President Costanza Takes On Inflation

Donald Trump has spoken about wanting to avoid increasing the nation’s Federal Reserve interest rate by three percent. The President recently claimed that some economists believe he would have accomplished this if he had not taken office, but many experts say it is unlikely as a president cannot do anything without Congress’ approval which must be obtained first. Experts also argue that inflation rates are generally controlled by international economic conditions like trade wars, strong US GDP and rumors of China devaluing its currency.

The “costanza seinfeld” is a famous episode of the sitcom “Seinfeld”. In it, Jerry Seinfeld’s character, George Costanza, takes on inflation.

On May 10, President Joe Biden speaks at the White House on the administration’s measures to combat inflation and cut expenditures.

PHOTO: REUTERS/LEAH MILLIS

President Biden sought to get ahead of Wednesday’s April inflation data with a speech on Tuesday that rehashed his tried-and-true price-cutting proposals: boost subsidies, raise taxes, and expand regulation. He should follow Jerry Seinfeld’s counsel to George Costanza and ignore every policy impulse he has.

The President urged Congress to support his “Building a Better America” proposal, which includes increased subsidies for renewable energy, electric automobiles, child care, housing, and other areas. He also reaffirmed his support for the planned billionaire’s tax, which is an unlawful wealth tax, as well as Medicare medicine price limits.

***

Mr. Biden blamed inflation on the flu and Vladimir Putin once again, ignoring the fact that Democrats poured kerosene on the fast economic recovery with their $1.9 trillion spending plan in March. When Mr. Putin invaded Ukraine, inflation was already at 7.9%. (see the nearby chart). At the same time, their policies are impeding the economy’s supply side in a variety of interconnected ways.

Consider food and energy. Despite high energy prices, the administration’s assault on oil and gas has generated huge regulatory uncertainty, which is stifling investment in new production. Workers are scarce for producers. Many people fled the sector when prices plummeted early in the outbreak, and they are wary of returning since Democrats have pledged to put drillers out of business.

Then there’s the left’s pipeline blockage, which is impeding natural gas production in the Northeast’s abundant shale reserves. Progressives blame rising gas prices on natural gas exports, but the bigger issue is increased demand in the United States Subsidies for wind and solar have caused coal and nuclear reactors to retire, but renewable energy still requires more gas.

More renewable energy, according to Mr. Biden, would lower power bills. Why, therefore, have electricity rates risen by 11.1 percent in the past year? As in California and Texas, more green energy will make the system less stable and raise demand for gas and diesel-powered emergency generators.

Diesel prices have risen $2.40 a gallon in the last year, a buck more than gasoline costs, due to rising freight demand and restricted refining capacity. Higher diesel costs affect food prices since it is used by ships, trains, trucks, tractors, and other agricultural equipment.

Refineries have been forced to close or switch to generating lesser volumes of “renewable” diesel from cooking oils due to biofuel requirements and subsidies. This is also one of the main reasons why soybean oil costs have more than quadrupled since the outbreak, and the American Bakers Association has lobbied the administration to relax renewable fuel standards.

The ethanol requirement, according to poultry farmers, is pushing up the cost of their feedstock. Increasing maize and soy prices, on the other hand, are preventing farmers from growing wheat to compensate for lost Ukrainian exports. The administration, on the other hand, wants to raise renewable fuel regulations and subsidies.

More investment is needed to enhance the economy’s supply side, which will raise worker productivity, real wages, and living standards. Mr. Biden’s proposal to impose taxes and regulations on firms and investors will have the opposite effect.

He pushed for Medicare to negotiate medication prices—i.e., price caps—again in his address, but this would exacerbate pharmaceutical market inefficiencies and reduce investment in innovation. Prescription medicine costs, by the way, have only increased by 2.2 percent in the past year. Competition, not government, is to thank for this.

***

Mr. Biden’s Tuesday address was actually less about inflation and more about setting up the fall campaign against Republicans, as White House advisers hinted to sympathetic journalists on Monday. As if Democrats don’t control Congress and the White House he said the GOP had no strategy for inflation. He tied all Republicans to Florida Senator Rick Scott’s vague idea that all Americans pay some kind of federal INCOME TAX and that all congressional bills expire after five years.

“The Republican program in Congress will put Social Security, Medicare, and Medicaid on the chopping block every five years,” Mr. Biden said. Who would believe this? The remainder of Mr. Scott’s party has not embraced his idea.

Mr. Biden claims that Republicans seek to “depress” American wages, while real disposable personal income grew $4,205 (in 2012 currency) from January 2017 to December 2020, but has subsequently fallen $374, nearly entirely under his watch. Despite growing nominal salaries, inflation is driving real wages to fall.

Over the previous two years, Americans have learned the hard way that no amount of government transfer payments will compensate for the loss of real earnings due to inflation. President Costanza has yet to respond.

Biden and the Democratic Party’s progressives believe that spending money will win voters’ appreciation. This time is different. courtesy of Getty Images Mark Kelly’s composite

The print issue of the May 11, 2022, was published.