Biden Flip-Flops On Fighting Inflation

By John Hood

RALEIGH — Remember when President Joe Biden and the Democratic Congress took resolute action to combat rising prices? I apologize for asking so much of you. It can be mentally taxing to recall the details of events long past. And according to my calendar, the event I’m asking you to recall occurred way back on August 16 of this year.

A couple of weeks ago, in other words.

That’s when Biden signed the Inflation Reduction Act into law. While it contained vast amounts of new spending — for corporate subsidies and entitlement programs, primarily — the measure also included hundreds of billions of dollars in additional federal taxes as well as price controls on drugs paid for with Medicare.

The net effect of the Inflation Reduction Act, then, was to be a $305 billion reduction in projected federal deficits over the next decade, according to the White House and the Congressional Budget Office. “We’re cutting deficits to fight inflation,” Biden said at the signing ceremony.

As it happens, that $305 billion figure was rather fishy. It assumed a scheduled expiration of the bill’s health-care subsidies that neither Biden nor anyone else truly believes are going to expire. And it counted as a budget cut the repeal of a Trump-era drug rebate that was never going to happen, anyway.

Still, the president’s explicit statement that “cutting deficits” would “fight inflation” was most welcome. Key members of his own Democratic Party have long rejected the very idea that federal deficits are a cause of inflation. (In fairness, key members of the Republican Party had rejected the connection, as well, either explicitly by word or implicitly by the deed of running massive deficits of their own.)

Unfortunately, Biden’s newfound fiscal probity lasted only a few days. On August 24, the president signed not a bill enacted constitutionally by a duly elected legislative branch but an edict enacted unconstitutionally by a power-mad executive branch. In a single stroke, Biden obligated the federal government to spend $500 billion on a new initiative to cancel student-loan debt.

That is, in a single stroke, the president took back all of the purported deficit reduction accomplished by the Inflation Reduction Act — and then expanded federal debt by many billions more. According to the theory Biden had himself advanced just days earlier, his debt-financed cancellation of up to $20,000 in student loans per borrower will make our inflation problem worse.

There are other reasons to be outraged by Biden’s appalling policy, to be sure. If you borrowed money to go to university or graduate school, then scrimped on expenses and worked hard to pay off your debts, the president has just turned you into a world-class sucker. If you chose not to go to a pricey university at all, but instead to pursue lower-cost education and training at a community college or private company, he’s turned you into a sucker, too. And if you went directly from high school into the workforce or military, learning a skilled trade on the job so you could subsequently earn a good living without college debt, ditto.

To return to my main point, however: Biden’s clumsy August Two-Step illustrates just how farcical our politics has become. Unlike North Carolina and most other states, there is no constitutional requirement that the federal government balance its operating budget. The practical effects of this oversight were rather modest until the 20th century — because the scope of the federal government was itself modest. Then came populism, progressivism, and several costly wars. Whatever modesty Washington possessed has long since vanished.

In the Cato Institute’s invaluable 2020 collection of essays A Fiscal Cliff: New Perspectives on the U.S. Federal Debt Crisis, its authors decried this bipartisan failure to forestall economic and social catastrophe. Some argued for a balanced-budget requirement or some other set of formal fiscal constraints. I agree.

But would they have stopped President Biden from issuing his student-debt edict and unilaterally widening the deficit? We need better leaders as well as better rules.

John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).

15 COMMENTS

  1. Yes, we have terrible leaders and the worst choice ever for the head of our country. I would say “they know not what they do”, but I really believe they are puppets controlled by big money and radicals and do whatever they are told to stay in power. What we really need is smarter people in this land who can see the light and drain the swamp so that we could hope for a better future.

    • What we need, is to institute an intelligence test for voters. Too many sheeple simply vote for “their” party (even if it is against their own, best interests). Let the smart people vote and make the decisions. Our democracy has failed — time for a noocracy.

  2. Is this the same John Hood who said (of the $659Billion Paycheck Protection Program, in May 2020), “…there is nothing wrong with public debt…” #flipFlopIndeed

  3. The president can’t forgive debts unless they are owed to him personally or an Executive agency like the Treasury/IRS. Student loans are owed to private banks, so require paying the banks off, so require Congress to spend the money.

  4. Mr. Hood: You “paying for someone’s degree” could be the someone that saves your life or your child’s life or teaches your grandchild or provides you with the elderly services you may need one day.

    Education is a national security issue for any country. Citizens pay a high price for everything when they live in a, collectively, uneducated nation. Investing in education is worth it.

    • Do not turn this around saying we are paying for someone’s education. We are paying an obligation that is not ours and against our will. That is government sponsored robbery.

      • @Carl: Exactly right! This is no different than forcing me to pay for government tax credits just because someone has a child! Or forcing me to subsidize someone’s property taxes just because you’re a senior! #stopTheSocialistSlide #payYourOwnWay

      • You also pay for the roads you don’t drive on, libraries you don’t visit, the elementary schools your grandchildren don’t attend, the parks you’ve never seen…
        We all do. It’s called being a member of society.

        • @NCGal: Smells a lot like a Socialist (or even Communist) society to me — not what I voted for!!! I’d rather see private companies build & maintain toll roads — only pay for the roads I drive. Same with libraries — privatize them all and simply charge an annual subscription fee for those that want to check out books.

        • Paying for roads, schools, etc is completely different than paying for someone’s personal education when they made the personal choice to go in debt to get that education! Why should I be penalized for working my butt off and paying off my own stupidity (stupid high student loans) by now having to pay for others stupidity too! Do I get a refund or exemption? What’s next a mortgage forgiveness? Car loan forgiveness? Personal responsibility needs to be taught and encouraged not government reliance.

          • @JenR: It is no different. If you make a personal choice to drive on an interstate road, then YOUR taxes should pay for it — not mine. Why should I be penalized because you want to drive? We do, in fact have mortgage forgiveness (Mortgage Forgiveness Debt Relief Act, Homeowner Assistance Fund, etc). Some people get their property taxes forgiven (Homestead Exclusions, etc). *ALL* of these are examples of government waste. *EVERYTHING* should be a free-market, individual, pay-as-you-go model.

  5. This isn’t paying for education, it’s paying for debt relief. The education was paid for when the loan was received.

    But let’s say it is paying for education just for the sake of argument. It’s completely unfair. It’s only paying for education for some. Maybe others would have taken loans if they knew what was going to happen, instead of paying for their college education the hard way or worse, forgoing it thinking they couldn’t afford it.

    In fact, I wouldn’t be surprised at all if the numbers are actually racist and favor certain “privileged” race(s) heavily.

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