OPINION:
President Biden’s woke economic policies will ultimately summon disaster.
From Jimmy Carter to Bill Clinton, presidents may have disagreed about the boundaries, but free trade, controlling government deficits and trust in markets were the abiding ideology. This Washington consensus undergirded prescriptions for reform in Europe, Japan and developing countries in debt crises.
The free trade movement began with the 1934 Reciprocal Trade Agreements Act and the 1948 GATT but was derailed when President Trump foolishly withdrew from the Trans-Pacific Partnership, and slapped tariffs on aluminum and steel. Mr. Biden shows little interest in reversing protectionism.
President Carter initiated the Reagan revolution with the deregulation of airlines, rails and trucking, and eliminating price controls on oil and natural gas. President Clinton capped it with the 1998 repeal of Glass-Steagall.
Mr. Carter appointed Federal Reserve Chairman Paul Volcker, who tamed inflation with a tight money policy. That constrained the federal government from borrowing large sums, but tight money ended with the 2008 Financial Crisis.
President Reagan may have wanted less domestic spending to pay for tax cuts and Messrs. Carter and Clinton somewhat higher taxes to pay for more domestic initiatives, but the Carter-Clinton era ended with federal surpluses from 1998 to 2001.
President Bush, having lost the popular vote and dealing with a Democratic House and tightly divided Senate, spent on Medicare prescription drug coverage, a big farm bill and the like, and bequeathed President Obama a half-trillion-dollar structural deficit.
The Financial Crisis set a new course. President Obama signed Dodd-Frank and issued a record number of pages of regulations across the whole economy. Former Federal Reserve Chairmen Ben Bernanke and current Treasury Secretary Janet Yellen were never able to end Financial Crisis-era low interest rates and massive Fed purchases of federal and mortgage-backed securities.
With the Fed printing money to buy bonds, deficits were headed above $1 trillion even before COVID-19 struck. Mr. Biden’s expansive programs seems likely to put annual federal borrowing at twice that level after the pandemic is over.
Moreover, Mr. Biden doesn’t just want guardrails on markets — limits on bank risk taking, regulations to police discrimination and subsidies to reshape health care. Rather, the president wants to reprogram American capitalism and culture to address alleged sexism, structural racism and climate change.
The Federal Reserve is under pressure to fashion policy to serve that social agenda, the SEC will support progressive groups in strongarming private lenders to do the same, and Mr. Biden’s infrastructure proposals would override rather than enable sound business decisions.
Social efficacy is subjective — what criteria should central banks and private lenders use to assess a race-neutral or transgender-friendly workplace? Economic policy has become a playpen for the woke Gestapo.
President Biden enables by his silence the cancel culture in the media and the jackboot thought control in teaching and research at American universities.
At the economic level, all of this is leading to terrible investment choices.
He promises to cut CO2 emissions in half by 2030, but Mr. Biden can’t quickly enable private investors to build out charging stations that would permit intercity travel in electric vehicles.
Left to their own devices, automakers would calibrate the transition from gas-power to EVs to emerging charging infrastructure but by subcontracting federal auto emissions standards to California’s zealous regulators, Mr. Biden will impose a Golden State utility meltdown — not enough electricity where motorists and truckers need it and sometimes no power at all — along the interstate.
Forcing homeowners to convert to electric heat would raise annual household costs more than $4,000 a year in the Northeast. With median family incomes at about $60,000 in Maine, not much will be left after mortgages and rent, taxes and the bare essentials for travel, to buy a few luxuries or even take in a movie. Don’t complain, AOC will likely tell you reclining seats and buttered popcorn is homophobic and racist anyway.
The Fed buying all those bonds to suppress interest rates and make federal borrowing cheap is creating zombie companies — cheap loans for enterprises with few prospects for turning a profit over the business cycle — and tying up capital that should flow to high-paying, jobs-creating activities.
For a year or so, massive stimulus spending and a pandemic rebound will justify progressives in Congress and the Biden administration with strong GDP growth, but so many resources steered into foolish purposes have a way of catching up — that’s what’s been going in Europe and Japan since the 1990s.
Growth will stall, Americans White and Black, straight and gay will fight over a diminished future and that’s the stuff that ignites revolutions.
• Peter Morici, @pmorici1, is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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