The President, the Economy, and Other Important Stuff

Let me begin by saying something that’s been apparent since President Biden took office on January 20, 2021. Everything our President knows about economics could be etched on the head of a pin with a jackhammer. Okay, that was a bit hyperbolic, but based on his political record during all those years as a senator from Delaware and as Barack Obama’s Vice President, Joe Biden really hasn’t learned very much. One suspects he’s been well-controlled by a team of handlers since he first ran for the U.S. Senate back in the early 1970s.

I’m not the only one who thinks ill of our President’s capabilities. Back in 2016, when Vice President Biden was competing for the Democrat nomination for President, his boss wasn’t too flattering about Joe’s abilities. An aide quoted Obama saying, “Don’t underestimate Joe’s ability to f**k things up.” Crude but revealing. Obama isn’t alone among those who know Joe well. As Robert Gates, President Obama’s defense secretary, once put it, Biden has “been wrong on nearly every major foreign policy and national security issue over the past four decades.” Judging by his actions during that past 20 months, Joe hasn’t changed. But yesterday, campaigning for a truly incompetent senatorial candidate in Pennsylvania, Obama and Biden stood on a stage hugging each other as Joe called those who disagreed with their far-left policies “idiots.”

But let me focus on the economy President Biden has given us. I’m not an economist. Although I took lots of economics courses in graduate school, they had little positive effect. I sat through courses in macroeconomics, microeconomics, and international economics. I even studied econometrics one quarter. I managed to get an A in that course, but I remember absolutely nothing, except that the professor was a bit creepy…but I won’t go into that. Heck, it was the early 70s, a time of ubiquitous creepiness. And yet, through it all, and with the help of a few books by Milton Friedman, Jude Wanniski, and Arthur Laffer, I actually learned a few things that have inexplicably remained in my aging brain. For example:

• The Law of supply and demand actually works. Ignore it at your peril.

• Inflation is caused by government and by no one else, because only government creates money. Inflation results from government printing too much money so it can spend lots of money. This leads to all that money chasing too few goods, so prices rise. But in a real sense inflation’s root cause is the demand by citizens for government largess. That’s right, folks, you and I are the real cause because too many of us love to receive “free money” from the government. The solution? Stop asking the government for expensive goodies, and instead tell the folks you elected to slow the increase in the quantity of money; that is, tell them to stop spending so much. After all, it’s not their money; it’s ours. And because the folks that create all that money always want more of it, they increase taxes, something that only makes things worse because it drives up the prices of goods and services. If you and I hope to see inflation drop, then, we must vote for politicians that intend to reduce spending and cut taxes. Nothing else will work.

• Speaking of taxes, here’s another truth: If you tax something, you will ultimately get less of it. Taxation is a cost to both producer and consumer. Taxation, then, has a significant effect on the basic law of supply and demand. If the government taxes something, its cost is reflected in the prices paid at every level. Demand then decreases, affecting supply.

• I’ve never been a believer in taxing businesses, for the simple reason that businesses really don’t pay taxes, at least, not as you and I do. I don’t mean they’re tax cheats, not at all. Like you and I, they write their checks to the U.S. Treasury. But if we take a close look at taxation, we’ll note the differences between businesses and individuals. When the government increases personal taxes, you and I can try to increase our income, but that’s not easy, at least not in the short term. Most often our only real alternative is to spend less by cutting back on our expenses, which has a negative effect on the economy. Businesses are different. If government increases their taxes, businesses look for ways to reduce production, equipment, and other variable costs, and seek means to increase sales. But they also take a hard look at their workforce. Cutting their workforce and expanding technology can be an effective means to lower costs. Increasing taxes on business, then, often leads to increased unemployment. But cost-cutting steps take time to implement, so businesses have only one other option: they raise prices, thereby passing on the increased cost of taxation to their customers. The result? Increased taxes on businesses are ultimately paid for by you and me because the stuff we buy costs more. Over-taxation of businesses and individuals, then, has both short- and long-term negative consequences.

• Energy is a key driver of modern economies. Drastic changes in energy production or energy sources will cause major disruptions to the nation’s economy. This is especially true when we try to replace highly reliable energy sources with far less reliable alternative sources. Clueless politicians simply do not understand or ignore the hidden costs, the national security implications, and the additional infrastructure demands that arise when they make major policy changes on such critical issues as energy.

Now these truths are neither accepted nor understood by our President. In fact, President Biden seems to believe that prosperity comes not from the free-market economy but from the government. This, to use one of the President’s favorite terms, is pure idiocy. A government-run economy is simply socialism; and socialism, whenever and wherever it has been tried, has failed miserably. To believe in socialism, then, is to be historically ignorant. In truth, to be a socialist is to be remarkably stupid. Okay, that’s a bit harsh. Only the useful idiots recruited by the hard-core socialists are the stupid ones. The hard core, the true believers, are well aware that socialism in all its forms does not bring about the paradise they promise. Unlike the useful idiots, they know the truth; and the truth is that socialism will give those in charge near unlimited power. And power is what they seek. Back in 1962 one of my professors at Georgetown, referring to the problems that plagued Ancient Greek democracy, said something I’ve never forgotten: “Power is sweetest when it is wielded secretly.” Perhaps behind the scenes at the White House there are a few folks savoring the sweetness of the power they have managed to acquire.

Watching and listening to our President, one senses there is a cadre of true believers who secretly run the show and set policy. Ideologically they obviously reside among the far left and have had no difficulty moving “moderate Joe” in their direction. They seem to have been less successful controlling our Commander-in-Chief during his public outings, hence the repeated gaffes and embarrassing senior moments. Even discounting his age, I think I can confidently predict that Joe Biden will be a one-term President.

What's Happened?

For Dear Diane and me April and May have been strange months. 

The first thing that happened was a car accident. I was sitting at a red light when pickup truck smashed into the back of my wonderful Kia Sorento. As it turned out, the other driver was uninsured and because of the extent of damage and the age of my car (2011), the insurance company had to total the Sorento...so sad. I really liked that car and took excellent care of it, hoping I could drive it for a few more years. Anyway, we had to get another car, so on Tuesday we went to a local Subaru dealer and leased a new Outback. It cost me far too much, both the up-front and monthly payments, but we took the plunge. The car is very nice, really too nice and too luxurious for us, and with far too many bells and whistles that will no doubt take me weeks to figure out. We had thought about getting either a Forrester or an Outback, but this was the only car of either model in their current inventory. Supply chain problems have also affected the automobile industry.

Then, last weekend, right after we left home for a weekend trip to Pensacola (Diane's hometown), we got a call from a neighbor telling us a large branch (actually, a very large branch) had broken off the huge live oak tree in our backyard and fallen on top of our roof. I don't believe there's any severe damage, but I won't know for sure until someone gets up there and checks it out. (I'm too old and too smart to do it myself.) Right now, I'm trying to get someone to look at everything and give me an estimate on branch and possibly tree removal. It's all very tiresome and I expect it will be expensive. 

Oh, yeah, I also broke a tooth and have to find a dentist that takes our insurance. As I said, strange times.

But then I realize how well we have it compared to so many others and all these personal worries and concerns just fade into the background. It's probably a lot easier for a retired couple like us to cope with all the problems the world has tossed our way. Today's younger generations must not only deal with a challenging economic situation, but also navigate society's moral decay and its effects on families. 

When we look at our economy, we find increasingly high inflation exacerbated by growing shortages of needed products including basic food items, baby formula, diesel fuel, equipment parts, almost everything. The supply chain problems likely resulted from the draconian COVID shutdowns of our economy, combined with the so-called Green New Deal and incentives that have kept people out of work. These policies -- along with continued massive spending by the Biden administration, the total lack of an energy policy that reflects reality, and a Fed that for too long has provided cheap money -- resulted in the gift of high inflation and a depressed stock market.

Society's moral decay is a whole other matter that must be fought through courageous action and prayer. I'm nearing the end of my life -- not real soon, I hope -- but young families today must be very worried about the future. My only advice is to hold tight and vote for those who are willing to fight legislatively for the soul of our nation. Vote, too, for those who actually understand the roots of inflation and its solution: tax cuts, less intrusive regulations, true energy independence, and most important, decreased government spending. We have survived similar periods -- just ask Jimmy Carter -- and we will survive this too, provided American voters don't go stupid on us and the current Congress practices a little restraint during the final months of 2022.

Pray for our nation.

Here We Go...

Our new president has been in office for 120 or so days, so maybe it’s time to take a look at the nation and see what’s happened on Joe Biden’s watch. 

Let's look first at the job situation and the statistics for April. According to the Department of Labor, there were 8.1 million job openings which, by the way, is an all-time record. The companion statistic relates to the number of jobs filled, and was a paltry 266,000, far short of the one million expected by the “experts.” 

I actually expected something like this simply because I have never seen so many small and mid-sized businesses with “Help Wanted” signs taped to their windows and doors. I’ve noticed this here in Florida and we saw the same thing on a recent trip to rural Georgia. Stores, restaurants, bars, contractors, gas stations, supply companies...the signs are everywhere. 

Business owners and managers all attribute the labor shortage to the extraordinary unemployment benefits now being paid to those who are out of work. As one owner told me, “People who make less than 40 or 50 grand would be fools to take a job. They get as much or more with unemployment, and get to stay home.” Thanks to President Biden, those benefits will continue into September, despite a booming economy. Interestingly, the Secretary of Commerce said, “The reason people aren’t getting back to work is fear.” She apparently presumes that Americans are afraid to return to the workplace because of COVID, even though anyone can now get vaccinated easily. 

And then there’s the rest of the economy. If you lived through the Carter years, you’ll remember inflation and how thrilled you were to get a 16% mortgage. Well, today the Consumer Price Index popped up at an equivalent annual rate of about 7%. And the Dow? It  dropped over 1,000 points in two days. If you live in the southeast, you might have noticed the long lines at gas stations because of the hacking of the Colonial Pipeline by a group of Russian criminals. They are indeed criminals but our smart spooks know they’re also supported by the GRU, Russian military intelligence. The President, of course, is taking a hands-off approach since he really doesn’t care much for pipelines. 

Under President Trump we achieved American energy independence, but during this pipeline crisis, we’ve had to buy gasoline from Canada. Guess who the Canadians buy much of their oil from? You got it...Russia. Gas prices today are at the highest level since 2014. 

Almost 50 years ago, when I was in graduate school I took a few courses in macroeconomics and microeconomics and learned all kinds of wonderful things about supply, demand, inflation, and other boring stuff. But based on the little I still remember, I expect inflation to continue and stick around for a while. 

The problem is, when the government gives lots of money to people and then tells them not to work, we end up with a bunch of folks who produce nothing but have real purchasing power. And then, when that same government hammers those who actually produce goods and services by subjecting them to higher taxes, you get even far fewer goods. The result? Lots of money chasing fewer goods, so prices rise and we get inflation.

Interest rates anticipate all this and will likely last for quite some time. The value of assets will drop. Major tax increases will probably, but not surprisingly, lead to less tax revenue. And while all this is going on, the Fed will continue increasing the money supply and buying bonds. Combine all of this with the administration’s wild spending and destructive energy decisions, and the long-term effects can be disastrous. 

Keep your eye on interest rates and the price of gold, then watch out for the crash of the dollar. We just might see a return to the ugly economy of 1979. Fortunately, I'm pretty poor and have nothing to invest, so I really don’t have to worry too much about all this. 

Of course, all of this ignores the chaos on our southern border as well as the administration’s weak foreign policy and the apparent abandonment of our only real ally in the Middle East, Israel. This week Hamas launched over 1,000 rockets from Gaza into Israel. And who supplied them with these weapons? Iran, the same terrorist nation to whom we gave a billion or more in cash thanks to the firm of Obama, Biden, and Kerry.

Iran is testing President Biden in Israel and doing the same with its Revolutionary Guard gunboats. This week 12 Iranian gunboats swarmed 6 U.S. ships and a submarine in the Strait of Hormuz. Our response? Warning shots. So long as we respond in weakness, they will act with increasing aggression.

None of this even considers our two greatest enemies whom Joe Biden considers mere competitors: Russia and Communist China, who by the way are both supplying weapons to Iran. 

How did the old curse go? May you live in interesting times.