The decade's most triggering comedy
On Friday, President Joe Biden vented his frustrations at the 2022 House Democratic Caucus Issues Conference in Philadelphia, Pennsylvania, giving a wide-ranging speech on current political affairs. During his remarks before the Democratic members of Congress, Biden bemoaned that the American people think more government spending causes inflation.
“Last year — because of all you did — we reduced the deficit by 360 billion dollars,” Biden told the House Democrats, before adding, “We the Democrats — while the economy grew!”
“We’re on track right now … to be the first president in history to lower the deficit by over 1 trillion dollars in one year,” he claimed.
“So, I’m sick of this stuff!” he said. “We have to talk about it because the American people think the reason for inflation is government spending more money. It’s simply not true.”
A clip of his heated moment can be seen here:
Biden: "I'm sick of this stuff … the American people think the reason for inflation is government spending more money. Simply not true!"
— RNC Research (@RNCResearch) March 11, 2022
Biden has previously claimed that he was the first president to lower the deficit by $1 trillion, most notably in his State of the Union address in early March.
Yet as explained by The Wall Street Journal, that embellishment is “one for the ages” noting that he was ignoring potential spending bills and COVID-19 relief funds he wanted to pass during his first year in office:
He’s also using the fiscal 2020 budget as his benchmark. Congress passed $2 trillion in Covid relief in March 2020 to prevent a recession. Both parties piled on $900 billion more that December, and Democrats in March 2021 ladled out nearly $2 trillion more. The deficit is declining because Congress blew it out for two years.
Revenues have been surging thanks to strong corporate profits, capital gains, and rising nominal incomes. Inflation is always good for government coffers. Receipts are up 28% during the first four months of this fiscal year. But the Congressional Budget Office still projects deficits to exceed $1 trillion on average over the next decade.
As for increased government spending leading to inflation, it is unclear on what economic reality the president is basing that claim.
In a Journal interview that is well worth the read, the Hoover Institute’s John Cochrane explained how the government’s behavior over the past few years is to blame for inflation and will continue to be so long as the government keeps spending money.
In short, Cochrane told the Journal that inflation is “dreams of costless fiscal expansion, flooding the country with borrowed money to address every perceived problem, hit a hard brick wall of reality.” He explained more clearly that COVID-19 stimulus checks, as well as other government spending checks, caused this very moment:
He traces the present inflation to the pandemic and the government’s response. Starting in March 2020, “the Treasury issued $3 trillion of new debt, which the Fed quickly bought in return for $3 trillion of new reserves.” The Treasury then sent checks to people and businesses, later borrowing another $2 trillion and sending more checks. Overall federal debt rose nearly 30%. “Is it at all a surprise,” Mr. Cochrane asks, “that a year later inflation breaks out?”
He likens this $5 trillion in checks to a “classic parable” of Milton Friedman (1912-2006), the great monetarist at the University of Chicago, where Mr. Cochrane was a professor for 30 years before moving to Stanford in 2015. “Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community,” Friedman wrote in “The Optimum Quantity of Money” (1969). If they spent the money, inflation would result.
The Covid checks, Mr. Cochrane says, were “an immense fiscal helicopter drop. People are spending the money, driving prices up.”
Biden wants to continue increasing government spending, and it is doubtful that he will change his course of action as he blasted the GOP for their spending policies as well.
“I don’t think we need any lectures about fiscal responsibility, for God-sakes,” Biden added during his speech on Friday.
The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.
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