President Joe Biden and his team schooled us on inflation with this week’s student loan debt forgiveness announcement, but not in quite the way they think.
Inflation is showing signs of tapering off, and Federal Reserve Chairman Jerome Powell has vowed to do what it takes to continue squeezing it out of the economy. “Last month incomes were up, and overall prices were down — that’s according to an important measure of inflation, which showed prices actually came down nationwide last month,” Biden said in a celebratory statement issued by the White House.
But the Biden administration has repeatedly demonstrated that it has learned nothing from its brush with inflation running at a 41-year high. If he and the Democrats are rewarded for a moderate drop in consumer prices in November’s midterm elections, more trouble could be on the way.
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Biden and those who work for him remain in total denial about inflation being primarily a monetary and fiscal policy phenomenon. They specifically deny that high spending can be a significant contributor to inflationary pressures when not disputing that the federal government is spending much money at all under their watch.
“This year, we’re on track to cut it by more than $1.7 trillion by the end of this fiscal year. The single-largest deficit reduction in a single year in the history of America,” Biden said during his student loan forgiveness announcement. “And the Inflation Reduction Act is going to cut it by another $300 billion over the next decade,” citing projected prescription drugs savings.
But Biden’s entire domestic agenda has consisted of piling trillion-dollar pieces of legislation on top of each other, ignoring repeated warnings about their impact until top Democratic economists such as Larry Summers and Jason Furman sound like Milton Friedman. That’s on top of the additional trillions that Biden rightly notes was spent under former President Donald Trump and congressional Republicans.
This includes the nearly $2 trillion American Rescue Plan, billed as a COVID-19 stimulus, after multiple previous attempts at stimuli during a time period when the pandemic was worse and economic reopening was a more distant goal. Biden’s signature piece of economic legislation, the bill he uses to take credit for every single good thing happening in the economy, has instead been compared to pouring gasoline on a roaring fire.
The only thing that has prevented inflation from being even worse is that Congress has failed to pass most of Biden’s proposals. The reconciliation bill that finally became law was well below the $3.5 trillion the president sought, itself a reduction from the $6 trillion or more congressional progressives preferred.
Biden continues to maintain that inflation is primarily driven by private sector price-gouging, Russian President Vladimir Putin, and other factors beyond his control.
“We’ve done all this, but then our critics say ‘inflation,’” he said at a grassroots rally organized by the Democratic National Committee. “You mean the global inflation caused by the worldwide pandemic and Putin’s war in Ukraine?”
Nothing tops the glib way in which the Biden regime has discussed inflation since the student loans announcement.
Referring to past spending in response to the pandemic and the 2007-2008 economic crisis, Biden said, “No one complained that those loans caused inflation.”
“But, look, has any Republican in the last year stood up and said, ‘Inflation is really high. You guys should stop providing this loan forgiveness to PPP recipients,'” Bharat Ramamurt, the deputy director of the National Economic Policy Council, told reporters at a White House press briefing.
One leading adviser to former President Barack Obama isn’t buying this fiscal nihilism. “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless,” tweeted Jason Furman, once chairman of the Council of Economic Advisers. “Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse.”
Furman was referring to the student loan program itself.
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If inflation subsides enough by November that voters keep Biden’s party in control of Congress, even handing them a few more Senate seats so the Democratic majority no longer hinges on a pair of relative centrists, there is no reason to think they won’t keep feeding the inflationary fire in the belief it will keep paying political dividends in 2024.
In that scenario, the Democrats might dodge the inflationary bullet — but consumers won’t.
