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The Biden Administration Needs To Go Back To Econ 101

John Galt

Updated: September 6, 2022

econ 101
Editor’s Note:

EDITOR'S NOTE: When President Biden took office in 2021, and immediately following it, the more progressive end of Democratic lawmakers began speaking in support of his Build Back Better plan, it was clear that partisan ideology was getting the better of what could have been sound economic policy. The very principles of Econ 101 not only were being violated but twisted to reflect an agenda that was somehow aimed at serving the greater good. By then, those who voted for Biden in the hopes that he’d take a more centrist approach to the economy were perhaps shocked to realize just how clueless the Dems were (save a rare handful) in all matters economic. Meanwhile, the Ph.D.’s over at the Federal Reserve—representing the extreme end of economic expertise—were just as clueless, struggling with excess “theoretics” that somehow kept all of them blind to the economic realities of most hard-working Americans. So, when Cato published their assessment of the Biden administration's grade in economic performance—a big fat F—they’re announcing something that we all know too well. Apparently, the White House’s economic agenda concerns just about everything except for the economy itself. 

"President Biden and his advisers seem confident that they can deny reality by ignoring long-standing economic principles and the basic market forces of supply and demand. The Biden team is in serious need of an Econ 101 refresher course. Key economic policies that the administration adopted during the president's first year and a half in office defy economic principles covered in introductory courses.

Consider one of the administration's earliest and most preposterous claims, that the federal government can increase its annual expenditures (and budget deficits) by trillions of dollars and that the cost will be nothing. As he tweeted on September 25, 2021, 'My Build Back Better Agenda costs zero dollars.' But even that's not the worst of it. He also claimed that the substantial added federal spending has dampened the rise in the inflation rate and that additional spending under his proposed agenda would have lowered inflation even more, if Congress had approved it, which it didn't.

President Biden and his advisers apparently have never heard the economic axiom, 'There's no such thing as a free lunch.' Because Biden insists that his trillions in additional federal expenditures cost nothing, he can feign - as he and his advisers have done - that his economic agenda will not impose a 'single penny of additional taxes' on Americans who earn less than $400,000 annually. Moreover, Biden proclaims, 'Everyone benefits.'

Nonsense. If only President Biden and his advisers would reflect on their Econ 101 lessons. Federal taxes reduce what Americans at all income levels can buy for themselves and their families with their paychecks, thus transferring resources for public purposes. Added federal expenditures - whether financed by added taxes or deficit spending - have the same consequence but sometimes in obscure and hidden ways. The added spending always soaks up real resources and, in doing so, reduces the availability of resources to produce an array of private goods....

No matter his reasons, President Biden's record on economic policies suggests that he either learned very little in his Econ 101 course or has forgotten most of what he learned. His insistence that his trillions of added deficit spending, which the Fed largely monetized, has had nothing to do with the rising inflation rate would, by itself, put in grave jeopardy his grade in my introductory course and in those courses taught by most economics professors who are not beholden to partisan ideologies and politics."

Originally published on Cato.

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