The Bureau of Economic Analysis (BEA) just announced that the economy grew at a 2% annual rate in the third quarter of this year — a marked drop from the 6.7% rate seen in the second quarter. While the Biden Administration will blame the poor growth on the increase in COVID-19 cases, the slow rate is due almost entirely to Biden policies.
BEA seems to agree. They say the “ economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate.”
Workers on the Sidelines, Businesses Uncertain
Admittedly, the increase in cases had some negative impact. But most of the slowdown is due to Biden’s policies that discourage growth. He discouraged mostly lower income earning Americans from working. He also created much uncertainty for business. Lack of workers and business uncertainty always slow growth.
In addition, he has filled his cabinet with so-called “politically correct” people who simply are not able to perform in the positions they are in. This slows economic growth.
For instance, the country has an energy problem. Biden’s policies are geared to discourage Americans’ use of fossil fuels. By canceling the Keystone XL pipeline, restricting drilling on federal lands and halting drilling off the coast of Alaska, he has created a shortage of energy, which in turn, has driven prices up. The high energy prices discourage economic growth.
Normally the President will seek advice from his cabinet. Yet Secretary of Energy Jennifer Granholm has no suggestions on how to eliminate the shortage except to say perhaps the US should sell off part of the strategic oil reserve or ban exports of crude oil. Neither of those will increase the supply or reduce prices significantly.
Add In a Labor Shortage
The US economy also has a labor problem. There are currently 10.4 million job openings and 7.7 million unemployed American workers. This has created a labor shortage, which slows economic growth.
Secretary of Labor Marty Walsh doesn’t seem to have any solution for this problem. He says it is the virus that is stopping Americans from going back to work. The reality is that it is Biden’s policies on vaccine mandates and his policies that pay people not to work, that are holding employment down. Without workers, the economy can’t grow.
We also have a problem with the supply chain. This is due primarily to a shortage of workers in warehouses, a shortage of truck drivers and the policies of labor unions representing dockworkers. The economy can’t grow if the supply chain isn’t working.
The truck driver shortage is probably the critical factor. In other words, there is a transportation problem moving the imported goods from the ships to the retail stores.
Yet Secretary of Transportation Pete Buttigieg has no solutions except to say that the problem will linger into next year. He says the problem is due to high demand, explaining thus: “Our supply chains can’t keep up.”
Of course, the reality is that while Biden’s policies have indeed created excess demand, prior to the current shortage, there has never been a supply chain problem in the past. The private sector was always able to handle any increases in demand.
It appears that economic growth is not a major goal of Biden’s economic policies. Instead, his goal is to cure real or perceived social injustices. The more he concentrates on income inequality, healthcare for all, free daycare for American parents and reduced debt for college students, the more economic growth will slow.
The U.S. Is Looking at a 7% Inflation Rate for 2021
The other major problem with his policies is that they will lead to higher prices. Since January, prices have increased at a 6.5% annual rate. Most likely, the inflation rate will increase significantly in October, November and December. That means the inflation rate for 2021 will be in the 7% range.
That’s the highest rate in more than four decades. Eventually, the Federal Reserve (Fed) will be forced to act. They will do that by significantly reducing the rate of growth in the money supply and dramatically raising interest rates. While the Fed continues to say they won’t raise interest rates until the end of 2022 at the earliest, they are likely to raise the rates early next year.
If the high inflation rate persists, which is also likely, the Fed may have to raise interest rates quickly and by large amounts. The last time that was done was four decades ago and it led to a severe recession.
Biden’s policies are leading to a stagnant economy with high inflation. Stagflation is something not seen since President Carter’s administration faced the same headwinds as President Biden.
Is this the late 1970s all over again?