The stagflation that doomed Presidents Ford and Carter was largely inadvertent; what we’re experiencing today is “greenflation” engineered by climate radicalism
Commentary
At his press conference on May 1 following the April–May meeting of the Federal Open Market Committee, Federal Reserve Chairman Jerome Powell called it “unlikely” that the central bank would raise the short-term interest rates under its control at its next meeting in mid-June. The Federal Funds Rate is currently between 5.25 percent and 5 percent.
At the same time, Mr. Powell
told reporters that “clearly, restrictive monetary policy needs more time to do its job” and that Fed policymakers “didn’t see progress in the first quarter” against inflation. The Fed’s target is a 2 percent inflation rate—a goal that is a long way off.
But the most troubling remark Mr. Powell made, which is unlikely to spur much interest among the chattering classes, unfortunately, was the following: “What’s causing this inflation, we’ll have a better sense of that over time.”
The improvements in the raging inflation of President Joe Biden’s administration are pretty much all the result of the “unwinding of the distortions,” according to Mr. Powell. Translation: the reopening and recovery of the economy from the assault it suffered in the massive COVID-19 lockdowns. Mr. Powell has faith that “those forces will still work” in reducing inflation, and he seemed to repeat endlessly that “we will bring inflation down to 2 percent.”
A charitable observer would describe this as thinking positively; others might call it wishful thinking. There’s no escaping the takeaway that Mr. Powell admits that he doesn’t really know what the cause of the unusual, stubborn inflation is but that maybe time will tell.
This election year is extraordinary in so many respects. Besides that it is an
unpopular 2020 rematch (barring an
emergency intervention replacing President Biden), one of the presumptive nominees, former President Donald Trump, is targeted in multiple politicized criminal trials perfectly timed to take votes from him; and the White House response to the far left’s
echoing of Nazi sentiments on the grounds of Ivy League institutions amounts to
a “fine people on both sides” approach.
In the everyday lives of ordinary Americans, however, the most extraordinary thing this election year is what Mr. Powell’s Fed is tasked to address: the persistence and worsening of inflation amid a teetering economy—a milder form (so far) of the dreaded, widely forgotten stagflation that went a long way in defeating both Republican President Gerald Ford in 1976 and the Democrat who beat him that year only to lose reelection in 1980, President Jimmy Carter. Stagflation was measured by the “misery index”—adding together the unemployment and inflation rates—which reached 22 percent under President Carter.
Asked about stagflation on May 1, Mr. Powell quipped that he sees neither the “stag” nor the “flation.” Still, economic growth came in at
only 1.6 percent in the first quarter of this year, well below the 2.4 percent that economists had expected, and inflation for March, as measured by personal consumption expenditures data, modestly exceeded expectations at
2.7 percent. In December 2023, the Federal Reserve seemed to have been planning a series of easings that had been expected to begin during the first half of 2024, with Mr. Powell
remarking at the time that “we’re seeing inflation making real progress.” Instead, an increase in the Fed Funds rate sometime this year is now not totally off the table.
There is little appreciation today for the fact that, not all that long ago, inflation was greatly played down by the Keynesian economists who dominated academe and public policy; there is no guarantee that such dangerous complacency won’t reemerge.
Michael Boskin, who chaired the Council of Economic Advisers under President George H.W. Bush, has
made note of “how far we have come in understanding inflation, its costs, and its role in the long-term performance of the economy.”
“Indeed,” he said, “it would be difficult to find any subject about which the consensus of economists has changed more in the time since I was in graduate school [in the late 1960s and early 1970s].”
Writing during the Bill Clinton era, Mr. Boskin said: “Most economists today would argue that low and stable inflation is an important pillar of maximizing long-run real economic growth and rising living standards. That contrasts remarkably with the notion that the cost of inflation is trivial or that it is often desirable to increase inflation to reduce unemployment. We now know that is likely to be unsuccessful, as we are likely to accelerate inflation without permanently affecting the level of unemployment in relatively normal times. We also know that the higher level of inflation will not be neutral in the long run but will damage capital formation and growth.”
Do Democrat policymakers today know this? Gasoline prices, which fell to
below $2 per gallon during the final year of the Trump administration, are above
$3.60 on average today after more than three years of President Biden—and
rising—and yet President Biden’s Department of the Interior (DOI) last month
issued prohibitions on new oil and gas leases on 13 million acres of federal land in Alaska, cutting off domestic supply that could lower prices and prioritizing the supposed interests of polar bears over people’s pocketbooks. The DOI also announced opposition to the construction of a proposed 210-mile road in northwest Alaska to access deposits of critical minerals such as copper, cobalt, gold, silver, and zinc.
A further volley in the war on fossil fuels was launched by the Environmental Protection Agency last month in the form of
new regulations to force coal plants to shut down via the wild demand that they reduce emissions by 90 percent.
Senate Armed Services Committee member Dan Sullivan (R-Alaska) last month described to
Fox News the paradox of the Biden administration’s imposing policies that “sanction Alaska but from a national security perspective they won’t sanction the Iranian oil and gas sector, which of course is the source of the Iranians’ funding of their proxies—Hezbollah, Hamas, the Houthis—all over the world.”
Regarding the obstruction of building the infrastructure needed for mining in Alaska, Mr. Sullivan characterized the administration’s stance as holding that “we can’t use this for our nation’s strength, for Alaskan jobs; we’ll just be more reliant on China for the critical minerals.”
The United States is now
dependent on imports for rare earth elements, such as the metals cerium, lanthanum, lutetium, praseodymium, scandium, thulium, ytterbium, and yttrium, which beyond their vast use in consumer electronics are vital for military equipment that includes guidance systems, radar, and lasers in nuclear submarines and military jets.
An Inuit Eskimo local elected representative in the city of Ambler in northwest Alaska,
Miles Cleveland,
wrote in March that the road project for the Ambler mining district “will greatly benefit” his community but that his and other Inuit voices “are getting drowned out by people outside the region and Alaska who don’t understand the struggles of” the community. Ambler can be reached only by plane, and “everything, from heating fuel to food to building materials, must be flown in” or, for some communities, “brought in by river barge, but only if conditions allow.”
In an appeal that Democrats who place a premium on the interests of Native Americans might be expected to find convincing, Mr. Cleveland wrote: “Many of our young people leave to find jobs in urban areas of the state, like Fairbanks or Anchorage. It’s very hard for them to leave their traditional lifestyles to live in a city. They often fall into drug use, and some take their own lives. We need long-term job opportunities so that our young people can stay in their home villages.
“We need the income from jobs in the region to continue our subsistence way of life. How else can we afford the snow machines, gas, guns, and bullets that we need to hunt and fish?”
It’s odd that the Biden administration is hostile to the Ambler road proposal, since critical minerals are essential to the operation of green technologies such as electric cars and wind turbines. A study by S&P Global finds that more of one critical mineral, copper, will be
needed in the coming several decades than all the copper ever mined over the course of millennia.
Ideology blinds this administration to the self-destructiveness of keeping Americans from using the treasures to be found under the ground beneath our feet, even when national security and the interests of indigenous peoples are at stake, let alone when one of the consequences is the exasperation of inflation during an election year.
The European Union imports
nearly the entirety of its fossil fuels, and, not surprisingly, the
price of a gallon of gasoline is about $7.50,
taxed to the tune of more than $1.50 per gallon. By closing off the domestic energy resources of 13 million acres of our own land, the United States is aping the failed import-dependent model of low-growth, socialistic Europe, and prices at the pump can only continue to rise and remain high in the long term as a result.
The stagflation that doomed Presidents Ford and Carter was largely inadvertent; what we are experiencing today is a “greenflation” engineered by the Democratic Party’s unrelenting climate radicalism. It isn’t only President Biden’s reckless
spending of trillions of dollars (with tens of trillions more proposed for the coming years) igniting an inflation unknown to everyone younger than 50; it’s the intentional inflation from extremist environmentalist policies.
The question is whether voters this November will recognize the greenflation hurting them and who is to blame for it, or will they be too distracted by the trials of President Trump and the rest of the smoke from the left. When even the chairman of the Federal Reserve says he has to wait because he can’t see what’s causing higher-than-expected inflation, it might mean that Washington needs an economics lesson taught by nonexperts at the ballot box rather than the blackboard.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
