Biden-Harris rely on a smoke-and-mirrors economy

If you had any doubt that the economic policies of a new Harris administration would slouch toward central planning, they were put to rest with the suggestion of Soviet-style price controls on groceries. Vice President Kamala Harris believes that inflation is the fault of greedy businessmen as opposed to her own administration’s fiscal mismanagement. Profit margins for publicly traded supermarket Kroger are about 2%, while Microsoft’s profit margins are 35%. Who exactly is being "greedy?"  

Sadly, this is just the latest in a series of extraordinary measures being taken by the Biden-Harris administration to make a fragile economy look stronger than it really is.  

For example, while you may be confident that the economic impact of COVID-19 ended a long time ago, you might be surprised to learn that the Biden-Harris administration just announced that it will re-start a new round of pandemic-related stimulus. That will take the form of the Employee Retention Tax Credit (ERTC), a government program that had previously injected $232 billion into the economy and was paid for by the American taxpayer with no questions asked.  

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It should shock absolutely no one to learn that the ERTC was stopped a year ago after it was determined that the program was rife with fraud. Senate Finance Committee chair Ron Wyden, D-Ore., recently said that he was told by an IRS insider that as many as 95% of ERTC claims were fraudulent.  

Democratic presidential nominee Vice President Kamala Harris, left, clasps her hand in the air with President Joe Biden at the Democratic National Convention, Monday, Aug. 19, 2024, in Chicago. (AP Photo/Jacquelyn Martin)

But it’s a little less than three months before the election, and it appears that the Biden-Harris administration has had a change of heart, with the IRS announcing that it had "identified 50,000 valid ERC claims and is quickly moving them into the pipeline for payment processing."  

We estimate that $5 billion in payments are likely to be sent out in the first few weeks of September with an additional $20 billion by the end of the year. This seems like a very convenient time less than three months before the election.  

Simultaneously, a variety of administration officials and mainstream media types have been telling us to ignore the economic reality of inflation we see with our own eyes. Beware the smoke-and-mirrors economy when casting your vote or making big economic decisions.  

Unfortunately for American taxpayers, this is not the only example of the administration pulling out all the stops to delay an inevitable reckoning that will arrive when they must foot the bill for unsustainable fiscal policies that are often little more than crass bribes to potential voters, citizens and non-citizens alike.

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Despite serious concerns about the constitutionality of President Joe Biden’s attempts to cancel student loans, the administration has forgiven $168 billion in student debt for people who often pursued, of their own accord, expensive degrees with little commercial value.  

Why this is necessary when it has been estimated that there are more than 8 million job openings in the United States defies comprehension. The fact that this largesse was not extended to people who decided that they could not afford college and simply started to work should be revolting to anyone with a basic sense of fairness. 

In yet another example that has national security implications, the Biden-Harris administration has also drawn down the inventory of the Strategic Petroleum Reserve at a time when it appears that the Middle East is on the verge of a wider war.  

The reserve was created in 1975 not as an administration’s political piggy bank to ease temporary economic discomfort but as a national security tool to allow the United States time to deal with serious geopolitical developments and disruptions in the oil supply.  

Treasury Secretary Janet Yellen helped keep interest rates artificially low. (Getty Images)

The reserve’s inventory now stands at 375 million barrels of oil, a level last seen more than 40 years ago in 1983. For reference, a complete drawdown of our reserves would provide the U.S. with less than 20 days’ worth of oil consumption.  

This is particularly galling and dangerous given the Biden administration’s attempts to stifle oil production at every turn. A greater conflagration in the Middle East would easily expose the fact that the current administration has never possessed a serious energy policy, only fanciful environmental "goals" that benefit the wealthy at the expense of the middle class. 

Finally, Treasury Secretary Janet Yellen, affectionately named "Janet the Juice" on Wall Street, has conspired to keep long-term interest rates low by decreasing the supply of longer-dated Treasury notes and bonds in favor of short-term Treasury bills.  

A stunning 35% of America’s outstanding debt matures in the next year, more than 55% in the next three years. This is again a short-term strategy designed to hide the economic consequences of the administration’s reckless spending programs. It puts the American taxpayer at great risk in the long-term. 

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Financing America’s increasing debt load with short-term funding means that interest expenses skyrocket as the Treasury Department must issue new debt. Interest expenses on America’s debt now exceed its defense budget. By 2025, interest expenses will exceed Medicare as well.  

This will not only increase America’s debt load, but also risk a "crowding out" of the private sector’s ability to access affordable credit. Never before has America run budget deficits nearing 7% of GDP when it was not at war or had an unemployment rate below 7%.   

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All of these maneuvers can be broadly put under the rubric of a new concept being bandied about in liberal economic circles – Modern Monetary Theory. In this world, debt and deficits do not matter for countries that possess the world’s reserve currency.  

Unfortunately, this isn’t much of a theory and there is absolutely nothing modern about it. All societies that possessed the "exorbitant privilege" of a reserve currency eventually abused it to fund misguided foreign adventures and "bread and circuses" for their constituents to hide the fact that theirs was a society in decline.  

In yet another example that has national security implications, the Biden-Harris administration has also drawn down the inventory of the Strategic Petroleum Reserve at a time when it appears that the Middle East is on the verge of a wider war.  

That is the reason that there have been so many reserve currencies throughout time. History has shown that it is no divine right. Sooner or later, the bill for America’s wayward fiscal ways will come due and Americans will find themselves poorer as a result.  

In contrast, the Trump-Vance ticket represents the country’s best hope in stopping the short-termism that has come to characterize America’s economic policies over the past four years and placing the country on a sustainable path benefits all Americans.  

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Those advising former President Trump on economic issues like my friend Scott Bessent have proposed a "three arrow" program to deal with America’s economic risks: 1) pursue a goal of 3% real GDP via deregulation and incentives for capital formation; 2) bring the budget deficit to 3% of GDP by 2028 by freezing discretionary government spending on everything save defense; and 3) increase crude oil production as quickly as is practicably possible to spur consumer spending and mitigate the effects of slower increases in government spending.  

Larry Kudlow, the former head of the National Economic Council, has stated, correctly I believe, that only economic growth driven by capital spending and productivity can allow the country to escape an almost cliché decline of a great society.