Joe Biden’s solutions only create more problems in the United States Business

Biden’s U.S. bailout — which the president touted throughout his speech as part of the solution to the current economic woes — pumped an additional $1.9 trillion into the real economy, adding to inflationary pressures that were already accumulating due to the transformation of economies around the world. turned off then back on in response to Covid.

And it was just a bill. Overall, federal spending in America grew nearly 50% between 2019 and 2021, reaching a staggering $6.8 trillion last year.

Add to that a fast-moving money-printing machine – which has seen the US do more quantitative easing in the past two years than it did in the eight years between the financial crash and the pandemic – and, unsurprisingly, you have a price spiral.

Of course, government action isn’t the only factor in America’s cost of living crisis. Inflation is felt strongly here in the UK as well. Countries around the world are grappling with shortages, supply chain issues and the slow return of global connectivity that has played such a big role over the past decades in driving prices down.

That’s why Biden’s other solution – adopting more of a “buy American” policy – doesn’t inspire much confidence either. No doubt the idea of ​​creating more jobs and investing more in American production will appeal to many voters, but it is not a solution to the inflation crisis: products made in the United States will inevitably have higher prices, because the cost of labor is comparatively much higher.

There is also a disconnect between Biden’s desire to bring the free world together and his refusal to promote free trade, which underpinned US alliances during the Cold War.

Perhaps the biggest difficulty for Biden is what is realistically within his control and beyond his control. The Federal Reserve sets interest rates, and with little appetite for a major hike, it’s hard to see how headline inflation will plateau anytime soon.

And what Biden has control over, he is loath to touch. The US Energy Information Administration predicted that half of households would see their energy bills rise by 30% this winter, and that was ahead of any discussion of economic sanctions against one of the world’s major oil suppliers. .

America has the resources to secure its own supplies, but that would require a serious return to fracking: a topic that would further divide Biden’s Democratic party between the more moderate wing and the progressive, green alliance. .

It therefore remains doubtful that Biden’s recent leadership in foreign affairs is likely to offset the serious economic problems that continue to develop at home. None of this takes away from his handling of the Ukraine crisis so far – but it also doesn’t guarantee that everything else is forgotten.

Kate Andrews is the economics editor at The Spectator

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This notice was published: 2022-03-03 19:13:34

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