For as long as I can remember, the Democratic Party has portrayed itself as the defender of the downtrodden and the slayer of economic inequality. While that may have been the case during the Clinton years, that is certainly not true today.
Today’s Democrats, in general, embrace a new economic concept called modern monetary theory (MMT), which posits that the U.S. government can print endless amounts of money to fund a bevy of government programs, without the consequences that typically ensue after such profligate spending and monetary debasement.
Because MMT is in complete conflict with longstanding economic principles, such as the law of supply and demand, it should be renamed magical monetary theory.
Unfortunately, the Biden administration has fully embraced MMT, which is partly to blame for the worst inflationary crisis the country has experienced in more than four decades.
Since taking office, Biden has signed two enormous bills—the $1.9 trillion American Rescue Plan and the $1.1 trillion “infrastructure” bill—into law. Biden also lobbied hard for an even bigger bill, the $5 trillion Build Back Better bill, which went down in defeat.
To “pay” for these bills, the U.S. government has ramped up the money printing presses like never before. Since taking office, the M2 Money Supply has increased by a whopping $3 trillion under the Biden administration.
Although the Biden administration repeatedly told us that all of this government spending would not be inflationary, the exact opposite has come to pass.
When Biden entered the Oval Office, inflation was absolutely tame at 1.4 percent. However, since Biden’s $3 trillion spending spree, inflation has skyrocketed to 8.3 percent.
Without a doubt, inflation is a regressive tax, meaning it disproportionately hurts low-income Americans.
For wealthy Americans, inflation is but a nuisance. But, for the 64 percent of Americans who are living paycheck-to-paycheck, 8.3 percent inflation is untenable. On average, Biden’s inflation is costing U.S. households an extra $327per month. While this may mean one less fancy dinner per month for a rich household, it has a much more profound effect on the 64 percent of Americans who lack discretionary funds.
When this inflationary tax is coupled with out-of-control energy prices, it makes it almost impossible for working-class Americans to keep their heads above water.
Unlike white-collar households, which usually have the propensity to offset rising energy prices, blue-collar workers are often hit hardest by rising prices at the pump. This is true for many reasons, including the fact that wealthy people are more able to work remotely, afford an electric vehicle, and tend to live in places (the suburbs) where gas prices are lower.
On the other hand, working-class Americans are more likely to have to work in person, cannot afford an electric vehicle, and live in urban centers, where gas prices are highest.
Recent polling shows that inflation is the number one concern for all Americans. Recent polling also shows that Americans have lost confidence in President Biden’s ability to do his job, namely when it comes to his economic stewardship.
Unless and until President Biden comes to grips with the fact that his policies have widened the wealth gap and continue to hammer those most vulnerable to inflationary spikes, he and his party will face a reckoning this November.
Moreover, if Biden really wanted to decrease economic inequality and help those struggling to make ends meet, he would take a page out of President Trump’s policy playbook.
When Trump entered office, he inherited a stagnating economy riddled in red tape from his predecessor. Yet, over the course of a few short years, Trump’s common-sense economic policies of lowering taxes for all Americans, cutting regulations, and unleashing American energy production fostered an economic boom felt by all Americans, especially middle- and lower-income earners.
UnderTrump, median household income increased by more than $6,000. In fact, before the pandemic, the American economy was firing on all cylinders. Inflation was low, employment was high, and the groups at the bottom of the economic ladder were making more gains than they had in decades.
In other words, at this point, if Biden is truly concerned with addressing rising economic inequality and the plight of the working man, he would make like George Costanza in Seinfeld and “do the opposite.” As Jerry told George: “If every instinct you have is wrong, then the opposite would have to be right.” This certainly applies to President Biden and congressional Democrats.
Chris Talgo (ctalgo@heartland.org) is senior editor at The Heartland Institute.