Over the past few weeks, Democrats seem to be having a revelatory experience, discovering that simply increasing demand through government spending doesn’t work if there are limited products to buy. The supply side of the capitalism equation is essential, and when government layers on excessive regulations, it holds back business and slows the production of goods.
The inability of the Biden administration to both create a constructive environment for producers and a dependable, efficient supply chain to get goods to market has produced the worst inflation in 40 years.
Without supply, all increased demand does is increase prices. This administration needs to focus on fixing the supply side of the economy. But instead, Biden tweeted Friday, “You want to bring down inflation? Let’s make sure the wealthiest corporations pay their fair share.”
So, his solution to inflation is to increase taxes on businesses, who will then pass those costs on to consumers. Sounds like a recipe for higher inflation.
Biden’s head-scratching tweet sparked a bigger reaction than the White House probably expected when one of the Democratic Party’s biggest boosters, billionaire Jeff Bezos, owner of The Washington Post, tweeted back, “The newly created Disinformation Board should review this tweet, or maybe they need to form a new Non Sequitur Board instead.”
Bezos went on, “Raising corp taxes is fine to discuss. Taming inflation is critical to discuss. Mushing them together is just misdirection.” Ouch. But it got worse.
Two days later, Bezos took to Twitter again: “The administration tried hard to inject even more stimulus into an already over-heated, inflationary economy and only Manchin saved them from themselves. Inflation is a regressive tax that most hurts the least affluent. Misdirection doesn’t help the country.”
By Monday, it was the new presidential press secretary, Karine Jean-Pierre, in the hot seat over Biden’s tweet when Fox News’ Peter Doocy asked her how taxing corporations translates into lower inflation.
Jean-Pierre served up a classic word salad that ignored the president’s focus on taxing corporations and instead leveled her sights on the rich: “Look, we have talked about … this past year, about making sure that the wealthiest among us are paying their fair share, and that is important to do.”
She went on, “So I think we encourage those who have done very well, especially those who care about climate change, to support a fairer tax code that doesn’t charge manufacturers, workers, cops, builders a higher percentage of their earnings than the most fortunate people in our nation, and not let that stand in the way of reducing energy costs and fighting an existential problem, if you think about it, that is an example. To support basic collective bargaining rights as well.”
Note that she avoided Doocy’s question, and for good reason — increasing taxes on business will increase the prices they charge, not lower them.
But Team Biden seems intent on ignoring well-founded criticism even from the Democratic fold. In February, Democratic economist Steven Rattner warned in The New York Times, “The bulk of our supply problems are the product of an overstimulated economy, not the cause of it. … It’s a classic economic case of ‘too much money chasing too few goods,’ resulting in both higher prices and, given the extreme surge in demand, shortages.”
In March, when Biden kicked off his blame game to explain newly released 7.9 percent inflation numbers and growing shortages, Rattner scoffed at the president’s argument that Putin was the real culprit along with the supply chain, greedy corporations and Republicans.
Rattner weighed in again, tweeting, “Well, no. These are Feb #'s and only include small Russia effect. This is Biden’s inflation and he needs to own it.”
Even former Treasury Secretary Larry Summers tried to pump up Biden but ended up doing the president little good with his tweet Monday supporting the idea of raising taxes that are “as progressive as possible.”
Summers wrote, “I say this even though I have argued vigorously that excessively expansionary macro policy from the [Federal Reserve] and the government have contributed to inflation. I have rejected rhetoric about inflation caused by corporate gouging as preposterous.” So much for the greedy corporations narrative.
Weeks of Biden’s disingenuous statements on inflation are now costing him precious capital with voters. In NBC News’ latest poll, released Sunday, people said the country was going off on the wrong track by a margin of 75 percent wrong track to 16 percent right track. Biden himself sunk to a new low in the poll, with a 51 percent negative rating to 37 percent positive.
But we’re beginning to see the Biden effect extend beyond the president’s own unpopularity to both congressional Democrats and the federal government itself. The poll found that Democrats in Congress are down 19 points in their net negative rating, which, according to NBC, is the highest net negative rating Democrats have received “in the 30 years that the poll has been conducted.” Not a good harbinger for the upcoming elections.
On top of that, confidence in the federal government to manage the nation’s challenges has also taken a beating. It started with a lack of COVID-19 tests, followed by shortages of everything from paper towels to cars to chicken and now baby formula, an embarrassing exit from Afghanistan, the negative effects of an open border, and inflation. The list is a long one.
In a survey done by The Winston Group for the S Corporation Association, we found the brand image of the federal government at an unbelievable low, with almost 2-to-1 negatives — 33 percent favorable to 59 percent unfavorable. It is even worse among independents, at 24 percent favorable to 68 percent unfavorable.
This puts the feds at the bottom behind Pelosi, Biden, Trump and both parties in Congress. Still, in the end, it is the president tasked with running the federal government, and if it is failing in its mission, so is the manager in chief.
It is hard to see a way out of the hole this president and his party find themselves in without a significant change in policy direction. But to listen to Biden over the past week, staying the course seems to be the operative strategy.
The Biden effect is real and not what the country needs.
David Winston is the president of The Winston Group and a longtime adviser to congressional Republicans. He previously served as the director of planning for Speaker Newt Gingrich. He advises Fortune 100 companies, foundations, and nonprofit organizations on strategic planning and public policy issues, as well as serving as an election analyst for CBS News.