Biden's “Build Back Better” efforts have been a phenomenal failure so far, but maybe that's because Americans just don't understand a good thing when they see it?
This has been Biden's argument on the state of the economy lately, as he persistently argues that there is no threat of recession because the US jobs market still “strong.” There is no mention from the White House regarding the fact that covid stimulus spending artificially drove up retail demand and created a temporary spike in jobs. If they were to admit that layoffs are about to ramp up because the covid checks are gone and people's credit cards are maxed out because of inflation, then Biden would have nothing left to brag about.
Biden economic adviser Cecilia Rouse responded to media question on the inflation situation in particular this week and offered even more propaganda, rather than an honest assessment of the dangers ahead. Remember, this is the same administration that was still saying only a year ago that inflation was “transitory” despite all evidence to the contrary. Yet, we're now supposed to trust their opinions on the potential for recession and solving inflation?
One of the key obstacles to “Build Back Better” is the reality of high inflation. If Biden gets what he wants, which is at bottom an infrastructure renewal plan similar to the New Deal plan under FDR during the Great Depression. Whether or not the New Deal actually saved the US economy is up for debate (the destruction caused by WWII left the US as one of the only major manufacturing nations still intact, and this was the main reason for the explosion in wealth and the national escape from poverty), but even if it made a difference the circumstances today are not the same.
The problem is that FDR was facing a deflationary crash in which the US dollar remained viable and strong. Today, we are dealing with a stagflationary crash in which price inflation is rampant and the dollar's buying power is growing ever weaker. One of the main reasons for this inflation is due to government spending and massive Federal Reserve stimulus created from thin air.
The US national debt when Barack Obama and Joe Biden entered office in 2008 was around $10 trillion. By the time Obama and Biden left in 2016, the national debt had doubled to $20 trillion. That's a 100% increase in only 8 years. Since 2016 the national debt has expanded to around $30 trillion. The Federal Reserve created over $6 trillion in a single year in 2020 to supply the government with currency for covid checks and PPP loans during the lockdowns. To be sure, the Federal Reserve is happy to continue destroying the dollar, but exponential government spending gives them the excuse to do it.
This is not even counting the spending required for long term government programs such as medicare and social security. And yes, programs like Social Security DO add to US debt and the Federal deficit and anyone that tells you otherwise is lying. Just because something is “off budget” does not mean it's not adding debt.
In March, Nancy Pelosi made a bizarre claim that in order to deal with inflation and bring down the national debt America need MORE spending, not less. Of course, anyone with a brain and a mediocre knowledge of fiscal responsibility knows that the national debt has little to do with inflation directly, and government spending always creates more national debt and inflation when it relies on fiat money printing from a central bank, which the US government does. One might write off Pelosi as a complete moron and they would be right to do so, but politicians like Pelosi do not make these kinds of statements in a vacuum.
Biden, Pelosi and other politicians rely on economic advisers and gatekeepers to write their talking points for them, and the narrative that government spending is a “good thing” that will eventually stop inflation is part of a much larger concerted propaganda effort; it is not just the ramblings of senile government hacks.
As we have seen recently from Biden's advisers, the all encompassing narrative is in support of massive spending as the magic talisman to ward off collapse. In other words, the claim is that we can print our way to prosperity. Cecilia Rouse argued that:
"The president is focused on inflation and in fact, Build Back Better is a long-run investment to increase economic capacity so that we're better able to address inflation. Parts of Build Back Better include addressing costs, such as prescription drugs. It includes making investments to make the transition to clean energy which we know we need to be making as well. So that's not the kind of dollars that is stimulus, it's investment, and it's the kind of investments that actually pay for themselves over time. So that's smart economic policy right now…"
This is utter nonsense. Infrastructure spending is stimulus; this is a fact. Increasing economic “capacity” does not address dollar devaluation, and creating projects from nothing in order to encourage spending does not address too many dollars chasing too few goods if you have to print even MORE dollars to make those infrastructure projects possible.
Ultimately, the government has no tools whatsoever to reduce inflation, they only know how to increase inflation. Beyond that, price controls (which Rouse seems to be embracing) do nothing but cause even more inflation because they destroy profit incentives. If producers and manufacturers can't make a profit on their goods because of price controls, then they will stop making those goods. Now you have increased shortages and prices rise again.
The true cost of the Build Back Better program if approved will hit approximately $5 trillion, and this spending would occur swiftly over the course of a couple of years, flooding the economy with even more fiat dollars at a time when inflation is (officially) at 40 year highs. Never in history has fiat spending ever reduced inflationary pressures, it only makes them worse. The real solution is a complete restructuring of the currency model, such as coupling a nation's money to a hard commodity like gold and a moratorium on deficit spending. Obviously Biden will never do this, and so, inflation is going to be a problem that Americans face for many months to come.
In the meantime, we get to listen to the people that told us inflation was not a threat now tell us that inflation can be solved with more inflation.