With the inflation rate hitting at a 30-year high, President Joe Biden and his White House team are confronting the most serious crisis of his presidency. Biden has been forced to stop predicting that the sharp price rises for everything from groceries to rent to consumer goods to energy prices to medical care are just “transitory” problems which will fade on their own as soon as the pandemic ends, enabling supplies to finally catch up to demand and cause prices to stabilize.
Biden’s inflation message changed the same day the Labor Department announced that the Consumer Price Index (CPI) jumped by 6.2% in October, the fifth-straight month it was at least 5%, outpacing average wage growth. Going forward, the prospects are worse. The current annualized rate of price increases is 12%, and even that number understates the soaring rate of rent inflation in most real estate markets across the country.
The soaring costs for the essentials of daily living hit low-wage and fixed income households the hardest. Many families are already being forced to cut back or dip into their savings for everyday living expenses to make ends meet.
Before the pandemic, Trump’s tax cut meant that minority and under-educated workers on the lower end of the wage scale were finally gaining ground economically. They had more jobs and opportunities for advancement available, and a decent shot at finally making their way up into the middle class. But now, because of the high inflation, working class families are losing ground again every month, despite their wage increases, and many of them are realizing it is the progressive policies being pushed by the same elitist liberal Democrats who claim to represent their interests who are really to blame.
BIDEN RECOGNIZES THE REALITY BUT NOT THE CAUSE OF INFLATION
Speaking in Baltimore last week, President Biden finally recognized what had long been obvious to everyone else. “Consumer prices remain too high,” he said. “Everything from a gallon of gas to a loaf of bread costs more. And it’s worrisome, even though wages are going up.” He even reluctantly confided, “Did you ever think you’d be paying this much for a gallon of gas? In some parts of California, they’re paying $4.50 a gallon.”
But Biden still could not offer any real assurances that the half-measures that his administration has taken so far to deal with inflation would give American consumers any immediate or even near-term relief.
As recently as July, Biden confidently declared on CNN that, “The vast majority of the experts, including Wall Street, are suggesting that it’s highly unlikely that it’s going to be long term inflation” — and despite hedging his bets on that statement with his comments last week in Baltimore, that is still the official administration position. The White House still insists that the inflation we are experiencing is due to a number of short-term problems, originating with the pandemic and resulting in a domino effect of international and domestic shipping disruptions, creating supply-chain bottlenecks on a worldwide scale.
Ever since the domestic inflation rate started rising six months ago, soon after the wave of Biden Covid stimulus checks began arriving in tens of millions of banks accounts across the country, White House officials have been repeating the mantra that factors such as strong wages and job growth would ultimately restore the lost productivity of the US economy and end the supply shortages driving the increase in prices.
While such reassurances initially sounded credible to the media and the public, they are inconsistent with the harsh economic reality which the pandemic — and Biden’s policies — have combined to create.
FOUR DECADES OF OUTSOURCING HAS HOLLOWED OUT OUR INDUSTRIES
After 40 years of American industrial companies cutting costs by outsourcing the supply chains for their products to factories all over the world — particularly China and other Asian countries — they have now lost their ability to produce them independently in-house. They can’t even turn to their former domestic suppliers, because, in many cases, they no longer exist in this country.
As a result, if a factory in Vietnam making a key widget was shut down because of a Covid outbreak in that country, or the recent shortages of electricity in parts of China slowed production of another key component at a factory there, assembly lines in the United States making products needing those parts would have to halt until new supplies arrive.
Even if those parts had been made in the foreign factory on time and shipped to the United States on a freighter which usually takes a few weeks to make the sea crossing, the journey now takes much longer than normal. That is because the ship will probably have to wait to load at an overcrowded foreign port, assuming that suitable empty shipping container (also in short supply) can be found. Then the ship must wait again to dock and unload at its overcrowded American destination port. Then the shipment must wait again for a truck to pick it up from the docks and transport it on the final leg of its journey to the warehouse at its ultimate destination.
Each point in the process, including the sea voyage, is subject to more delays due to shortages of storage space and containers, as well as sick laborers or those stuck in quarantine. Each delay adds to the cost of shipping the item. For example, the cost of sending a standard shipping container full of goods by sea from Shanghai to Los Angeles has increased from $3,392 at the start of this year to $11,362 today. That additional cost will ultimately be reflected in the retail price of the product.
FALLING SUPPLY CHAIN DOMINOES
Each additional delay also increases the time that the American factory must stand idle waiting for the missing parts it needs to finally arrive. Now multiply this scenario for the hundreds of separate component items that goes into the manufacture of a complex household product such as a vacuum cleaner, an air conditioner, or a washing machine, and thousands of separate items that go into the manufacture of a new car.
Just the acute shortage of one such item — the relatively low-tech computer chips which run every modern car’s engine and other mechanical and electrical systems — has brought the American auto industry to its knees. When the pandemic hit, the auto industry assumed that demand for new cars would quickly dry up, so they canceled their standing bulk orders for such chips from their manufacturers, mostly in Taiwan.
As it turned out, the chip makers had no problem selling those excess chips to computer manufacturers who needed them to make millions of cheap laptops and tablets for American schoolchildren stuck at home during the pandemic to learn with during their Zoom sessions.
Demand for new cars picked up again, sooner than expected, but when the auto makers sought to reinstate their canceled orders, the Taiwan chip makers told them, “Sorry, those chips are no longer available. You will now have to wait your turn.”
DRAGS ON THE ECONOMY
The impact of the resulting chip shortage on new car sales and prices has been dramatic. General Motors reported that due to the chip shortage, it delivered 33% fewer new cars in the third-quarter of 2021 than in the already-pandemic-depressed third-quarter of 2020. Because of the shortage of available new cars, the average sale price has increased by 19% over last year, and for those who can’t find or afford a new car they want, the average cost of a used car is now 42% higher than it was last year.
The auto industry is not alone. The worldwide chip shortage has also delayed the introduction and availability in recent months of the newest models of smartphones made by Apple and Samsung.
The story of supply chain problems due to delayed shipments and closed factories is the same in almost every sector of American industry, from consumer appliances to building materials to processed foods. American supermarket shelves these days are littered with announcements of popular products in short supply. During the current end-of-year shopping season, retail stores and their warehouses are well-short of the quantity of goods they usually sell. Many are also operating with shortened hours due to the lack of enough workers, even though the typical pay scale has now increased to start at $15 an hour.
TOO MUCH RELIEF MONEY MADE THE PROBLEM WORSE
Despite warnings from respected economists such as former Obama advisor Larry Summers, and despite the vocal opposition of all virtually House and Senate Republicans, Biden and the Democrats passed a huge $1.9 trillion Covid relief bill. Its checks flooded consumers with money to bid up the prices for all kinds of essentials still in short supply, and overgenerous unemployment payments which provided a powerful incentive for workers to stay home instead of going back to their jobs, exacerbating the labor shortages hobbling the recovery.
Taken together, since the pandemic started, the Trump and Biden administrations have given away $6 trillion to US consumers and offered enhanced jobless benefits that kept two million more Americans out of the workforce. The result is a textbook example of an inflationary spiral: too much money chasing too few goods.
At the same time, the Biden administration encouraged state and local governments to keep public schools, restaurants, and “non-essential” businesses locked down much longer than necessary. Biden has also decreed a sweeping vaccine mandate for all federal employees, health care workers, and 80 million employees of private businesses, worsening the already serious nationwide worker shortage.
BIDEN’S WAR ON FOSSIL FUELS
Consumer price inflation, especially as reflected by the rising price of gas at the pump and basic groceries at the supermarket, is one of the most sensitive issues in American politics. It is a topic of daily discussion and constant worry around kitchen tables across America, and a concern that no practical politician can afford to ignore for long.
Since taking office, Biden has led an unceasing war on the domestic fossil fuel industry — stopping construction of the Keystone XL pipeline, halting new oil drilling leases on federal lands, and proposing tough new carbon emission standards meant to drive innovative US energy companies out of business and destroy the 10 million American jobs they have created. By promoting these policies, Biden is responsible for a sharp cutback in exploration at a time when worldwide demand is increasing, exacerbating the recent sharp rise in oil and natural gas prices which will hit hard at the budget of every home and car owner in the country this winter, while undermining America’s hard-won, newly-found energy independence.
President Biden’s recent pleas to Russia and the OPEC countries to step up their crude oil production while continuing his own efforts to kill the domestic fossil fuel industry would be laughable if their real-world consequences were not so damaging to America’s consumers and its national security interests.
Out of growing desperation, White House officials finally reached out for advice and help from leaders of the US fossil fuel industry on high gas and oil prices — but it was a half-hearted attempt, because the administration is still unwilling to relax any of the anti-fossil fuel policies it has adopted since the day Biden took office.
As the Institute for Energy Research noted, “Biden is asking for help from domestic producers without giving them back any of the tools he took away — the Keystone XL pipeline . . . a ban on new oil and gas leases on federal land and waters, and pressure on banks not to lend to the oil and gas industry.” Even more infuriating, the institute pointed out, “the Biden administration is sending a strong signal that American energy is not welcome,” at the same time that the president is beseeching OPEC to boost its oil output.
Why, according to Biden, is the carbon dioxide generated by burning overpriced imported foreign oil preferable to carbon dioxide from burning cheaper, domestically-produced oil distillates, supporting millions of American jobs and reducing its international trade deficit?
A BRIEF HISTORY OF AMERICAN ENERGY SHORTAGES
There have been several crude oil and gasoline price hikes and shortages over the past 50 years, when America had become dependent upon imported foreign oil to meet its domestic energy needs. The first took place in 1973, when Arab oil producing states deliberately reduced oil exports as a form of retaliation against the US for its support for Israel in the Yom Kippur War, which led to gas rationing, shortages, and long lines of cars waiting to fill up at American gas stations and the imposition of federal gasoline price controls.
In 1979, another oil crisis was triggered by the fall of the Shah of Iran, creating the expectation among American car owners that it would result in a global oil shortage. In fact, there was no actual shortage of supply, but the fear of one caused panicky car owners to once again create long lines to fill up at gas stations around the country, generating spot shortages and a crisis mentality. President Jimmy Carter responded to the panic by keeping the Nixon-era price controls on gasoline in place, eventually to be ended after President Ronald Reagan took office and the US hostage crisis with Iran was peacefully resolved.
There was another sharp runup in crude oil prices between 2003 and 2008, rising from $28 to $134 a barrel, which ended with the recession caused by the 2008 global financial crisis. But the current increase in oil prices is the first one to be deliberately orchestrated by the policies of the federal government to destroy America’s long-term capacity to produce its own fossil fuels.
The new Biden narrative is to ignore the effects of its efforts to eliminate America’s use of fossil fuels by 2050, replacing gasoline and diesel-powered cars with electric vehicles and all coal, oil, and natural gas-powered electrical generators with more unreliable renewable sources, such as wind turbines and solar panels. Instead, the Biden administration now seeks to redirect the blame for soaring consumer energy prices onto price-gouging by American oil companies and foreign oil-producing nations. Their alleged “crime” is to have taken advantage of the worldwide fossil fuel shortages that Biden and other worldwide liberal leaders have created, by unquestioningly following the self-destructive edicts issued by the international climate change establishment.
HOW ENERGY INFLATION SPREADS THROUGH THE ECONOMY
Persistent energy inflation is particularly damaging, because it rapidly transmits itself through most other aspects of the domestic and international economies. It makes itself felt at each stage of the production cycle, from the energy needed to cultivate and harvest crops in the field and to mine raw materials from the earth, followed by their transport to the factories where more energy is needed to refine them into usable raw materials, and yet again to other factories to incorporate them into finished goods. Then, even more energy is needed to transport the finished goods — by sea, rail, air, and road — to warehouses and retail stores, and ultimately to the final consumer. Those energy costs are cumulative, to be passed along at each stage, adding to the price of the product until it reaches the end user.
The Biden administration’s deliberate restrictions on fossil fuel production, without providing satisfactory renewable energy replacement alternatives, means that the resulting high energy prices are not only reflected explicitly in the rising cost of gas and utility bills, but also hidden in the increased costs for virtually everything else we buy in our daily lives that must be shipped by trucks, trains, or boats powered by fossil fuels.
BIDEN ADMINISTRATION INFLATION DOUBLE-TALK
When pressed for answers as to when Americans could expect the long-promised relief from today’s “transitory” burst of inflation to arrive, even the most optimistic administration economic expert or spokesperson has had no choice but to try to dodge the question.
White House press secretary Jen Psaki and Transportation Secretary Pete Buttigieg insist on telling reporters and the American people, while keeping a straight face, that Biden’s current spending proposal is the real answer to the long-term inflation problem. Somehow, providing hundreds of billions of dollars of free child care, two years of free pre-K education, and a grab bag of other welfare state items on the progressive wish list, will all help to unravel the worldwide supply chain issues by persuading more idled laborers at home to pass up all the new benefits Biden’s bill will give them and go back to their old jobs.
In January, the newly appointed Treasury Secretary, Janet Yellen, urged President Biden upon taking office to “go big” in trying to stimulate the American economy with huge Covid relief payments, arguing that it would a greater risk to fail to spend enough. When Yellen was asked last Sunday on CBS whether inflation would be under control by next fall, her response was to deny all responsibility for it, claiming that “it really depends on the pandemic. The pandemic has been calling the shots for the economy and for inflation. And if we want to get inflation down, I think continuing to make progress against the pandemic is the most important thing we can do.”
In other words, Yellen was saying that the $6 trillion in deficit-financed Covid relief spending so far has brought us no closer to the end of the problem. Pressed for a more specific answer, Yellen responded that if supply chain and labor issues could be addressed and a more equal balance could be restored in the economy between the forces of supply and demand, “I would expect that if we’re successful with the pandemic to be sometime in the second half of next year — I would expect prices to go back to normal.”
If prices then don’t go back to normal, Yellen implied, the pandemic, rather than Biden’s ineffective responses to it, should be held to blame.
JOE MANCHIN SPEAKS THE TRUTH
One of the few Democrats who has had the courage to speak out with the truth about Biden’s massive liberal spending bills and their likely economic consequences has been West Virginia Senator Joe Manchin.
His reaction to the latest alarming indications of rising inflation announced by the Labor Department for the month of October was a renewal of his previous call to put the brakes on the progress of Biden’s big social welfare bill through Congress until sometime next year, when a hoped-for decline in the rate of inflation would make the new spending less dangerous.
“By all accounts, the threat posed by record inflation to the American people is not transitory and is getting worse,” Manchin tweeted, arguing for a further delay for consideration of the spending proposal. “From the grocery store to the gas pump, Americans know the inflation tax is real.”
INDEPENDENT VOTERS SEE THE LIGHT
President Biden’s arguments for his spending package as a cure for inflation don’t make sense, but Democrats have so much contempt for the intelligence of the American public and their real concerns that they keep on making these blatantly false promises, believing that most voters will not notice.
Democrats may have gotten away with it when many independent voters got so tired of Trump’s antics that they didn’t pay much attention when Biden ran against him last year — the fact that the other name on the ballot they checked off was not Trump was good enough for them. They also blindly trusted Biden’s reputation as an experienced, competent, Washington insider, a conventional mainstream Democrat pledging to restore bipartisan civility in the federal government.
Now those independent voters, and even some moderate Democrats, are suffering from buyer’s remorse. They now know they were wrong, and are closely scrutinizing the words and policies of the man in the Oval Office. According to poll after poll, most don’t like what they have found out — that Biden is not acting like the president they thought they knew and had elected.
Another key architect of the pandemic-inspired inflation bubble is Federal Reserve Chairman Jerome Powell, whose four-year term as the head of the central bank just happens to be up for renewal now by President Biden. For the past year, he has been steeped in public denial that the current spike in the inflation is threatening to become chronic, with devastating consequences to the health of the American economy and the budgets of tens of millions of lower and middle-class American families.
FED CHAIRMAN POWELL IS RUNNING OUT OF EXCUSES
The Wall Street Journal’s “Streetwise” columnist, James Mackintosh, notes that, “Every time the Federal Reserve comes up with an excuse for raging inflation and why it won’t last, the [latest economic] data knock it back down.
“Inflation hasn’t turned out to be temporary and has accelerated, reaching the highest in a single month since January 1990. It is high even when measured against pre-pandemic prices, so this isn’t merely catch-up for the deflation of last spring. It is no longer merely about a narrow set of Covid-disrupted supply chains, or demand for used cars… Even the … FAIT, the Fed’s year-old policy of flexible average inflation targeting, is wearing thin” as a credible excuse for failing to clamp down on runaway prices before they can take hold in the economy and spiral out of control.
One by one, Mackintosh demolishes each of the technical economic arguments that Fed Chairman Powell has been using to put off the politically distasteful but necessary remedies to bring inflation under control, and not wait for it to correct itself, sometime next year, maybe. These include cutting off the Fed’s stimulus program of huge monthly cash purchases of securities, which continue to inject cash into already overheated equity and bond markets.
It is also time for the Fed to start raising interest rates, which it has been artificially holding at near-zero, stoking more consumer and business demand for goods and services for which the economy still cannot generate enough supply to satisfy.
DAILY VOTER REMINDERS OF INFLATION
Meanwhile, American consumers are reminded of inflation every time they fill up the family car with gas or go shopping for necessities at the supermarket. For example, the price of gas at the pump is up by 50% over the last year. Natural gas prices have jumped more than 180% since September 2020. The cost of fuel oil to heat homes has jumped by 115% over the past year. The federal government forecast last month that home heating costs could rise by an average of 54% this winter.
The price of beef is up by 20% and more for the better cuts, and the typical cost of a slice of pizza has risen by a dollar or more. There is no longer such a thing in many places as a cheap and wide variety of readily-available takeout foods.
In blue states and Democrat-ruled large cities, a climate of government-inspired fear now pervades the marketplace. Store-owners and restauranteurs have been forced into the role of unwilling policemen enforcing government mask-wearing and vaccination mandates on their customers. They risk ruinous fines or closure orders, as well as public condemnation and blacklisting in the progressive-dominated social media universe if they dare to resist.
As in the early days of the pandemic, consumers have been forced to start hoarding household staples once again, as a hedge against steadily rising prices and unpredictable supply shortages. Each time they go to the store, the prices they must pay keep going up faster than their paychecks, leaving them struggling to put enough food on their tables and balance their checkbooks at the end of each month, no matter how much they may try to scrimp and save.
THE PANDEMIC THAT NEVER ENDS
Angry voters have begun to demand action to provide relief from rising prices from their Democrat officials in the federal, state, and city governments. But all they get in response are finger-pointing excuses, meaningless economic numbers, and anodyne promises that all will be well again someday when and if the Democrats and their cheerleaders in the mainstream media ever decide to call an official end to the pandemic.
In truth, even the Delta variant of Covid is now passé. “Bidenflation” has become America’s next pandemic, with no end in sight.
When the public conversation starts to get really heated, liberals invariably start finger-pointing and name-calling in an attempt to shift the blame to the most convenient candidates on their list of favorite villains. These include, but are not limited to, the Delta variant, millions of unwoke Trump-supporting vaccine resisters, Republican governors, China, Russia, big oil companies (of course), nefarious financial market manipulators (which is code for you-know-who), and, still, almost a year after he left office, the supposedly-unfair but actually quite successful economic and anti-Covid policies of Donald Trump.
So far, most Republicans have been smart enough to stay out of the way as the Democrats look foolish and insensitive by squabbling among themselves over the spoils in Biden’s latest spending proposal. They persist in demanding the prompt passage of the measure costing at least $2 trillion (and probably a lot more), including more than half-a-trillion dollars in new subsidies for risky green energy projects, many of which will probably wind up further enriching their already fabulously wealthy liberal donors (Elon Musk, Jeff Bezos, etc.).
HOW DEMOCRATS HELP THE RICH GET RICHER
This is hardly a new tactic for liberal Democrat presidents responding to a national crisis. Take the $570 million in defaulted federal loan guarantees that was included in President Obama’s 2009 global financial crisis fiscal stimulus package for Solyndra, a soon-bankrupted green energy company. It was owned by a Democrat party campaign contributor who was among first in line in Washington when all that federal money was being handed out.
Yet 12 years later, President Biden is once again calling on the American people to issue more blank checks to risky liberal-sponsored green energy ventures, to be cashed by the giant taxpayer-provided slush fund in Biden’s so-called Build Back Better spending program. That proposal has been languishing in Congress for the past two months as Democrat moderates and progressives fight over the huge size of the fund, and which faction’s donors should get the lion’s share of the political spoils.
If the bill is ultimately passed — and that is still not certain — it will not provide any relief to consumers from the current spike in inflation. Instead, it is likely to make inflation even worse, as consumers are forced to pay higher electricity bills from the new renewable energy sources, and higher prices for goods and services as the result of corporations passing along their newly-raised federal taxes to their customers.
THE HIDDEN NEW DEMOCRAT TAX BREAK FOR BILLIONAIRES
President Biden persists in claiming that all this new social welfare and green energy spending will come at a “zero-dollar” cost to American families which make less than $450,000 a year. But that will only be true if those families don’t have to pay for gas, electricity, and heating bills, or any of the broad spectrum of consumer goods and essentials which will be selling at highly inflated prices when the added costs to businesses from Biden’s tax hikes are figured in and passed along.
For example, the latest addition to the House version of the Build Back Better plan, stealthily introduced when Democrats thought nobody was looking, is the restoration of the full SALT itemized tax deduction that Bernie Sanders and other progressives have rightfully condemned as a “tax break for billionaires.” Before Trump capped the annual SALT deduction at $10,000 per couple to help pay for his 2017 tax cut bill, 80% of SALT’s benefits used to go to the top 10% of taxpayers by income.
The deductions enabled the rich to use federal tax money from residents in other lower-taxed states to help them pay for the exorbitant state and local income and real estate taxes on their luxury homes in Democrat-ruled states. If it passes, the restored SALT deduction will in many cases result in a tax windfall for many wealthy blue-state homeowners, even after accounting for all of Biden’s new tax hike proposals that he falsely claims will only impact those earning more than $450,000 a year, forcing them to “pay their fair share.”
But Democrats are also probably right when they claim that if their latest spending proposal is adopted, consumer demand will eventually slow. That is because those higher taxes will cripple the economy’s new job creation potential and slow worker wage increases. Prices will then start to level off, but at much higher levels than working- and middle-class Americans are used to or can now afford to pay.
DEMOCRATS FACING A COLD WINTER AND A DISASTROUS MIDTERM
President Biden changed his inflation rhetoric last week because political pressures on his administration are now building rapidly.
The pressure they are responding to is not coming from ordinary voters, whose opinions have never counted for much with the policymakers for the Biden administration, but rather from the wealthy liberal elites on Wall Street who have finally noticed that if inflation is allowed to continue unchecked, it will likely upset financial markets and depress corporate profits. Only now might we really begin to see effective government action to check inflation from DC’s entrenched Democrat officials and liberal bureaucrats.
Meanwhile, Biden and his Democrat allies in the House and Senate are looking at forecasts by their own pollsters for a bitter political winter of rising voter discontent over inflated energy and many other consumer product prices. That chill seems likely to last until the voters make their final decision, that Democrats are now dreading, in next November’s midterm elections.