LARRY KUDLOW: Every part of Biden's economic agenda is inflationary

The Fed isn't getting help from Biden's fiscal policy

Before we go "ballooning" again tonight—and we'll be speaking with Senator Tom Cotton in just a moment — a few words about today's hotter than expected consumer price index. It wasn't a disaster, but it wasn't so great either.   

Basically, the Federal Reserve is still a one-man band getting no help from Joe Biden's inflationary fiscal policy, but the central bank is making progress.  Today's topline number was 6.4%. Excluding food and energy the core rate was 5.6%. 

One reason I hate this core rate stuff or other slicing and dicing that has become a Wall Street obsession is: first, food and energy are crucial to families and, second, the topline number really tells you whether your purchasing power and your standard of living is doing better or worse.  

The answer is regrettably still worse, but at least we've come way down from the 9%+ readings a year ago.  However, bear in mind consumer prices have increased 14% since January 2021 when Joe Biden took office.  That's another way of saying the dollars in your wallets and purses are worth 14% less than two years ago, but I'll warn, food prices are up 10.1% over the past 12 months and that includes groceries at home, up 11.3%. 


Joe Biden

President Joe Biden delivers a speech on infrastructure spending at Carpenters Pittsburgh Training Center, Wednesday, March 31, 2021, in Pittsburgh. (AP Photo/Evan Vucci) (AP Photo/Evan Vucci / AP Newsroom)

That's a nasty number and frankly it has not improved much at all, despite the Fed's tightening move and that is a very key issue for middle-income working folks and for lower-income people.  Also, it’s worth noting that real wages dropped by 1.8% year-on-year, another measure of declining living standards.   These real wages have been falling the better part of the past two years.

This has always been the soft underbelly of the Biden economy. It's the reason why people think they're worse off than they were two years ago or a year ago and why they have no confidence in the president.  I'll do my once in a year reference to John Maynard Keynes: "Inflation is the cruelest tax of all." 

Now, inside this story, there is some good news.  The inflation rate has eased, as I mentioned earlier, and then there are some other factors which look to be counter inflationary. Namely, the CRB commodity index has been flat for the last six months, after dropping significantly this past spring and that's a good sign for lower future inflation. It also suggests that the commodity value of the dollar is steadily stabilizing and improving. That's a good thing.   

This is what happens after the Fed starts raising its target rate from 0% to 4.75% and I reckon they're going to take it up several more notches. More controversially, the broad M2 money supply has been plunging in the past year, after skyrocketing before then and the toughest nut to crack is the deeply inverted yield curve, where the 3-month Treasury bill rate is almost 4.80 and the 10-year bond is 3.75.  In other words, the market is standing on it's head, short rates higher than long rates.

This is a leading indicator of lower inflation, but it's also a leading indicator of recession. Last evening, former Fed governor and Ronald Reagan appointee Robert Heller suggested the Fed's target rate would go up to 6% and he predicted a double-dip recession.   

The first dip was the first half of last year and the second dip looks to be the second half of this year. I am reporting here, not forecasting, but I basically think Bob Heller is leading us in the right direction.  Now, here's the rub.    

Biden State of the Union address 2023

U.S. President Joe Biden speaks during a State of the Union address at the US Capitol in Washington, DC, US, on Tuesday, Feb. 7, 2023. Photographer: Jacquelyn Martin/AP/Bloomberg via Getty Images (Photographer: Jacquelyn Martin/AP/Bloomberg via Getty Images / Getty Images)

Judging from Biden’s State of the Union message and virtually everything else he’s said before then, every part of his economic agenda is inflationary: massive central planning, stifling oil and gas, waging war against business, regulatory control of nearly every part of the economy and an across-the-board phalanx of higher fees and taxes.   

We will talk about the junk economics of his junk-fee politics later in the show. Basically, Mr. Biden wants unlimited welfare without workfare and wants higher taxes on successful earners, entrepreneurs, producers and investors.  He thinks he's waging war against rich people and that's bad enough, but he's actually waging war against jobs and workers.   

Mr. Biden is a Bernie Sanders Democrat, also known as a big government socialist. He likes employment, he just doesn't like employers.  He wants a government-run economy, which will over time increase demand, but he wants to stifle innovation and productivity, which will hold down the production of goods and services.   


He's a spender. He's a borrower. He is therefore an inflator.  So, like everyone, I'm glad to see the inflation rate come down a bit, although frankly 6.5% inflation would've been utterly unheard of two years ago, but if Biden gets his way, it won't last and that's the problem with this whole story.   

Save America. How about limited government, lower taxes, fewer regulations and a sound dollar? That's my riff.