 percent under current law and an OECD average (excluding the U.S.) of 22.8 percent.

The good news, relatively speaking, is that the United States would not have the highest aggregate tax burden (taxes as a share of economic output).

And the U.S. would not have the highest tax burden on consumption (no value-added tax in America, fortunately).

But with all of Biden’s new spending (along with the built-in expansions of government that already have been legislated), it may just be a matter of time before the U.S. copies those features of Europe’s stagnant welfare states.

The net result is lower living standards for the American people. The only open question is how far we drop.

Read Full Post »

Biden’s Nonsensical Class-Warfare Tweet

Trump had some economically illiterate tweets about trade during his presidency, including the infamous one about being “Tariff Man.”

I think Joe Biden must be feeling envious that Trump got so much attention, so he has issued a tweet showing that he also suffers from economic illiteracy.

Or maybe Biden’s problem is dishonesty because his tweet is based on a make-believe number about the the average tax rate paid by billionaires.

For what it’s worth, this isn’t the first time that Biden has issued a tweet based on fake numbers.

In the previous instance, he deliberately confused the distinction between the financial concept of book income and and cash-flow concept of taxable income.

What accounts for his most recent error?

Reporting for the Wall Street Journal, Richard Rubin and Rachel Louise Ensign explain how the Biden Administration concocted this number.

What do the wealthy pay in federal taxes? On paper, the top marginal income-tax rate is 37% on ordinary income and 23.8% on capital gains. Government estimates put high-income filers’ average rates in the mid-20s. A new Biden administration analysis, however, pegs the average tax rate for the 400 wealthiest households at 8.2% from 2010 to 2018. …It’s far below traditional estimates from government number crunchers… Recent estimates of a broader group of rich people from the Congressional Budget Office, Treasury Department and the Joint Committee on Taxation fall between 23% and 26%.

So how does the Biden Administration get a number that is radically different than other sources?

By artificially inflating the income of rich people by asserting that changes in wealth should count as income.

White House…economists Greg Leiserson and Danny Yagan..include increases in unrealized capital gains. That is the change in the value of assets, including stocks, that haven’t been sold. …Conventional analyses and the current income-tax law don’t include unrealized gains.

At the risk of making a wonky point, “conventional analysis” and “income-tax law” don’t include unrealized capital gains as income because, well, changes in net worth are not income.

And the fact that some folks on the left want to tax people on unrealized capital gains doesn’t change that reality.

To understand why that would be wretched policy, let’s cite examples that apply to those of us who, sadly, are not billionaires.

• Imagine filing your taxes next year and having to pay more money to the IRS simply because Zillow estimated that your house rose in value.
• Imagine that you’re filling out your 1040 form next year and you have to pay more money to the IRS  simply because your IRA or 401(k) rose in value.

Both of these examples sound absurd because they would be absurd. And if a policy is absurd and unfair for regular people, it’s also absurd and unfair for rich people.

Since I’m a fiscal wonk, I’ll close by making the point that the Biden Administration wants to take a bad tax (capital gains tax) and make it worse (by taxing paper gains in addition to actual gains).

The net result is that we would have a backdoor wealth tax – a approach that is so anti-growth that even most European governments have repealed those levies.

But since Joe Biden is motivated by class warfare (see here, here, here, and here), he apparently doesn’t care about the economic consequences.

P.S. Biden once claimed that it is “patriotic” to pay higher taxes, but he then played Benedict Arnold with his own tax return.

Read Full Post »

Debunking Biden’s Absurd “Cut the Deficit” Claim

After almost 16 months in office, what is President Biden’s track record on fiscal policy?

The good news is that his big tax-and-spend plan to “build back better” has not been approved by Congress (and fingers crossed that it stays that way).

The bad news is that he has done other things, such as getting a fake stimulus though Congress, as well as a so-called infrastructure package.

The Committee for a Responsible Federal Budget put together an estimate of his major initiatives.

By the way, the CRFB folks fixate on how these initiative impact the deficit. What we really should be concerned about is how much money is being spent.

But let’s set that aside and focus instead on a jaw-dropping claim from the White House.

Even though all of his major initiatives have increased red ink, he is patting himself on the back for lower deficits.

For what it is worth, Biden’s claim is semi-accurate. It is true that budget deficits are temporarily falling.

But not because of him. Instead, red ink is falling because there was massive, one-time, multi-trillion dollar emergency spending for the COVID pandemic in 2020. That spending began to wind down in 2021 and it has mostly dissipated this year, so of course deficits have fallen.

For Biden to take credit for this drop would be akin to Truman taking credit for the big drop in red ink after World War II ended.

Eric Boehm of Reason wrote a column that debunks Biden’s ludicrous claim.

…this year’s budget deficit is forecasted to be the third or fourth-largest in American history—but President Joe Biden claims…his administration is overseeing a period of fiscal austerity. …Here are some words that actually tumbled out of the president’s mouth at a press conference… “We’re on track to cut the federal deficit by another $1.5 trillion by the end of this fiscal year. …on top of us having a $350 billion drop in the deficit last year, my first year as president,” Biden continued. …Those facts, however, exclude a few key details. …Biden took office the year after the budget deficit hit previously unimaginable highs due to a completely unprecedented spending binge triggered by a once-in-a-generation public health disaster. …if you look at the actual budgetary baselines published by the Congressional Budget Office—that is, the ongoing amount of annual federal spending absent any emergency stimulus bills like the ones passed on several occasions during the height of the pandemic—Biden has overseen a noticeable increase in the deficit above the pre-pandemic baseline. According to the Committee for a Responsible Federal Budget, a fiscal watchdog group that advocates for lower deficits, Biden’s policies have added about $2.5 trillion to the deficit over the next 10 years.

Brian Riedl is now with the Manhattan Institute, but we used to work together earlier this century at the Heritage Foundation. One of his admirable traits is that he hasn’t lost the ability to be outraged.

That comes through in his tweet about Biden’s supposed accomplishment.

By the way, I’m not making a partisan point. I have no doubt Trump would have done the same thing.

After all, politicians are probably the least ethical people in the nation. And Washington brings out the worst of the worst.

Read Full Post »

Another Failure for Keynesian Economics and Interventionist Government

Keynesian economics is based on the misguided notion that consumption drives the economy.

In reality, high levels of consumption should be viewed an indicator of a strong economy.

The real drivers of economic strength are private investment and private production.

After all, we can’t consume unless we first produce.*

Not everyone agrees with these common-sense observations. The Biden Administration, for instance, claimed the economy would benefit if Congress approved a costly $1.9 trillion “stimulus” plan last year.

Yet we wound up with 4 million fewer jobs than the White House projected. We even wound up with fewer jobs than the Administration estimated if there was no so-called stimulus.

So what did we get for all that money?

Some say we got inflation. In a column for the Hill, Professor Carl Schramm from Syracuse is unimpressed by Biden’s plan. And he’s even less impressed by the left-leaning economists who claimed it is a good idea to increase the burden of government.

Nobel Laureate economist Joseph Stiglitz rounded up another 16 of the 36 living American Nobel Prize economists to declare, in an open letter, that…there was no threat of inflation. …The Nobelists’ letter showed that those signing had bought Team Biden’s novel argument that its enormous expansion of social welfare programs really was just a different form of infrastructure investment, just like roads and bridges. …The laureates seemed to have overlooked that previous COVID benefits had often exceeded what tens of millions of workers regularly earned and that recipients displaced by COVID were never required to look for other work. While the high priests of economic “science” were cheering on higher federal spending, larger deficits and increased taxes, employers were and are continuing to deal with inflation face-to-face. …The Nobelists assured that we would see a robust recovery because of President Biden’s “active government interventions.” Their presumed authority was used to give credence to the president’s continuously twisting storyline on inflation — that it was “transitory,” good for the economy, a “high-class problem,” Putin’s fault for invading Ukraine, and the greed of oil and food companies… Today’s fashionable goals seem to have displaced the no-nonsense pragmatism that has long characterized economics as a discipline. …Don’t expect a mea culpa from Stiglitz or his coauthors any time soon. …They can be wrong, really wrong, and never pay a price.

The New York Post editorialized about Biden’s economic missteps and reached similar conclusions.

President Joe Biden loves to blame our sky-high inflation on corporate greed and Vladimir Putin. But a new study from the San Francisco Fed shows it was Biden himself who put America on this grim trajectory. …other advanced economies…haven’t seen anything like the soaring prices now punishing workers across America. Which means that the spike is due to something US-specific, rather than global prevailing conditions. That policy, was, of course, Biden’s signature economic “achievement.” …The damage it did has been massive. …inflation…to 7%… Put in concrete terms, a recent Bloomberg calculation translates this to an added $433 per month in household expenses for 2022. And historic producer price inflation, a shocking 10%, guarantees even more pain ahead.

For what it’s worth, I don’t fully agree with Professor Schramm or the New York Post.

They are basically asserting that Biden’s wasteful spending is responsible for today’s grim inflation numbers.

I definitely don’t like Biden’s spending agenda, but I agree with Milton Friedman that it is more accurate to say that inflation is a monetary phenomenon.

In other words, the Federal Reserve deserves to be blamed.

The bottom line is that Keynesian monetary policy produces inflation and rising prices while Keynesian fiscal policy produces more wasteful spending and higher levels of debt.

I’ll close with a couple of caveats.

• First, Friedman also points out that there’s “a long and variable lag” in monetary policy. So it is not easy to predict how quickly (or how severely) Keynesian monetary policy will produce rising prices.
• Second, Keynesian deficit spending can lead to Keynesian monetary policy if a central bank feels pressure to help finance deficit spending by buying government bonds (think Argentina).

*Under specific circumstances, Keynesian policy can cause a short-term boost in consumption. For instance, a government can borrow lots of money from overseas lenders and use that money to finance more consumption of things made in places such as China. The net result of that policy, however, is that American indebtedness increases without any increase in national income.

P.S. You can read the letter from the pro-Keynesian economists by clicking here. And you can read a letter signed by sensible economists (including me) by clicking here.

P.P.S. Keynesianism is a myth with a history of failure in the real world.

• It didn’t work for Hoover.
• It didn’t work for Roosevelt.
• It didn’t work for Japan.
• It didn’t work for Europe.
• It didn’t work for Obama.

It’s also worth pointing out that Keynesians have been consistently wrong with predicting economic damage during periods of spending restraint.

• They were wrong about growth after World War II (and would have been wrong, if they were around at the time, about growth when Harding slashed spending in the early 1920s).
• They were wrong about Thatcher in the 1980s.
• They were wrong about Reagan in the 1980s.
• They were wrong about Canada in the 1990s.
• They were wrong after the sequester in 2013.
• They were wrong about unemployment benefits in 2020.

Call me crazy, but I sense a pattern. Maybe, just maybe, Keynesian economics is wrong.

Read Full Post »

Biden’s Anti-Competitiveness Tax Grab

I wrote a few days ago about Biden’s plan to impose punitive double taxation on dividends.

But that’s not an outlier in his budget. As you can see from this table from the Tax Foundation, he wants to violate the principles of sensible fiscal policy by having high tax rates on all types of income.

What’s especially disappointing is that he wants tax rates in the United States to be much higher than in other developed nations.

At the risk of understatement, that’s not a recipe for jobs and investment.

The Wall Street Journal editorialized about Biden’s taxaholic preferences.

Mr. Biden…is proposing $2.5 trillion in new taxes that would give the U.S. the highest or near-highest tax rates in the developed world. …The biggest jump is in taxes on capital gains, as the top combined rate would rise to 48.9% from 29.2% today. That’s a 67% increase in the government’s take on long-term capital investments. The new top rate would be more than 2.5 times the OECD average of 18.9%. Nothing like reducing the U.S. return on capital to get people to invest elsewhere. Mr. Biden would also lift the top combined tax rate on corporate income to 32.3% from 25.8%. That would leap over Australia and Germany, which have top rates of 30% and 29.9% respectively, and it would crush the 22.8% OECD average. …Mr. Biden would also put the U.S. at the top of the noncompetitive list for personal income taxes, with multiple increases that would put the combined American rate at 57.3%. Compare that with 42.9% today and an average of 42.6% across the OECD.

The WSJ‘s editorial contained this chart.

The United States would be on top for corporate tax rates if Biden’s plan is adopted (which actually means on the bottom for competitiveness).

The bottom line is that Biden wants the U.S. to have the highest corporate rate, highest double taxation of dividends, and highest double taxation of capital gains.

To reiterate, not a smart way of trying to get more jobs and investment.

P.S. The “good news” is that the United States would not be at the absolute bottom for international tax competitiveness.

Read Full Post »

Dividend Taxation in Europe and the United States

Modern tax systems tend to have three major deviations from good fiscal policy.

1. High marginal tax rates on productive behavior like work and entrepreneurship.
2. Multiple layers of taxation on income that is saved and invested.
3. Distortionary loopholes that reward inefficiency and promote corruption.

Today, let’s focus on an aspect of item #2.

The Tax Foundation has just released a very interesting map (at least for wonks) showing the total tax rate on dividends in European nations, including both the corporate income tax and the double-tax on dividends.

Because it has a reasonably modest corporate income tax rate, some of you may be surprised that Ireland has the most onerous overall burden on dividends. But that’s because there are high tax rates on personal income and households have to pay those high rates on any dividends they receive (even though companies already paid tax on that income).

It’s less surprising that Denmark is the second worst and France is the third worst.

Meanwhile, Estonia and Latvia have the least-onerous systems thanks to low rates and no double taxation.

But what about the United States?

There’s a different publication from the Tax Foundation that shows the extent – a maximum rate of 47.47 percent – of America’s double taxation.

The bottom line is that the United States would rank #7, between high-tax Belgium and high-tax Germany, if it was included in the above map.

That’s not a very good spot, at least if the goal is more jobs and more competitiveness.

To make matters worse, Joe Biden wants America to be #1 on the list. I’m not joking.

I’ve already written about his plan for a higher corporate tax rate.

But he wants an even-bigger increases in the second layer of tax on dividends.

How much bigger?

Pinar Cebi Wilber of the American Council for Capital Formation shared the unpleasant details in a column last year for the Wall Street Journal.

The Biden administration has released a flurry of tax proposals, including a headline-grabbing tax hike on capital gains that would apply retroactively from April. Dividends would be subject to the same treatment, according to a recently released Treasury Department document. …the proposal would tax qualified dividends—dividends from shares in domestic corporations and certain foreign corporations that are held for at least a specified minimum period of time—at income-tax rates (currently up to 40.8%) rather than the lower capital-gains rates (23.8%).

I also like that the column includes references to some academic research.

A 2005 paper by economists Raj Chetty and Emmanuel Saez looked at the effect of the 2003 dividend tax cuts on dividend payments in the U.S. The authors “find a sharp and widespread surge in dividend distributions following the tax cut,” after a continuous two-decade decrease in distributions. …Princeton’s Adrien Matray and co-author Charles Boissel looked at the issue the other way around. In a 2019 study, they found that an increase in French dividend taxes led to decreased dividend payments. …Another study from 2011, looking at America’s major competitor, reached the same directional conclusion: A 2005 reduction in China’s dividend tax rate led to an increase in dividend payments.

Not that anyone should be surprised by these results. The academic literature clearly shows that it’s not smart to impose high tax rates on productive behavior such as work, saving, investment, and entrepreneurship.

Unless, of course, you want more people dependent on government.

P.S. Biden also wants American to be #1 for capital gains taxation. So at least he is consistent, albeit in a very perverse way.

Read Full Post »

Biden’s Farcical Tax Plan

I’ve already written that massive spending increases for various bureaucracies is the most offensive part of Biden’s new budget.

But I explicitly noted that these huge budgetary increases (well above the rate of inflation, unlike what’s happening to incomes for American families) were not the most economically harmful feature of Biden’s plan.

That dubious honor belongs to either his massive expansion of the welfare state or his big tax increases.

In today’s column, we’re going to focus on his tax plan.

The Wall Street Journal editorialized a couple of days ago about what the president is proposing.

A President’s budget is a declaration of priorities, so it’s worth underscoring that President Biden’s new budget for fiscal 2023 proposes $2.5 trillion in tax increases over 10 years. His priority is taking money from the private economy and giving it to politicians to spend. …Raising the top income-tax rate to 39.6% from 37% would raise $187 billion. Raising capital-gains taxes, including taxing gains like ordinary income for taxpayers earning more than $1 million would snatch $174 billion. Raising the top corporate tax rate to 28% from 21%—a tax on workers and shareholders—would raise $1.3 trillion. Fossil fuels are hit up for $45 billion. We could go on… Let’s hope none of these tax-increases pass, but the Democratic appetite for your money really is insatiable.

That’s a damning indictment.

But the WSJ actually understates the problems with Biden’s tax agenda.

That’s because the White House also is being dishonest, as explained by Alex Brill of the American Enterprise Institute.

The budget proposes $2.5 trillion in net tax hikes, almost entirely from businesses and high-income households, and touts policies that would “reduce deficits by more than $1 trillion” over the next decade. But a short note in the preamble to the Treasury Department’s report on the budget reveals a sleight of hand: “The revenue proposals are estimated relative to a baseline that incorporates all revenue provisions of Title XIII of H.R. 5376 (as passed by the House of Representatives on November 19, 2021), except Sec. 137601.”In other words, the budget pretends that the failed effort to enact President Biden’s Build Back Better Act was a success and considers new budget proposals in addition to those policies. But you won’t find the price of the Build Back Better (BBB) Act (including its roughly $1 trillion in net tax hikes) in the budget tables.

I’m going to use this trick during my next softball tournament. I’m going to assume at the start that I’ve already had 20 at-bats and that I got an extra-base hit each time.

So even if I have a crummy performance during my real at-bats, my overall average and slugging percentage will still seem impressive.

Needless to say, my teammates would laugh at me, just as serious budget people understand that Biden’s budget is a joke.

But there is some good news. Barring something completely unexpected, Congress is not going to approve the president’s farcical plan.

P.S. Don’t fully celebrate. As I noted in my “Hopes and Fears for 2022” column, there is a risk that some sort of tax-and-spend plan might get approved. The only silver lining to that dark cloud is that it wouldn’t be nearly as bad as Biden’s full budget.

P.P.S. If that prospect gets you depressed, here are a couple of humorous images depicting Biden’s fiscal agenda.

Read Full Post »

The Worst Part of Biden’s New Budget?

Since the economy suffers when tax rates go up and the burden of government spending increases, there obviously are plenty of awful features in President Biden’s newly released budget.

If I had to select a worst feature, though, I’d be tempted to pick the proposed spending hikes that Biden is seeking for some of Washington’s most-wasteful bureaucracies.

Here’s a chart from a story in today’s Washington Post (based on Table S-8 in the budget), which summarizes how much additional “discretionary spending” Biden is seeking.

Why am I upset about these proposed spending increases?

From a big-picture economic perspective, it’s bad fiscal policy to allow the burden of government spending to grow faster than the private sector.

And since Biden is projecting that real GDP will grown by 2.8 percent next year and inflation will be 2.1 percent during the same period (see Table S-9 of the budget), he obviously wants all these bureaucracies to enjoy big increases (unlike families, who are losing ground compared to inflation).

But I’m also irked from a targeted fiscal perspective. That’s because Biden wants giant spending increases for bureaucracies that should not even exist.

Here’s what I’ve written about some of them.

• Get rid of the Department of Housing and Urban Development.
• Shut down the Department of Agriculture.
• Eliminate the Department of Transportation.
• Abolish the Department of Education.
• Pull the plug on the Department of Energy.
• Phase out the Department of Veterans Affairs.

By the way, “worst feature” is not the same as most economically damaging feature.

There are two other parts of Biden’s budget that definitely will cause more harm.

• Many of the same tax increases he was pushing last year, plus Elizabeth Warren’s “billionaire’s tax” that will force people to pay tax on unrealized capital gains.
• Many of the redistribution programs he was pushing last year as part of his plan to expand the size and scope of entitlements and increase the burden of the welfare state.

These tax increases and entitlement expansions will do considerably more damage than the discretionary spending increases excerpted above.

But it’s still an outrage that Biden is shoveling more money at some of Washington’s most wasteful and counterproductive bureaucracies.

Read Full Post »

Blame the Federal Reserve

The good thing about being a policy-driven libertarian is that I don’t feel any need to engage in political spin.

I can praise Democrats who do good things and praise Republicans who do good things. And also criticize members of either party (sadly, that’s a more common task).

It also means I don’t believe in blaming politicians for things that are not their fault. For example, NBC just released a poll showing that Joe Biden has low marks for economic policy.

Some of that is appropriate (his fiscal policy is atrocious, to cite one reason), but I think the answers to this question show that the president is getting a bum rap on one issue.

Why am I letting Biden off the hook about monetary policy?

For the simple reason that the Federal Reserve (the “Fed”) deserves the blame. The central bank’s inflationary policies are the reason that prices are rising.

One can claim that Joe Biden is partly to blame because he recently re-nominated Jay Powell, the current Chairman of the Fed. But, if that’s the case, then Donald Trump also is partly to blame – or even more to blame – because he nominated Powell in the first place.

Moreover, as illustrated by this chart, the Fed’s mistake that led to rising prices occurred in early 2020.

Simply stated, the Fed pumped lots of liquidity into the system. That set the stage for today’s price increases (as Milton Friedman told us, there’s always a lag between decisions about monetary policy and changes in prices).

If you look closely, you’ll notice that this massive monetary intervention began nearly one year before Biden took office.

Given his support for Keynesian fiscal policy, I suspect Biden also believes in Keynesian monetary policy. As such, we presumably would have had the same policy if Biden had been elected in 2016.

In other words, Biden would have been just like Trump. At least on this issue.

But none of that changes the fact that Biden’s actions since becoming president have very little to do with today’s price increases.

Let’s close with a few additional observations about the aforementioned polling results.

• The folks at NBC deserve some criticism for failing to give people the option of choosing the Federal Reserve’s monetary policy. I’m guessing this was because of ignorance rather than bias.
• The people who blamed “corporations increasing prices” obviously didn’t pay attention in their economics classes. Rising prices are a symptom of inflation, not the cause.
• The people who blamed Putin for inflation are even more ignorant. At the risk of stating the obvious, a Russian invasion in February of 2022 obviously wasn’t responsible for rising prices in 2021.

P.S. The inflation-recession cycle caused by bad monetary policy could be avoided if the Fed was constrained by some simple rules.

P.P.S. Or maybe, just maybe, we should reconsider the role of central banks.

P.P.P.S. For what it’s worth, very few politicians have the intelligence and fortitude to support good monetary policy.

Read Full Post »

The Failure of Bidenomics, Part VI

Having addressed Biden’s track record on subsidies, inflation, protectionism, household income, and fiscal policy, let’s finish our series by reviewing the president’s record on regulatory issues.

The first place to start is the Federal Register, which is Uncle Sam’s official site for new rules.

Though it gives us conflicting information. The number of pages (a crude measure of regulatory zeal, as I noted a few years ago) actually decreased during Biden’s first year. But only compared to Trump’s last year.

To understand what’s really going on, let’s look at the Forbes article from which the above table was taken.

Clyde Wayne Crews of the Competitive Enterprise Institute sifts through the data and concludes that Biden is a fan of expanded red tape.

The Federal Register is the daily depository of rules and regulations produced by hundreds of federal departments and agencies. …Under Biden, the regulatory establishment has its Hall Pass back, and it shows. The Federal Register page count ended the year with 74,532 pages. …The 2020 count under Trump was far higher, at 86,356. There had been “only” 61,308 pages back in Trump’s first year of 2017, which had been the lowest count in a quarter-century… Trump’s first year represented a 35 percent drop… But Trump’s final year made him number two… How come? Well, …removing rules that ought not have been written in the first place still requires writing new rules to do it. …So, paradoxically, any concerted Trump moves on “one-in, two-out” in service of deregulating and removing that which came decades before required fattening the Register to some extent. …Despite Biden’s lower Federal Register page count, we’re nonetheless back in the mode of not just unapologetically but combatively fattening the Federal Register. …several hundred of Trumps rules had been deemed “deregulatory” for purposes of his one-in, two-out program… Biden’s revivalist counts are embedded with no such purpose… Trump definitely left a mark. Biden is working on erasing it.

Incidentally, I don’t think regulatory experts from the left would disagree with the above assessment.

For instance, Brookings has a regulatory tracker that monitors what’s been happening since Biden took office and you will not find any evidence that the current administration is interested in limiting or reducing red tape.

Let’s wrap up by looking at a specific example of Biden’s regulatory excess. It’s about domestic energy production, which is a very timely issue given what is happening in Ukraine.

Ben Cahill of the Center for Strategic and International Studies summarized some of what Biden did to hinder America’s ability to produce energy.

President Joe Biden has followed through on a campaign pledge by introducing a moratorium on new oil and gas leasing on federal lands and waters. With nearly 25 percent of U.S. oil and gas production coming from federal lands, the policy shift may have significant implications for future investment and production. …This pause will not affect existing operations or permits for existing leases, and private lands will not be affected. …A more permanent leasing ban would have a significant impact, although visible offshore production declines may not materialize for up to 10 years, given the typical timeframe for planning, exploration, appraisal, and development. Onshore production declines could conceivably show up faster.

As you can see, the main damage is to future energy production rather than current energy production.

Needless to say, the same is true about the Biden Administration’s limitations on energy exploration and development in Alaska.

And don’t forget about pipelines (and geopolitics!), as mentioned in this column by Kevin Williamson for National Review.

The Biden administration already is reaching out to Caracas, where officials describe the initial conversation as “cordial” and “respectful.” I’ll bet it is. And Maduro’s isn’t the only tyrannical tuchus that requires kissing: President Joe Biden is said to be planning a personal trip to Riyadh to beg Crown Prince Mohammed bin Salman to ramp up Saudi production. …Right about now, President Biden must be wishing he had an extra pipeline to Canada. The thought has occurred to Alberta premier Jason Kenney, who observes about Keystone XL: “If President Biden had not vetoed that project, it would be done later this year — 840,000 barrels of democratic energy that could have displaced the 600,000 plus barrels of Russian conflict oil that’s filled with the blood of Ukrainians.” …We could spare ourselves some of these calculations by maximizing our own output — not only of crude oil and natural gas but also of refined-petroleum products. That would also mean building the necessary pipeline infrastructure and reforming our antiquated maritime regulations to enable the transportation of those fuels.

The bottom line is that the Biden Administration wants more regulation and red tape.

That has adverse consequences for economic dynamism and growth.

Especially when bureaucrats at the regulatory agencies ignore cost-benefit analysis (or put their thumbs on the scale to get a result that matches their ideological preferences).

And, in the case of energy, regulatory policy can have significant geopolitical implications as well.

P.S. You can click here to learn something about Obama’s record on the issue, and click here to learn a bit about Trump’s track record as well.

Read Full Post »

The Failure of Bidenomics, Part V

Our series on the failure of Bidenomics has touched on four topics.

• Biden’s subsidy agenda will lead to higher prices and economic inefficiency.
• Biden’s inflation policy is mocked even by senior Democratic economists.
• Biden’s so-called Buy America policy hurts taxpayers and means fewer jobs.
• Biden’s statist agenda means families lose as prices rise faster than income.

For our fifth edition, let’s turn our attention to the president’s misguided fiscal policy.

This means analyzing three pieces of legislation.

First, his so-called stimulus was approved last year, adding $1.9 trillion to the nation’s fiscal burden. The president and his team claimed it would lead to four million additional jobs, but the net result was a drop in employment compared to the White House’s own projections.

Second, his costly infrastructure plan also was approved last year, though only a small fraction of new spending was actually for roads and bridges (and even that spending should be handled by state and local governments).

Third, his “Build Back Better” proposal dramatically would expand the burden of government spending – by $5 trillion over the next decade! Along with a plethora of economy-sapping tax increases.

Regarding the third item, the president so far has not been able to convince all Democratic senators to support the scheme. And with the Senate evenly split between the two parties, Biden needs all of their votes to get his plan approved.

With any luck, that will never happen.

So what is the plan wrong? Along with several hundred other economists, I signed on to this letter explaining why Biden’s massive expansion of the welfare state would be bad news for the country.

The most important part of the statement is that bigger government would “reduce the number of people working, badly misallocate capital, and hobble economic growth.”

Based on research from the Congressional Budget Office, the damage would be enormous, reducing worker compensation by $1.6 trillion over the next ten years.

What about the other issues mentioned in the statement, such as debt and inflation?

It’s not good that debt goes up, of course, but that’s a symptom of the bigger problem, which is government consuming a greater share of the nation’s output.

Also, at the risk of being annoyingly pedantic, I don’t actually think Biden’s budget would increase inflation. That only happens if the Federal Reserve adopts bad monetary policy.

That being said, central banks are more likely to adopt bad monetary policy when politicians are following bad fiscal policy. So the core assertion is correct.

P.S. I don’t know whether to characterize this as absurd, pathetic, addled, or dishonest, but Joe Biden actually claimed his budget plan has zero cost.

Read Full Post »