Lawrence Summers is probably not getting invited to any Georgetown cocktail parties any time soon. Bill Clinton's former treasury secretary, who chaired the National Economic Council under Barrack Obama, has more recently developed into a thorn in the side of his own party's big spending Progressives, especially those in the Biden administration.
It began quite early on: in March of 2021, just two months after Joe Biden entered the White House, Summers slammed the president's $1.9 trillion Covid relief package as, "the least responsible macroeconomic policy we’ve had in the last 40 years.” While sympathetic to "arguments for providing relief to those hurt by the economic fallout of the pandemic, investing in controlling the virus, and supporting consumer demand," Summers was clearly shocked by the degree to which "the policy discussion has not fully reckoned with the magnitude of what is being debated.”
The U.S. government had already spent a tremendous amount of money on Covid since the virus made its way to our shores from its origins in Wuhan, China. Lockdowns and other pandemic policies had increased unemployment and weighed down economic productivity. Meanwhile government indebtedness was way up. But here was the Biden administration, spending nearly $2 trillion at the stroke of a pen a full year into the pandemic apparently just because Donald Trump got to do it before him. It was utterly irresponsible.
Much to the annoyance of his fellow liberals, Summers continued to prophesy the advent of serious inflation. And to their even greater annoyance— it was clearly a shot at Summers when Biden claimed "no serious economist" believes "there’s unchecked inflation on the way"—he kept being proved right.
As inflation numbers skyrocketed, Summers pivoted to arguing that the administration and Federal Reserve weren't doing enough to address the real problem. In particular, he worried about the Fed's comparatively small increases in interest rates being too little, too late. He suggested that this might be because the Fed "still believes that inflation is in fact transitory and that it will evaporate as supply chains are restored." For Summers, this line of thinking "never seemed plausible, given accelerating residential and wage inflation and room for acceleration in the costs of health care, airfare and lodging. It seems even less plausible today, with war in Ukraine and Covid lockdowns in Asia."
And he hasn't let up -- in the lead-up to the president's lawless executive order "forgiving" (i.e. using tax dollars to pay off) outstanding student loans, Summers tweeted:
I hope the Administration does not contribute to inflation macro economically by offering unreasonably generous student loan relief or micro economically by encouraging college tuition increases... Student loan debt relief is spending that raises demand and increases inflation. It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.
Drowning in college debt? Uncle Sucker can help!
Now the economist has begun to gesture at one of the key drivers of inflation, namely the significant increase in energy rates due to shortages at the point of consumption. “It’s kind of insane that we have truck and trains carrying oil all over this country, rather than constructing pipelines, which would permit accessing more resources and cheaper, safer transmission,” Summers told the Boston Globe’s Globe Summit earlier this month.
He's right once again. In fact, we at The Pipelinehave argued that Biden's cancellation of Keystone XL (particularly if understood as a prefigurement of the administration's overarching anti-resource sector policy) was more or less the administration's "original sin," from which the rest of its economic woes and problems have flowed.
Of course, environmentalism is the contemporary Left's sacred cow, so even a prominent liberal like Summers calling for a course correction is unlikely to bring one about. Still, they can't say they weren't warned. Nor can we.
Next time you stop at a gas station, think of it as a $100-a-month tax cut. Or a maybe $100-a-month raise. The steady drop in gas prices over the last few months has turned into an unexpected form of economic stimulus.... Since hitting a record of $5.02 a gallon on June 14, the national average price for regular gas is down $1.10, or 22 percent, to $3.92, according to AAA.... Since the typical US household uses about 90 gallons of gas a month, the $1.10 drop in prices equals a savings of $98.82.
Got that? The decline in gas prices over the past six weeks means that you, average American, have effectively gotten a hundred dollar raise! Hurray!
How'm I supposed to afford this? I voted Democrat.
Except, well, we can't help but notice that this article ignores the 108 percent increase which led up to that record $5.02 national average, beginning when Joe Biden took office. As Ed Morrisey points out, even with the drop, prices are still sitting 65 percent above what they were on inauguration day. And even that doesn't factor in the lessening value of each dollar, the result of Bidenflation. Moreover, says Morrisey,
[T]he price didn’t drop because the Biden administration brought massive new supplies into the market. The prices dropped due to a fall in demand for gasoline as it got too expensive for American consumers to use on vacations and other non-essential travel. That indicates an economic contraction on the way, not a pay raise.
Which is to say, far from being a sign that the recession is cancelled, this dip in gas prices is more like the spotter shouting, "Iceberg, dead ahead!"
Biden Mistakes Demand For Supply
Gas prices continue to average around $5.00 per gallon nationally, which is a major factor in our ongoing issues with inflation. Democrats, with the upcoming midterm elections in mind, are freaked out. And all the more because President Biden's approval rating, according to two new polls, is down to 32 percent. Glenn "Instapundit" Reynolds predicts that that number will continue to drop, commenting "He has only begun to fail."
How, you ask, could a Democratic president, in our hyper partisan age, with the media always in his corner, fall much further than 32 percent? By refusing to address this problem in any meaningful sense. That's exactly what we're seeing -- the president's response to rising oil prices thus far has been to blame "greedy" oil executives (we're meant to believe that they were overwhelmed by greed only after Biden took office, and not during the plutocratic Trump administration) and Vladimir Putin's aggression in Ukraine (never mind that prices had been rising steadily for months before Russian hostilities began), while maintaining the same anti-oil and gas policies he's held to since the day he entered the White House.
No one is buying it, of course, so Team Biden has moved onto gimmicks which they hope will distract the voters. Earlier this week, the president called for a temporary suspension of federal gasoline and diesel taxes. Such a move would shave somewhere in the neighborhood of 15 or 20 cents per gallon off of your local fill-up price.
Now, we'd all like to pay less for gas, but this isn't going to work. We've even seen the same play fail not long ago. As Saagar Enjeti recently explained,
On June 1st, New York suspended its motor fuel tax of eight cents a gallon, as well as its four cent sales tax on up to two dollars a gallon. The average price of gas that day was $4.93 cents. Two weeks after what is, in effect, a .16 cents per gallon tax holiday went into effect in the State of New York, the price of gas was $5.04 per gallon!
Fundamentally, the problem we're facing now is one of supply, and that is being choked off both by our limited refinery capacity (which is itself a product of environmentalist policies that make it nearly impossible to build new refineries) and Biden's anti-resource-sector positioning. By goosing demand -- people will drive somewhat more if gas prices are somewhat lower -- Biden's proposal arguably exacerbates the problem.
And no federal taxes!
As things stand, the opposite is happening. The Wall Street Journalreports that the demand for gas this spring and summer is down between 5 and 8 percent from the pre-pandemic average, a significant drop. "Drivers have begun consolidating trips or filling up their tanks with only as much fuel as they need to get by for a few days. Some are carpooling or taking mass transit, while others are working from the office for fewer days each week, analysts said."
This might not be such a bad thing -- the WSJ quotes OPIS head Tom Kloza as saying, “You have to have some demand destruction to give supply a chance to catch up.” It is, essentially, a case of the market adjusting to demand outstripping supply. But the less driving there is, the fewer goods and, especially, services are consumed. An economic slow-down will be the consequence of this, and very likely, a recession.
Pray that our house of cards doesn't tumble from the shock, and that our leaders -- Biden included -- correct course before things go too far. But don't count on it.
Biden Announces 'Fiscally Responsible' Budget
The White House has announced its $5.8 trillion budget plan, which without even a hint of embarrassment the president describes as a “clear message that we value fiscal responsibility.” You see, flush with a record tax windfall, created by the president’s inflationary spending, Biden proposes to throw more money away on domestic and international outfits which work to curtail the use of fossil fuels, a course which already has driven up the cost of everything to domestic consumers and would only further impoverish developing countries. He’s already taken no less than eighty-one steps which has driven the price of gas to historic highs.
About $11 billion for “international climate finance” to accelerate a global transition to net-zero emissions by 2050.
Another $6 billion to something called the Green Climate Fund, backed and supported by the United Nations for “climate adaptation and mitigation. in developing countries.
A $3.2 billion loan to something called the Clean Technology Fund to provide resources to developing countries “to scale up low carbon technologies with significant potential for long-term greenhouse gas emissions savings.”
Another $3.3 billion would go to support clean energy programs.
Some $18 billion would go to something called “climate resilience programs.” This includes funding for a “Civilian Climate Corps” (which given the history of such fanciful projects probably involves paying unskilled workers to do construction jobs ostensibly to conserve energy and install things like solar panels which they are unsuited to perform.)
You can be sure that this profligate spending will not be monitored. With these folks, auditing never matters in their definition of “fiscal responsibility.” The administration has already wasted billions under its Paycheck Protection and Covid relief plans— as much as 10 percent of the $800 billion handed out under the Paycheck Protection Program has gone walkabout. Not to mention the wholesale looting of the Covid unemployment relief program.
Even with inflation-driven increases in tax revenues, such a grandiose plan depends on the passage of a “wealth tax” and much as I don’t mind seeing higher taxes on American oligarchs like Bezos, Zuckerberg, and Gates, who have profited as the rest of the country suffered, a Democratic Congress is most unlikely to hit the pocketbooks of these, their very generous donors and running dogs. Raging inflation will force even the “fiscally responsible” Democrats to shell out even more to finance the already $30 trillion debt, making this budget’s passage even more unlikely. And in any case, West Virginia senator Joe Manchin has already announced his opposition to the idea.
The Democrats have catered to their far-left constituencies on energy at the cost of losing their more numerous traditional working and middle class supporters. If they back off this ridiculous scheme to kill fossil fuels, they will lose their San Francisco big buck supporters.
Tongue in cheek, Scott Adams, the creator of the Dilbert comic strip, proposes a new federal tax on gasoline, which could be used “to fund stimulus checks so people can afford to buy gas.” Not to be outdone, California governor Gavin Newsom has already proposed giving Golden State motorists gas-tax rebate debit cards. You can't make this stuff up.