Kudlow: Allow American producers to produce
'No new spending until at least the second half of next year' says the FOX Business host
Over the weekend on various news shows, we saw various Biden communicators defend inflation and the economy, and the $4 trillion social welfare entitlement spending and tax hiking and fossil fuel destroying bill that they argue will actually reduce skyrocketing inflation. It's a tough job arguing that more spending will hold down inflation or that much higher taxes will stimulate the economy.
Or there's nothing they can do about high gasoline prices that is except to allow American producers to produce.
The fun thing about the Biden defense that this big government socialist bill will actually lower inflation is that outside the White House and the executive branch of the Biden administration. There is no living human being that agrees with this view. No one.
Just check out the polls. Just check out the liberal polls. Like even the Washington Post poll. Right after the infrastructure bill was passed last week, Biden’s job approval sunk to 41% with a roaring 39% approval on the economy. Republicans even have a 10 point lead in the generic ballot for Congress.
If Washington Post is posting those kinds of numbers, I would say that's a bit of a warning to the Biden's. Though it appears that they're not hearing. We've had a lot of spending. About $4 trillion emergency spending last year which I thought was in the main necessary. And we've had so far $3 trillion in spending this year with another $4 trillion on the way. With a relatively strong economy, this kind of excessive spending is associated with inflation by virtually the entire economics profession. Again, outside of the executive branch of the Biden administration. So, I’d say they're in something of a political pickle.
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The only kind of, sort of, maybe, truth teller yesterday was Treasury Secretary Janet Yellen. Now, she blamed the inflation on the COVID pandemic, and I think there is some truth to that assertion. But now she's taking a decent idea way too far. Her new argument is that we won't see an end to inflation until we see an end to the pandemic.
Now the pandemic is ending. The virus will never end. But the point is not to argue the science here. The point is the economy has reopened, and it will remain reopened and yes in the shorter term, economic demand is outstripping economic supplies.
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There's no excuse for union rules and government regulations that stopped the ports from operating 24/7. But after 10 months, demand and supply should be in a lot better balance and prices should already be stabilized, not skyrocketing.
There are two missing links here, which Ms. Yellen is not fessing up to. One of them is all this government spending stimulating excess demand. Democrat Larry Summers has had that right. So have a number of republican economists.
Ms. Yellen knows better than to deny this. The emergency has been over for 10 months. Hence the emergency spending should be over. But it's not.
Second, the emergency federal reserve pump priming money creation should have been over 10 months ago. Quantitative easing and free money should have stopped last winter. And putting the two points together it's the excessive fed that is financing the excessive federal government spending. And that is a lethal situation for higher inflation.
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Now, Ms. Yellen said that she thought the inflation would stop in the second half of next year. Now that's a new forecast. I have no idea if it'll be true, but I give her credit for being realistic instead of her other colleagues who are selling bologna.
Now, enter Joe Manchin. This guy is near heroic. He ought to run for president, because he keeps saying that we should pause any new spending until the inflation is brought under control. Ms. Yellen is saying second half of next year. So, I’m waiting for Sen. Manchin to say he'd be happy to consider another spending bill but not until the second half of next year in accordance with the apocryphal forecasting impressions of our nation's treasury secretary.
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Right? She's the thought leader and he's applying her thought. Republicans ought to jump on this band wagon. We have a semi-quantitative inflation forecast from the leading economic policy maker and who knows. she may be right. But more importantly, we should fall into line with her view. In fact, her boss should fall into line with her view. No new spending until at least the second half of next year. I’m calling this the Manchin-Yellen hypothesis. I’m bringing them together. They will make a lovely couple. And that's my riff.
This article is adapted from Larry Kudlow's opening commentary on the November 15, 2021 edition of "Kudlow."