Bidenomics: A “That 70s Show” Rerun

President Biden has said openly that one of his main objects is to turn back Ronald Reagan’s famous line from his first inaugural address that “Government is the problem.” Of course, everyone omits the qualifying preface of the entire Reagan quote: “In this present crisis, government is not the solution to the problem; government is the problem.” (Emphasis added.)

While we can argue about how Reagan’s qualifier “in this present crisis” should be understood, one thing is clear: Biden is doing everything imaginable to recreate the economic crisis that Reagan responded to in 1980 with his package of economic changes that were soon called “Reaganomics.” But as Reagan noted, when things got better in a hurry, the media and his critics stopped calling it “Reaganomics.”

Now we have upon us “Bidenomics.”

First, let us note that every major economic catastrophe—and many minor ones—of the last 100 years involved policy errors by the Federal Reserve as a primary cause, most famously the Great Depression, the inflation of the 1970s, and the housing crash of 2008. And lots of ordinary business-cycle recessions can be traced to bad Fed policy, too. Keep in mind that when banks are caught trying to manipulate short term interest rates and credit flows, they get hit with a criminal charge. But when the Fed does it, it’s called “quantitative easing” or some other euphemism. Make no mistake: Fed control of short term interest rates, and their massive purchases of credit in the open market, are an attempt at price controls—in this case, the price of money. And like all other kinds of price controls, it creates market distortions that sooner or later have bad effects.

Which brings us to current Fed chairman Jerome Powell, who is up for reappointment next year. President Trump appointed Powell because Powell represented a bias toward easy money and low interest rates—music to the ears of a real estate person like Trump. (Most everyone else favored John Taylor for the Fed chair position, which would have been much better.) So far Powell has mostly not disappointed the easy-money constituency. While it is reported that Biden’s economic team is inclined to reappoint Powell to a second term as Fed chair, there is one group inside the Democratic Party who don’t like him, and are pressuring Biden to pick someone else. Guess who they would be?

Progressive Opposition to Jerome Powell Clouds His Chances for Second Term as Fed Chairman

Members of President Biden’s economic team generally support nominating Federal Reserve Chairman Jerome Powell to a second term, but growing resistance from prominent Democrats including Sen. Elizabeth Warren (D., Mass.) could lead to his replacement, according to people familiar with the matter. . .

Reappointing Mr. Powell “would be disappointing” for those who care about Mr. Biden’s agenda to address financial regulation, climate change and racial wealth gaps, said Erik Gerding, a senior fellow at Americans for Financial Reform, a nonprofit that argues for tougher financial regulation. “Having Jerome Powell continue would just mean one less vote for sustained and healthy regulation of the banking system.”

You can see here that the left thinks the Fed should be in the business of greater financial regulation (never mind all the other existing regulatory agencies with responsibility for financial regulation), climate change, and income redistribution. Great. What could go wrong?

The main reason the Progressives want a leftist Fed chair is that they want the Fed to accommodate massive amounts of new spending under the doctrine of “modern monetary theory,” which holds that since you’re borrowing in your own currency you can borrow as much as you want without consequence. Back in the New Deal era, the slogan was, “We owe it to ourselves!”

Except in the “That 70s Show” rerun that Biden watches at naptime, the latest inflation reading out today came in at a 5.4 percent annual rate, continuing the acceleration of inflation we’ve seen for several months now.

Then there’s energy. One of the economic problems of the 1970s was energy scarcity (entirely due to stupid regulations) and price increases tied in part to OPEC market dominance. The Biden Administration is trying to strangle fossil fuel production here at home, and thus has had to resort to this today:

The White House urged OPEC to boost oil production Wednesday, saying recent planned increases are insufficient as countries around the world seek to emerge from the Covid-19 pandemic.

National security adviser Jake Sullivan said in a statement that recent planned production increases by the Organization of the Petroleum Exporting Countries would “not fully offset previous production cuts” made by OPEC and its oil-producing allies during the pandemic.

How about production increases here at home? Also, this part is delicious:

The White House also asked the Federal Trade Commission in a letter to use “all of its available tools” to monitor the U.S. gasoline market and take action against “any illegal conduct that might be contributing to price increases for consumers at the pump.”

Question: how much is the typical oil company profit from each gallon of gas sold at the pump? I believe it is still around 20 cents (or less). How much do state and federal governments make from each gallon of gas sold at the pump from gasoline taxes? Around 45 cents. (Incidentally, every time the government investigates gasoline price markets, as they have since the 1970s, they find . . . nothing. It’s like markets actually work or something. No one ever seems to remember any of this.)

Jimmy Carter was unavailable for comment.