It is the economy, stupid.
Unfortunately, Democrats pander to their far-left base. That pandering is leading to an economic disaster across the nation, with high inflation and decelerating growth. A clear majority of economists now say that a recession is inevitable.
President Joe Biden and the Democratic Party continue to fail on economic policy. They believe in modern monetary theory — that deficits don’t matter. Democratic policies stimulated demand, but Biden and his party ignored the supply side of the supply-demand equation. The Biden administration is responsible for adding more than $4.8 trillion to federal deficits over the 10-year period 2021-2031. The major deficit item was the American Rescue Plan, which added almost $2 trillion to the deficit. Since that budget buster, Democrats have pursued further borrowing.
MAJORITY SAY THE ECONOMY IS BIDEN’S FAULT AND IT’S GETTING WORSE: POLL
This deficit spending is causing an inflation spiral and a dramatic increase in borrowing costs by the federal government. Increased borrowing results in higher debt and increased federal interest payments. As the net federal deficit is almost equal to 100% of GDP, each 1% increase in borrowing costs by the federal government raises the federal deficit by 1% of GDP. The math is straightforward. The path to a fiscal nightmare is open and downhill.
Making matters worse, Democrats are turning to price controls. Sen. Elizabeth Warren (D-MA) is pushing legislation to stop what she describes as “price gouging.” Ignoring his own culpability for the situation, Biden has hit out at oil companies for the prices consumers are seeing at the pumps. Seemingly they have forgotten the horrible history of America’s flirtation with price controls under the Nixon administration. Democrats are failing economics 101: Price controls reduce supply and increase demand. Shortages follow. Business responds by reducing investment. At the state level, too, Democrats turn to voodoo economics, price controls on rent, rather than rolling back zoning regulations and other restrictions in order to increase the supply of housing. As of Jan. 1, 2022, California introduced statewide rent control. It is now illegal for residential landlords to raise rent by more than 5%, plus the local rate of inflation, in one year.
California is the nation’s wealthiest state, yet because of far-left policies, it has the nation’s second-highest poverty rate and an extreme shortage of housing. Rent controls will make matters worse.
Reject voodoo economics. Embrace small government, the rule of law, and free market capitalism. Through the wisdom of free market prices and the “invisible hand,” shortages will evaporate and a supply-demand equilibrium will be restored.
Price controls are fool’s gold.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
James Rogan is a former foreign service officer who later worked in finance and law for 30 years. He writes a daily note on finance and the economy, politics, sociology, and criminal justice.
