My two favorite topics recently on this blog are 1) our fundamental strengths as a nation, and 2) my great concern about the damaging effects of high inflation. In short, we’re doing a good job of providing leadership in the free world, but poorly in letting high inflation get such a strong grip on our economy.
More specifically, our current President Joe Biden is doing a good job on foreign policy but a very poor job on the economy. Consider:
- World Leadership. The Biden Administration’s new National Security Strategy Plan clearly identifies the challenges and opportunities facing the U.S. in dealing with our principal adversaries around the world: China, Russia, Iran, and North Korea. In fact, the U.S. has many strengths to build on in dealing with these rogue countries. U.S. companies are now, for example, responding to government incentives to withdraw from the Chinese Chip market. In short, the Biden Administration is defending and further building on our strong record of supporting democracy and freedom around the world.
- The U.S. Economy. Here the situation is the reverse of the above. When President Biden took office in January 2021, the U.S. inflation rate was 1.4% and the economy was already recovering strongly from the Covid lockdowns and their consequent unemployment. Nevertheless, despite strong warnings from many prominent economists, including Larry Summers, Congress passed, and President Biden signed, the $1.9 trillion American Rescue Plan in March 2021. Inflation immediately took off, reaching a high of 9.3% in June 2022 and now sitting at 8.2% for September 2022. Based on our experience in the 1970s and 1980s, the Federal Reserve will have to keep raising interest rates for many months to come, in order to force inflation back to the desired 2% level. In the meantime, inflation has spread around the world, and hundreds of millions of people will be feeling the pain of higher prices and slowing economies. Understanding that there are many contributing factors to inflation, see here and here, by tripping off the current inflationary spiral, the Biden Administration and fellow Democrats are largely responsible for inflicting this pain, not only on the U.S., but on the rest of the world as well.
Conclusion. Giving credit where credit is due, President Biden is strongly supporting U.S. interests, broadly construed, around the world. But his economic policies have been disastrous, tripping off a huge surge of inflation at home and abroad. The answer is to elect a Republican Congress next month to put the brakes on excessive federal spending, in order to help the Fed bring the inflation rate back down to normal levels.