America needs U-Turn away from Biden’s inflationary over-spending

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Biden touts jobs report as inflation continues to soar

KPS Capital Managing Partner Michael Psaros joined 'Fox News Live' to discuss Biden touting the economy as Americans continue to battle sky-high consumer prices.

Following the recent midterm elections, where the American public changed the House majority by a cumulative margin of more than 3 million votes, President Joe Biden’s reaction was not a reevaluation of his policies. Instead, he responded that he is going to do "nothing" different because he believes his policies "are working." The problem is that they are doing the opposite. Inflation remains high, household earnings have not kept up, and government debt has exploded. 

Delivering prosperity to the American people long ago stopped being a priority of the political left. In its place is an ideological zeal to transform America into a country where the income of hardworking Americans is redistributed to those who don’t work, energy production is a scourge on the planet (unless done by autocratic foreign powers), and the government is responsible for paying everybody else’s bills except its own. These destructive values are manifest in all the major legislation passed and the constant executive overreach. Despite the public’s rebuke, President Biden and his progressive allies are doubling down on failure. 

Consider the recent announcement to again extend the forbearance on student loans into summer 2023. Already, this pause in payments has cost taxpayers more than $150 billion, and the latest extension could cost another $40 billion at a time when America’s debt-to-GDP is at World War II levels, all to benefit college attendees who earn more on average than the hardworking taxpayers carrying the water on these loans. 

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If that wasn’t enough, congressional progressives are looking to resurrect the anti-work child tax credit provisions that expired last year. The original, bipartisan child tax credit provided financial assistance to parents on the condition that they earn some money on their own. Under the Biden administration, the child tax credit’s pro-work features were eliminated, and the size of the payments increased, turning the tax credit into another government welfare program. Permanently reinstating this policy would cost an estimated $1.6 trillion over the next 10 years, and a recent study has found it could push as many as 1.5 million workers out of the labor force. 

Student loan borrowers stage a rally in front of The White House to celebrate President Biden cancelling student debt and to begin the fight to cancel any remaining debt on August 25, 2022 in Washington, DC. (Paul Morigi/Getty Images for We the 45m)

What makes these policies inflationary? As former Obama Administration economic advisor, Steve Rattner said in June 2022, "We’re all paying the price for having overstimulated this economy during the pandemic and putting too much money into people’s pockets, which created a lot of this inflation … There’s no free lunch, and we’re all going to have to pay the price."  

At the same time, the federal government has undermined economic supply by discouraging work and indulging a green-activist agenda of erecting barriers to domestic energy production. Together, these policies have embodied the inflationary recipe of too much money chasing too few goods. 

This is evident in the data: economic output is only 4.2% higher than it was at the beginning of the pandemic. Yet, households had more than 42% more money in their checking and savings accounts at the end of June compared to the end of 2019. Household liquidity has risen at 10 times the pace of output, resulting in the 40-year-high inflation that the American people have been suffering from.   

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Instead of solely relying on the Federal Reserve’s interest rate hikes to tame demand, the federal government ought to complement these actions with a fiscal and regulatory agenda that further curtails artificial demand and boosts supply.  

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Step one should be unleashing American energy — a key prong of the America First Agenda — by ending the regulatory onslaught against domestic producers. America should never be at the mercy of autocratic foreign regimes for its energy security.  

Step two should be reinstating student loan payments. People should be expected to pay their own bills while being liberated from the forced responsibility of paying others’ bills.  

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Step three should be reviving the spirit of welfare reform by attaching work requirements for able-bodied Americans to the full range of government support programs. Work must be encouraged as it is the way society creates prosperity and helps instill a sense of purpose.  

These America First economic actions are just the start of what ought to be a policy U-turn that will end the scourge of inflation and restore prosperity for the American people. 

Aaron Hedlund is the director of research at the America First Policy Institute and formerly served as the chief domestic economist and senior adviser at the White House Council of Economic Advisers.