U.S. President Joe Biden has had a pretty rocky start to his first years of his presidency. As if inheriting the U.S. during a pandemic wasn’t bad enough, the economy, while looking decent on paper, has been hell for middle and lower socioeconomic individuals. While Biden cannot be fully blamed for the ebbs and flows of the markets, he isn’t fully without blame either. On top of this, Russia’s aggressions towards Ukraine put unwanted additional strains on already struggling supply chains. Their actions, along with our government’s inactions and misplaced funding has caused the U.S. inflation rate to top anything seen in the last 40 years. A few days ago, Biden released his plans on how to soften the blows we have all felt from this unrelenting degradation of our hard earned money. Let’s see what he has to say.
After independently analyzing the Federal Reserve Supervision and Regulation Report, the Federal Reserve is confident that our economy remains strong. This claim is backed up by data showing how the banks leveraged their liquid assets during the pandemic and the beginnings of the war between Russia and Ukraine. The banks liquidated their assets appropriately as to not be completely washed out by the raging volatility. Having more liquidity reduces the risks brought on by volatile swings in a crazy market. Biden again repeats a very similar story by assuring us that even though we are in the midst of these economic challenges, we are still facing these challenges from a position of strength. Something other nations, namely Russia and China, cannot say for themselves. We must not forget that what we are seeing in this nation, especially as of now when global tensions are high, is a result of supply chains and other economic hurdles being erected throughout the world. Economies are not completely cut off from the outside world. We are all vitally connected through energy and other commercial sectors. All of that to say, we are not the only ones experiencing hardships. Taking all into consideration Biden claims that we are still doing much better than most of our counterparts.
Biden also claims that his administration has supported the creation of 8.3 million jobs, the strongest job market increase since post-World War II. While also supporting the fastest decline in unemployment ever recorded. In early May the White House Briefing Room exclaimed that the Biden administration’s plan and policies including, but not limited to, the American Rescue Plan, the COVID vaccination program, and Biden’s plan to grow the U.S. economy from the bottom up and the middle out, are what has allowed this record breaking achievement. After this claim Biden continued by promising that he and his administration will work tirelessly to ensure that inflation cools and that middle to lower class families will be less and less burdened as time goes on. A beautiful sentiment indeed, but how exactly does Biden plan on making good on these promises?
Thankfully for Biden, there is some credibility to be given to these statements he and his administration have been spouting for over a year now. According to the Federal Reserve report, “Economic Well-Being of U.S. Households in 2021”, published in May of 2022, found that a greater percentage of Americans self-reported feeling more financially comfortable than at any time since this survey began in 2013. 78% claiming that they are living comfortably in 2021 compared to 75% year over year and 62% at the survey’s inception in 2013. However, details on the collection of this data are not provided by the Federal Reserve and just states that it represents all American adults. I am highly skeptical of this allegation; however, I am going to trust that their sample size is large enough to make this claim. On top of this claim Biden also boasts that business investments are up 20% and manufacturing jobs are growing at the fastest rate in the past 30 years. He also noted that there were more new small business applications in 2021 than in any other year previously. Granted, I am not sure how much the stimulus checks and forced working from home has affected these numbers. As Americans struggle with rising prices throughout their daily lives, we have become much keener on investments and starting new businesses. Given a few years’ time how many will go back to W2 jobs and forget all about their newfound entrepreneurship dreams? How many will make poor investment choices since they are new to the game? How many will waste their stimulus payments and deplete their savings? There are so many variables, sure it looks good for the Biden administration, but how much of these statistics are actually being manipulated by the government and/or how many of these statistics will hold for the long-term? I am still waiting for Biden to tell us exactly how he plans to cool down inflation for the next few years.
The struggle will be to hold onto all of these historic gains boasted by the Biden administration. To maintain these statistics and reign in the U.S. economy from recovery stage, to a more stable stage, and to eventually pull us up to a growth stage, that is where our questions lie. Biden makes the argument that in order to pull our economy from recovery stage to growth stage we will not be able to continue such rapid job growth and that within the year we might see a dramatic drop in jobs. Currently we are seeing on average a creation of ~500,000 monthly job, next year we will be looking at ~150,000. Biden says that this will be a sign that we are moving into the next stage of economic recovery. He argues that job growth at its current levels do not align with low unemployment and an overall healthy economy. This makes since as the number of jobs being created right now shows us that pandemic era unemployment is still a concern and that many have not rebounded from “the great resignation”. So, how exactly will Biden address these concerns?
Biden has a three part plan to tackle the ever growing U.S. inflation rate. Biden’s first plan is to rely heavily on the Federal Reserve. Biden states that he has appointed highly qualified people from both sides of the political divide to lead the Federal Reserve. He will follow their counsel and have faith that they will do their best to assess and fight inflation. This is a very vague stance to take, I would like to see evidence that Biden is more involved with the intricate proceedings of the Federal Reserve other than just trusting the people he has appointed.
Second on his list, making things more affordable. Yes, you heard that right, making things more affordable through every political avenue that he has available to him. Biden blames the rising gas prices on Putin and his attack on Russia, which is a valid point. However, economic restrictions put in place by Biden’s administration directly caused the reduction in availability of oil and natural gas. Biden understands that these sanctions on Russia are indirectly hurting the American people and he says that they must mitigate these effects for American consumers. In an effort to realize this Biden has released the largest amount of global oil reserves in history. Claiming that the release of extra oil held in reserves will reduce the prices we see at the pumps. However, is this really the best move? Since the release of these reserves the price of gas continues to rise in many places around America. What is to happen if an unforeseen greater disaster strikes, we will not be in a position to maintain American lives comfortably. Biden also claims that congress could help by passing clean energy tax credits and investments that he has put in front of them. He alleges that he and his administration can reduce the cost of everyday consumer goods by fixing broken supply chains, improving infrastructure, and reducing the pricing and fees that foreign ocean freight companies charge to move products. He goes on to claim that his Housing Supply Action Plan, which promises to build more than a million more housing units would reduce housing costs. He claims that he can reduce the price of prescription drugs by giving Medicare the power to negotiate with pharmaceutical companies and capping the cost of insulin. He claims that he can lower the cost of child and elderly care, helping parents get back to their jobs. However, these claims are just that, claims. On top of the fact that these are just baseless claims of propping up the American economy, to me, they just sound like short-term Band-Aids slapped over a gaping wound. We need deeper, more broadened, better rooted long-term plans if we want to see the American economy boosted for decades to come.
Biden’s third and last plan of action to reduce inflation is to keep reducing the federal deficit. Biden and his administration allege that the deficit will fall by $1.7 trillion this year alone. If this does come to fruition, it would be the largest single year reduction in the federal deficit in American history. Biden claims that by making common-sense reforms to the tax code they will be able to collect on debts owed by the American people. He also plans to level the international taxation playing field so that companies will no longer be incentivized to build manufacturing and other jobs overseas, thus bringing home more taxation benefits. He also claims that he will find a way to tax billionaires who have thus far been able to reside in loopholes that allow them to pay lower tax rates than lower income individuals such as teachers and firefighters.
There are many ways in which a government can lower the inflation rate their population is experiencing. Biden sure has some ideas. I am by no means an expert on the whole of global economics and what all variables go into adjusting inflation on a national scale, however to me, it seems that these plans are nothing more than shallow wishful thinking. I for one am a little disappointed that our American president has nothing else to offer the American people and no real plans of action to be taken. This administration as well as many previous administrations are all full of baseless and/or weakly based claims on how they have done a great job. Stop having such an egotistical view on our economy. It does not matter if a single person is adored or hated, they need to be taking into account the grand picture. Start making changes that help the American people and stop making decisions that boost your approval on paper.
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