COMMENTARY ON CLUB FOR GROWTH FOUNDATION REPORT:
BY DAVID McINTOSH
President, Club for Growth
Unfortunately, due to President Joe Biden’s radical policies, the U.S. economy is now in deep trouble and teetering on the edge of a full-blown recession. The coming Biden Recession will harm all Americans.
President Biden and his Radical Left allies in Congress have passed multiple, massive and unnecessary federal spending bills, which have led the way in causing historic inflation. For far too long, Congress has acted irresponsibly with the nation’s credit card and taxpayer dollars. Their trillions in spending have caused higher than expected 8.3% inflation, very close to April’s 40-year high. Because inflation raises the cost of gas and groceries, while wages fail to keep pace, inflation is known as the invisible tax, but it’s far from invisible to most Americans and it disproportionately hurts America’s working class and families.
Despite, the dire state of the economy today, as clearly evidenced by the 1.4% decline in U.S. GDP in the first quarter of 2022, Club for Growth fears an even worse outcome from the profligate Biden spending–an economic recession. The evidence indicates that this fiscal crisis will badly damage the economic outlook for prosperity and opportunity that belongs to the American people and future generations.
How did we get here so quickly, when less than three years ago the economy was strong, taxes were low, America was energy independent, and wages were rising, while inflation was in-check?
The answer is simple, President Biden reversed many of the successful economic policies President Trump’s administration championed with the help of pro-growth Republicans in Congress. President Biden pumped trillions of dollars in federal spending into the economy during supply chain interruptions, while demand was volatile due to the COVID-19 pandemic, causing prices to rise. Biden inherited U.S. energy independence and the U.S. as a net energy exporter on day one of his administration. However, Biden’s Executive Orders and regulatory actions turned us into a nation reliant on foreign energy — all because he sought to placate radical climate change environmentalists. Biden incentivized millions of Americans to drop out of the labor force, adding pressure on the supply chain. His policies created wage pressure on inflation. Progressive economic polices a made goods and services more difficult to come by, thus more expensive. Biden has even proposed the largest tax increases in American history in an attempt to fund his spending spree. This caused U.S. job creators and entrepreneurs in many areas of the economy that lead new business formation and risk-taking to stop investing in order to reevaluate the future of the U.S. economy.
While this fiscal calamity is being inflicted upon Americans, we believe that it is still not too late for the United States to reclaim our economic prosperity. But time is running out. In order to compete internationally, and grow domestically, Americans need champions of economic freedom and liberty, and leaders with a basic understanding of free market principles and supply side economics. This means policymakers who will demand low taxation, low regulation, and free trade agreements. And it also means addressing federal spending that is resulting in trillion-dollar annual deficits being added to the burgeoning national debt. By enacting fiscal reforms that will address the drivers of the unsustainable levels of debt –i.e., reckless Congressional spending – a conservative Congress can deal with inflationary pressures. This will allow investing to catch up. By eliminating overly generous COVID-era transfer payments, Congress will restore incentives for wage earners to return to work. These policies are the best way to correct the harm to American families that will come from the looming Biden Recession.
Washington’s elected politicians from 1600 Pennsylvania Avenue down the street to the U.S. Capitol need to wake up and face the fiscal and economic reality–President Biden’s policies are the “Recipe for a Recession.” The Biden Recession is around the corner. It’s up to the rest of us, from all walks of life, to fight back against a Socialist takeover of the U.S. economy and renew the promise of economic prosperity to all Americans in all communities.
EXCERPTS FROM CLUB FOR GROWTH FOUNDATION POLICY REPORT
Diana Furchtgott-Roth | George Washington University
President Biden’s agenda includes raising taxes; substantially increasing government spending, including entitlement payments; imposing burdensome regulations on businesses and ordinary Americans; increasing the cost of labor through regulation and expansion of union power while real wages are declining; and forfeiting America’s energy independence.
Standing alone, each initiative is harmful to America’s economy. In combination, these initiatives have led to the increased possibility of an economic recession, as can be seen from the 1.4 percent decline in real Gross Domestic Product in the first quarter of 2022, the first decline in GDP since the pandemic.1 If this decline persists for another quarter, then the country will be in a recession. In addition to the decline in GDP, the results include rising inflation, currently at 8.3 percent, close to April’s 40-year high; supply chain problems; disincentives to work; and slower GDP growth.2 Inflation is an “invisible tax” and the effect on American families and small businesses is serious; higher gas prices; higher food prices; and labor shortages. If additional parts of President Biden’s agenda are enacted, we expect the elimination of millions of jobs, weakened national competitiveness, and increased dependence on other nations, including Russia and China, for our energy needs, further eroding our energy independence.
On his first day in office, President Biden rolled back many of President Trump’s pro-growth regulatory reforms and initiatives, reimposing costly regulations by Executive Order.3 Since then, President Biden and Congress have added trillions of dollars in government spending. Although the U.S. economy has continued to grow in large part from the 2017 tax cuts signed into law by President Trump, President Biden has repeatedly sought to raise taxes, most recently in a speech on the economy on May 10, 2022 and his proposed budget presented to Congress in March 2022.4 These proposed tax increases, if they were to become law, would cause corporations and small businesses to reduce investment. Some would move offshore. New taxes, regulations, and higher inflation are a signal to those interested in taking risks to start or to expand a business to wait on the sidelines until there is predictability and certainty in economic policies.
The paper describes how President Biden’s policies have weakened the American economy. We will examine increases in government spending, the effects of this spending on inflation, proposed tax increases, effects of labor regulations, and reductions in domestic energy production.
Prior to the COVID-19 pandemic, America had the strongest economy in the world, was energy independent, was the leading exporter of energy, and was poised for expansive future growth. President Biden dismantled pro-growth policies and his subsequent spending agenda is increasing the likelihood of a recession. With the Federal Reserve raising interest rates in an attempt to curtail inflation, real wages are declining, limiting Americans’ ability to purchase goods and services. These higher interest rates discourage investment in new projects and reduce expansion of existing enterprises.
Spending – Additional spending, including new spending on infrastructure, is not adding to productive growth. President Biden proposed, and Congress has passed, more than $4 trillion in new federal programs, likely the largest increase in government spending in history. The expanded spending programs, with vast increases in programs that required no more spending, are unnecessary and wasteful of taxpayer dollars.
Inflation – The clear evidence is that the Biden spending programs have harmed the economy. Inflation is close to 40-year highs as a result of Federal Reserve monetary accommodation combined with disincentives to work and produce. The American worker, our most important resource, is being discouraged from working to qualify for expanded entitlement programs. The Ukraine war is exacerbating inflation problems with the Biden Administration offering few meaningful responses. The Federal Reserve is combating inflation by raising interest rates and reducing its balance sheet, with no assistance from the Biden Administration, slowing economic growth in the process.
Taxes – President Biden proposes new taxes that will reduce American jobs, slow American growth, and diminish the prospects for innovation and entrepreneurship in America. That is a prescription for an uncompetitive economy, reducing economic growth and potentially leading America into a recession.
Labor – In addition, President Biden’s actions are resulting in higher labor costs than would be the case otherwise. He wants to raise the cost of labor by artificially raising wages by regulation, attempting to take away secret ballots for elections for union representation, requiring Project Labor Agreements, and making it harder to be an independent contractor. These actions raise the costs of employment, encouraging employers to reduce labor or move offshore.
Energy – America has been, and should still be, the largest producer of energy in the world. Yet, energy production and independence are not objectives of the Biden Administration. Ordinary Americans want more energy, not less. However, President Biden has adopted policies to ensure that America is neither energy independent nor generating more energy. Cutting energy production at home, while encouraging hostile countries to expand their production, further shifts U.S. economic growth overseas and contributes to slower growth. Mandating that all cars sold in America run on batteries will cause the United States to be dependent on China for vehicular transportation.
As inflation whittles away Americans’ real income, raising prices and decreasing the ability to buy goods and services, businesses will see a decline in sales, leading to lower earnings. This is how a recession starts. As seen by the recently released economic data, Biden’s policies have led to negative growth in the first quarter, and if this negative growth continues, the country will be in a recession. Has the Biden Administration put policies in place to lift sustainable growth? The answer is no.