You know we’ve reached a tipping point when both Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell finally stop emphasizing climate change and zero in on their primary job description — promoting economic growth and fighting inflation.
But the Biden administration continues to demonstrate little appetite for the realistic policy choices necessary to clamp down on rising prices beyond phony platitudes, new spending schemes and now ramped up climate change hysteria. Of course, we are in a summer heat wave so Democrats may see this as a perfect time to elevate climate emergency rhetoric. Never mind the cost to consumers.
Brian Deese, National Economic Council director, last week promoted yet more spending proposals to address inflation challenges. He highlighted semiconductor plant legislation to “ease supply chain disruptions.” But the details remain murky and history has shown many of these Federal funds find their way into state, local patronage machines or worse. Another example of an inflation fueled mechanism.
Inflation will only be tackled by substantive, meaningful fiscal and monetary policy changes.
A multi-trillion-dollar gusher of federal funding during COVID plus years of easy monetary policy combined with supply chain problems and a post-pandemic American consumer anxious to spend, led to this current inflation shock.
The Federal Reserve only began raising interest rates in March. So, the current short term (Fed Funds) rate only sits at 1.75%. There is more upside ahead and the Federal Reserve has to undo a policy of purchasing trillions of treasuries and mortgage backed securities which it has used for years to maintain low rates.
In order to impact inflation, short term interest rates need to be adjusted above the level of inflation to effectively cool down prices. Inflation will only be tackled by substantive fiscal and monetary policy changes or else this economic pain will surely linger .
Equity and Bond market declines accelerated in the spring as inflation reports revealed it was not transitory.
The S&P index turned in the worst first half of year return since 1970. That index remains down almost 20% in addition to the tech heavy Nasdaq down 25%.
This market downturn coupled with historically high inflation has caused real damage to American household savings. Last week’s reports were alarming because they revealed broader price pressures gaining momentum. Americans seem to understand this problem as most recent polls demonstrate.
That is why it is bewildering that the Biden administration is mulling the pursuit of a left-wing and ludicrous “climate emergency” executive action in the face of these debilitating energy costs. A policy that is not a priority for most American households who simply want more supply of cheap energy — not less.
Gasoline prices may be diminishing modestly, but we still have over 250 million fossil-fueled powered cars and trucks on the road in America. There are currently only 3 million electric vehicles on our streets which are charged by electricity grids powered primarily by natural gas and coal.
Climate change may be real but it is not an emergency requiring American households to shoulder expensive, polarizing schemes that have caused a crisis — wrecking the economy of European nations.
We — and that includes politicians — need to hear more rational sides of this story if we are going to be better informed to prevent causing more pain. The reality remains that China and India will indeed continue with cheaper, scalable fossil fuels to power their countries for the foreseeable future which will offset all the West’s climate sacrifice.
Does this mean those countries have more consideration for their population’s needs than the West?
Americans rarely lose faith in the power of our nation’s innovative, opportunistic spirit. That is why our economic strength underlies a U.S. stock market that has a track record of recovery and upward momentum.
It’s time our leaders focused on the economy and getting a more commonsense energy policy. If they don’t it’s time that we get some new management in Washington that prioritize economic growth and controlling inflation over climate change.
Clara Del Villar is Director of Senior Initiatives at FreedomWorks Foundation. She is a former financial executive with senior roles over 25 years in Investment Management, Private Asset Management, and Capital Markets. Currently serving as Board Director at General American Investors Co. (NYSE:GAM)
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