Joe Biden’s Insulting Inflation Nonsense

By Noah Rothman

Wednesday, March 02, 2022

 

The average American who tuned in to Joe Biden’s first State of the Union address—assuming anyone who voluntarily engaged in such an unrewarding task could be considered an “average American”—probably went into the affair with one primary issue on their minds: inflation.

 

National polling indicates that concerns over rising consumer costs have replaced the pandemic as the issue that voters care most about, and dissatisfaction with the economy is on the rise. That is poison for any party in full control of the federal government in an election year. It was, therefore, reasonable to expect that Joe Biden would lay out a plan that would directly address voters’ chief concern. He didn’t.

 

“I understand,” Biden said after acknowledging voters’ frustrations with the “rising cost of food, gas, housing, and so much more.” Following a digression into his childhood and the folksy wisdom he gleaned from those occasionally lean years, Biden first told voters what he would not do. He would not implement the kind of monetary policy that brought a halt to the last inflationary spiral, which America experienced 40 years ago. “I have a better plan to fight inflation,” Biden said. “Lower your costs, not your wages.”

 

Sounds great. But how? “I call it building a better America,” Biden said. He focused first on prescription-drug costs, singling out the cost of insulin to make his point. The president said that his administration would arbitrarily cap the price of insulin at $35, which was met with wild enthusiasm from his fellow Democrats. As price controls at the state level have demonstrated, though, artificial limits on out-of-pocket expenses are a cosmetic fix. An insulin consumer’s insurer still pays full price for the therapy, which puts pressure on the insurer to pass on the price to you in the form of higher premiums. Biden’s solution just contributes to the layers of opacity that prevent consumers from confidently navigating the pharmaceutical marketplace.

 

When Biden was through endorsing Richard Nixon’s economic agenda, he pivoted to the bizarre notion that the country can ease the pain associated with inflation by making consumer goods even more expensive. “When we use taxpayer dollars to rebuild America,” Biden said, “we are going to buy American: buy American products to support American jobs.” Everything, he added, “from the deck of an aircraft carrier to the steel on highway guardrails” should be produced domestically. It’s not clear how subsidizing American labor costs will reduce the price of consumer goods. If Biden’s goal was to generate some cheap applause, he accomplished it.

 

Perhaps most insulting, Biden retreated back into a familiar comfort zone by insisting that his preexisting legislative agenda is a cure-all for the inflationary pressure already exacerbated by his legislative agenda.

 

Biden claimed that letting Medicare negotiate prescription-drug costs reduces inflation; he said “combatting climate change” cuts energy costs and reduces inflation; subsidizing childcare expenses, affordable housing, pre-K and community-college grants, higher nursing-home standards, and raising the minimum wage all somehow reduce inflation. By some act of prestidigitation, even the “PRO Act,” which makes it harder for firms to hire and retain contract labor, would reduce consumer costs. Calling this package of legislative initiatives “build a better America” is the political equivalent of slapping a false mustache on Biden’s defunct Build Back Better bill.

 

If you’re one of the Democratic Senators who killed Build Back Better because it was inflationary—a belief supported by independent analyses such as those conducted by the Congressional Budget Office or the San Francisco Fed, which indicted Biden’s February 2021 Covid-relief package for contributing to the overheated economy—Biden’s contempt for your concerns was downright insulting. The president’s attempt to reignite a debate that was definitively settled in favor of the bill’s opponents is nothing short of monomaniacal. It signals that there is no relief in sight for the American public, and Democrats will still be contending with inflation when voters head to the polls in November.

 

Moreover, the situation is doubtlessly going to get worse. While addressing the crisis in Ukraine, Biden displayed welcome resolve to meet the challenge to the American-led geopolitical order now under threat by Russia. To his credit, Biden informed the public that there will be “costs” associated with this commitment. But he didn’t specify what those costs would be. Instead, he promised “robust action to make sure the pain of our sanctions” would be borne by Russia. To that end, America and the world will release 60 million barrels of oil from global strategic reserves. For reference, in a non-pandemic year, the globe consumes just under 100 million barrels of oil per day.

 

The Western world has not sanctioned the Russian energy sector, but it didn’t have to. Those sanctions are implementing themselves. Owing to the newly volatile economic climate in Russia and the reputational cost of doing business with a criminal regime, major oil producers are pulling out. Firms like British Petroleum, Shell, Exon Mobil, and Eni are withdrawing from their interests in Russian deposits on a voluntary basis. Indeed, it’s hard to find a buyer for Russian energy today even at sharply reduced prices. It will take some time for Americans to feel the effect of reduced global energy supplies, but they will be felt. Less energy in the marketplace means that more dollars will be chasing fewer goods, which contributes to price hikes and deepens the inflationary cycle. Releasing the equivalent of 18 hours’ worth of oil into the global economy won’t make a dent.

 

Voters who went into the State of the Union address deeply concerned about inflation likely walked away from their television screens even more concerned about inflation. Joe Biden doesn’t have any idea how to relieve the pressure on American wallets. It doesn’t seem as if he’s even inclined to try. Democrats with an instinct for their own political self-preservation would be wise to chart their own course, and soon. The cavalry is not coming.