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Joe Biden: Economic Ignoramus

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Are “greedy” corporations driving inflation? Could taxing billionaires solve the federal government’s fiscal problems?

According to President Joe Biden, the answer to both questions is yes.

And the correct answer is no.

So, Biden is either economically ignorant or a liar. Or maybe both.

Biden put his economic ignorance on full display with a couple of comments last week.

Greedy Corporations Are Causing Inflation!

Biden made the first comment in a speech during the launch of a new White House supply chain initiative. It had to do with price inflation.

Any corporation that has not brought their prices back down, even as inflation has come down, even as the supply chains have been rebuilt, it’s time to stop the price gouging. Give the American consumer a break.”

The general public eats this stuff. Blaming greedy corporations for rising prices plays to the president’s base.

The truth is that corporations don’t create price inflation. One simply has to reason through the claim to uncover the absurdity of the idea. If corporations can willy-nilly raise prices and enjoy “excessive” profits, why don’t they do it all the time? Did corporations suddenly get greedy in 2021? And why did the Federal Reserve spend a decade fretting about inflation being “too low” as it struggled to hit its 2% target? Was there not enough corporate greed before the coronavirus?

But government people like Biden can get away with this narrative because they have redefined inflation.

Historically, economists defined inflation as an increase in the amount of money and credit — or put another way, an expansion in the money supply. Over the years, the government, along with its apologists in the corporate media and academia, altered the definition to suit government purposes. Today, inflation just means “rising prices.”

But rising prices in and of themselves aren’t inflation. Prices can go up for all kinds of reasons. For instance, we might have higher demand or supply shortages.

Rising prices aren’t inflation, but they are a symptom of monetary inflation. When governments and central banks increase the money supply,  ALL prices go up more than they otherwise would have.

Economist Ludwig von Mises explains the problem with this change in definitions.

“People today use the term `inflation’ to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation.”

If we use the traditional definition of inflation as an “expansion of the supply of money,” the culprit becomes clear. Who expands the supply of money? It’s the Fed and the federal government. So, if you accurately define inflation, you know exactly who’s to blame. But if the government can fool people into believing that the effect of inflation is inflation, they can blame it on everybody but themselves.

Biden played it perfectly. It’s good politics, but it’s horrible economics.

The comment is even dumber than that. Biden implies that inflation “going down” means companies should lower their prices.

That’s not how this works. That’s not how any of this works.

When we say inflation is “cooling,” we just mean that based on the CPI, prices aren’t rising as fast as they were earlier this year. But prices are still rising. Now granted, the CPI in October was flat. Prices didn’t rise during that month. But they didn’t fall either. So, why should corporations cut prices? They are still paying much more to produce goods and services than they were last year.

How much more?

Since January 2022, prices have gone up 9.7% based on the CPI. And you should know that the CPI is designed to understate rising prices. They changed the formula in the 1990s. If we were using the CPI formula they used back then, CPI would be double what it is today.

To sum it up, prices have gone up almost 10% in less than two years (based on questionable government numbers). They are still going up today, just not quite as fast. And Biden is finger-pointing at corporations. Meanwhile, his administration is borrowing and spending like a drunken sailor, which, by the way, is inflationary.

And that brings us to Biden’s second ignorant statement.

Taxing Billionaires Will Fix Everything!

You won’t be surprised to learn Joe Biden wants to tax billionaires more.

A billionaire minimum tax of just 25% would raise $440 billion over the next 10 years. Imagine what we could do if we just made billionaires pay their taxes like everyone else.”

This is typical left-wing class warfare stuff. I don’t even want to get into the value of billionaires to society. Let’s just take it at face value, pretend billionaires are evil parasites, and look at the math.

That $440 billion sounds like a lot of money. And it is to normal people. But in government accounting, it’s basically pennies.

The US government spends around $500 billion every single month. That means the amount of money Uncle Sam could collect with this proposed tax over 10 years wouldn’t fund the government for one single month.

Let’s look at it another way. The US government paid $879 billion in interest expense during fiscal 2023. That means this $440 billion windfall would only pay half of the interest expense for one year.

Out of curiosity, I did a little digging. Turns out there are 740 American billionaires with a collective net worth of $5 trillion. Keep in mind, it’s not like these people have $5 trillion in cash sitting in a vault somewhere. A lot of that wealth is in stocks and real estate. A bad week in the stock market could drastically lower that number very quickly.

But let’s pretend they have that much money in cash. If the government took all of it – every single penny – it wouldn’t fund the government for a single year.

Last year, the Biden administration spent $6.46 trillion. You don’t have to have a Ph.D. in math to realize that’s bigger than $5 trillion.

Democrats especially like to use billionaires as a scapegoat. They pretend that if we just taxed these people more, the government could do whatever it wants, solve world hunger, and give you a unicorn.

It’s just not true.

The truth is the government spends too much. It borrows too much. The Fed creates inflation to do it. You pay the inflation tax every time you go to the grocery or the gas station. The government is stealing your wealth every single day.

Here’s the truth – despite what Joe Biden tells you, none of your problems are because of a billionaire.

Your biggest problem is politicians and government people. And they’re playing you.

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About The Author

Michael Maharrey is the managing editor of the SchiffGold blog, and the host of the Friday Gold Wrap Podcast and It's Your Dime interview series.
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