We recently referenced how Joe Biden seeks a 2024 job extension from American voters even while he has presided over a record 24 consecutive months of earnings declines (wages minus inflation), and our friend Stephen Moore offers an instructive illustration of the point:
Record Biden Earnings Bust
While Joe Biden simply repeats his claims to be building an economy “from the bottom up and the middle out,” and strangely brags about slight reductions in the rate of inflation that shot upward under him, our friend Stephen Moore provides yet another handy visual on how inflation has outpaced wage gains since Biden entered the White House:
Joe Biden the Wage Slayer
Continuing our efforts to warn against the perils of federal, state, and local efforts to target short-term lenders while working families face increasing economic headwinds, Stacy Watson came out with a fantastic new commentary entitled “What’s the Fed Doing to Fight ‘She-Flation?” She highlights the ways in which inflation can hit women particularly hard, and cautions against counterproductive legislation and regulation that will only make access to financing more difficult:
While the federal government is acting to tame inflation through legislation and monetary policy, there is more that can be done to ease the burdens of she-flation. For one, the government should increase access to liquidity for small businesses. That would incentivize and enable women to become entrepreneurs, seize control of their destinies, and, it is hoped, increase earning potential. Encouraging banks to partner with technology companies that serve underbanked consumers would open access to credit for many single moms and entrepreneurial women.
Lawmakers should also take off the table legislation that would remove access to personal and small business credit, such as the recently reintroduced “Safe Lending Act.” Although the bill purports to protect consumers from deceptive lending practices, what it would actually do is gut access to credit for working-class families, minorities, and women.”
Bravo.
We at CFIF often warn how attempts at “drug price controls” will only succeed in killing lifesaving drug innovation, in which the U.S. leads the world without a close second.
Joe Biden’s so-called “Inflation Reduction Act” constitutes a perfect illustration, and in a Wall Street Journal piece entitled “The Inflation Reduction Act Is Already Killing Potential Cures,” USC Schaeffer Center for Health Policy & Economics fellow Joe Grogan shows how “we’re already getting signs of the damage”:
One poorly crafted provision is driving companies away from research into treating rare diseases. In its Oct. 27 earnings statement, Alnylam announced it is suspending development of a treatment for Stargardt disease, a rare eye disorder, because of the company’s need ‘to evaluate impact of the Inflation Reduction Act.’ Alnylam’s decision turns on a provision in the Democrats’ bill that exempts from price-setting negotiations drugs that treat only one rare disease. The company’s drug is currently marketed as treating only amyloidosis, and thus is exempt from Medicare’s price setting. If Alnylam proceeded with research into treating Stargardt, it would lose its exemption.”
And that’s not even the end of it. Earlier this week, Eli Lilly announced termination of a blood cancer drug because, “In light of the Inflation Reduction Act, this program no longer met our threshold for continued investment.”
Mr. Grogan proceeds to offer a must-read primer on how and why this is happening, then concludes by admonishing the next Congress convening in January to abandon this instant disaster and promote innovation instead of cheap Biden Administration talking point schemes:
The Democrats may have achieved a short-term talking point for the midterm elections, but in the long term this partisan healthcare bill will prevent patients from receiving innovative, lifesaving treatments. A new Congress would serve Americans well by replacing the Inflation Reduction Act with an approach that recognizes the need for economic incentives to bring new treatments to patients.”
Good advice.
Joe Biden has leased fewer acres for oil and gas drilling than any other president. Don’t dare suggest that he bears any responsibility for skyrocketing energy prices during his presidency, though.
Biden Administration’s War on Drilling
As inflation continues to spiral upward at multi-decade highs and with the U.S. economy now in recession, maintaining an “all of the above” array of lending options for American consumers becomes more and more important. Unfortunately, activist groups like the “National Consumer Law Center” aim to do the opposite and limit rather than expand consumer options.
For a sense of consumers’ growing desperation, consider a Federal Reserve report on exploding credit card debt, as highlighted by Steve Cortes:
How have consumers dealt with these skyrocketing prices? The simple answer, unfortunately: via credit cards, particularly for working-class households. Just last week, the Federal Reserve Bank of New York issued a damning report on this credit binge for consumers, into a pronounced economic slowdown.
Total consumer debt rose a staggering $40 billion in June, far surpassing Wall Street expectations of a $25 billion increase…
A huge portion of this new debt flows from costly, risky credit card use. In fact, for the April-June second quarter of 2022, total credit card debt rose a staggering $46 billion, the biggest jump in 20 years. Americans pile into new accounts to accomplish this borrowing, opening up a whopping 233 million new cards during that second quarter, the most new cards since 2008. Such comparisons to the Great Recession should worry everyone.”
Additionally, credit cards aren’t always a viable option for many Americans, and traditional bank loans aren’t always an option due to small amounts needed for short-term emergencies. Whereas higher-income Americans with stronger credit history can borrow from banks, utilize assets they possess as leverage or use their savings, consumers with lower credit scores or lacking sufficient savings cannot. Indeed, according to the Fair Isaac Corporation, some 46% of consumers possess credit scores below 700, meaning that traditional bank loans aren’t possible for them.
In such circumstances, struggling Americans can access the money they need for the short-term via consumer finance loans.
Groups like the National Consumer Law Center (NCLC), however, want to limit the availability of such options, which they falsely characterize as some sort of scheme “to snare consumers into predatory loans for auto repairs, tires, furniture, and even pets.”
In reality, however, the unintended consequence of efforts like that of the NCLC will be to drive temporarily strapped consumers to seek out illegal loansharks, suffer overdrafts, or simply be unable to cover their temporary costs. As none other than the World Bank found, such limitations lead to “increases in non-interest fees and commissions; reduced price transparency; lower number of institutions and reduced branch density; and adverse impacts on bank profitability, in addition to the lack of access for smaller and riskier borrowers.”
That doesn’t help the people whom groups like the NCLC claim to protect, it hurts them. Accordingly, American consumers and elected leaders should recognize the peril that NCLC and similar groups present. Their efforts would only make consumer lending more difficult, more dangerous and more expensive.
As Senators Joe Manchin (D – West Virginia) and Kyrsten Sinema (D – Arizona) betray their “moderate” charade and join Senate Majority Leader Chuck Schumer’s (D – New York) latest tax-and-spend monstrosity, we’ve highlighted the preposterousness of the claim that imposing drug price controls will in any way address out-of-control inflation. Price controls will kill innovation, but do nothing to reduce inflation, because prescription drug prices simply aren’t the problem. Once again, economist Steve Moore offers a handy illustration of that truth:
Prescription Drug Costs Aren’t the Problem
While Joe Biden attempts to blame a shifting array of scapegoats for inflation, the simple numbers demonstrate the unmistakable truth. Consumer prices began skyrocketing upon Biden’s inauguration in January 2021, and wage gains plummeted toward an immediate deficit relative to inflation. During the Trump presidency, wages consistently exceeded inflation, only rarely even coming in even, let alone in negative territory. Economist Stephen Moore illustrates the reality unambiguously:
We recently sounded the alarm on how the Biden Administration, political left and crony capitalist big business interests are coalescing on an idea almost too bizarre to be real: heaping new carbon taxes on traditional energy sources in order to “reduce energy costs.” We subsequently illustrated one of the main reasons for that novel ploy: so-called “green” energy sources are non-competitive without government intervention to artificially make more efficient fossil fuel sources more costly. Courtesy of economist Stephen Moore, we have another biting illustration of that dynamic:
Taxpayers Power “Green” EV Initiatives
There’s nothing wrong with electric vehicles, and in fact they offer a promising future technology. But that should occur via market forces and consumer choice, not artificial government costs and subsidies paid by strapped taxpayers.
As Americans express growing alarm over consumer price inflation that commenced in January 2021 under the Biden Administration and Pelosi/Schumer Congress (see here), it’s worth highlighting how critical broadband access on which our economy increasingly depends has diverged from that trend. It’s also worth highlighting that stems from the fact that internet service has so far escaped Biden Administration regulatory attempts to reverse free-market progress achieved under former Federal Communications Commission (FCC) Chairman Ajit Pai:
Apparently nothing is too preposterous for Joe Biden and his apologists. They attempt to rationalize out-of-control inflation and wage erosion as a “Putin Price Hike,” but a simple chronology immediately refutes that (unless Vladimir Putin somehow took control of the U.S. economy in January 2021):
“Putin Price Hike?”
As if enough reasons to oppose Joe Biden’s “Build Back Better” agenda, from destructive drug price controls to higher taxes, didn’t already exist:
Build Back Bigger (Inflation)
In our Liberty Update this week, we highlight the Biden Administration’s role in rising inflation, some of its under-discussed negative consequences and its shockingly tone-deaf responses and rationalizations. In positive news from NCTA, The Internet & Television Association, however, internet service provider costs are actually declining:
Good News: Internet Service Costs Decline
From Andy Puzder, a snapshot of how inflation dreadfully continues to outpace American workers’ paycheck gains:
Biden’s Inflationary Gift
The Biden Administration’s failures aren’t exclusively overseas in nature. For seven consecutive months now, average U.S. hourly wages have declined when adjusted for inflation.
The Biden Inflation Boom
From RealClearPolitics, a comparison of wage gains (blue line) versus inflation (red line) under President Trump and now Joe Biden. But don’t sweat it, Joe – nothing that another creepy photo-op to an ice cream shop for fawning reporters won’t cure.
Biden’s Inflation Boom
The Trump Administration is contemplating a move to improve the way the federal government taxes capital gains by indexing rates for inflation, which amounts to a de facto tax cut.
It’s a no-brainer in terms of fairness and efficiency, as illustrated by the fact that even leftist economist and former Clinton Administration adviser Alan Blinder acknowledges the need for it today in The Wall Street Journal:
Why index gains? Suppose you own a stock for many years, during which time overall prices have doubled because of inflation. Over the holding period, the value of your stock has also doubled. When you sell, the proceeds have precisely the same purchasing power as the original purchase. There’s no gain, no loss. But under current tax law, you owe taxes on the phantom ‘gain.’ Worse, if your stock went up by less than the cumulative inflation, you’ll still get taxed despite your loss. This is unfair and dysfunctional.”
We’ll admit that it’s amusing to see a man who played the role of cheerleader for Barack Obama, who openly circumvented the Constitution and legislative process using his “pen and phone” to enact policy, demand that Trump refrain from making the change and instead allow Congress to act. Nevertheless, we’ll gladly celebrate his support for the underlying need for change.
Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.
View more of Michael Ramirez’s cartoons on CFIF’s website here.
Cato expert Mark A. Calabria suggests a simple reform that would make decisions by the Federal Reserve Board more responsive to America’s different regional economies – include at least one board member from each Federal Reserve region.
Congress imposed a “geographic diversity” requirement upon the Fed for good reason. Regions of the country do not move together. Nevada’s 11.7 percent unemployment rate, for example, is significantly above South Dakota’s 4.3 percent. If the Fed lacks a wide range of voices, then its policies are not likely to reflect the economic differences across our country. An interest rate policy that might be appropriate for New York City, and its financial sector, might not be appropriate for industrial Ohio. Just the fact that only one current Fed governor, Janet Yellen from San Francisco, is from west of the Mississippi raises questions as to the legitimacy of Fed decision-making.
Calabria points out that another benefit of diversifying board membership is that doing so follows the law. The Federal Reserve Act requires that, regarding members of the board, “not more than one of whom shall be selected from any one Federal Reserve district,” so that those making monetary policy decisions “shall have due regard to a fair representation of… geographical divisions of the country.”
Unsurprisingly, this easy to apply standard was recently violated when President Barack Obama nominated and the liberal Senate confirmed new members from Massachusetts and Maryland, even though two current members also hail from those states. Combine this with the New York Fed’s distinction as the only district with a permanent vote, and there is a regional – and arguably illegal – bias in favor of the Northeast.
Every region of the country should be represented equally when the Fed Governors decide how much money to print and where to peg the interest rate. To be sure, it would be better if the free market was deciding these issues, but that’s not the reality of the 21st century’s administrative state. With that in mind, perhaps the cry could be, “No manipulation without representation!”
Ashton asks me if I know of businesses eager to expand. The answer is no. Or, rather, “Bleep no!” And today’s news about the dollar falling even farther will worry them even more. Obama regulatory policy, Obama/Reid fiscal policy, and Bernanke’s recklessly inflationary monetary policy all have given businesses the willies. Now comes word that consumer confidence, already low, has fallen even more precipitously. Nothing will give businesses confidence until the leftists in the executive branch are gone.
That said, I agree wholeheartedly with the main thrust of Troy’s excellent column about tax reform — bold reform of individual income taxes is desperately needed, and Mitt Romney’s failure to propose such a thing is another horrendous mark against him — but I disagree that individual tax reform should come first in this horrid economy, and I disagree that only four people still have a chance to win the Republican nomination. Individual tax reform, no matter how designed, will take tremendous time and effort to work through the legislative process, with all sorts of trade-offs along the way. And in this economy, the problem isn’t really coming from individuals, it’s coming from a failure of corporations to re-invest the mountains of cash on which they now sit.
All of which is to say that the best way to cut the Gordian knot, for the current economy, is to completely eliminate corporate income taxes in one fell swoop. Almost as good is to cut them in half, and eliminate them entirely for manufacturers, as Rick Santorum would do. Which leads us to the failure to mention Santorum as a real contender for the nomination. A word to the wise: Check out his grassroots organization in Iowa. It’s the single best one to date.
Sure, voters are focused on how their taxes, not corporate taxes, will change. That’s why 9-9-9 proved so sexy. But they care about jobs as well, and if the sale is made right, they’ll see that the good jobs will come fastest from corporate tax reform, not individual tax reform. All Santorum need add when he’s discussing his tax proposal is that he has always supported various versions of the flat tax, that the idea isn’t anything new, and that so many off-the-shelf flat-tax plans have been out there for a quarter-century that the exact details don’t matter. He’s for a flatter, simpler individual tax code, period. But you don’t worry about income taxes if you don’t have a job, and a one-stop corporate-tax slash is the best way to achieve that.
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