Biden’s Spending Gives Milton Friedman the Last Laugh
The monetarist ‘isn’t running the show anymore,’ the 46th president said in 2020. Would that he were.
By William McGurn
Nov. 15, 2021 6:30 pm ET
“Milton Friedman isn’t running the show anymore.”
So declared Joe Biden in an interview with Politico in April 2020, not long before he locked up the Democratic presidential nomination. The context was Mr. Biden’s ambitions for a stimulus that would be “a hell of a lot bigger” than the $2 trillion coronavirus relief bill Donald Trump had signed. It was a curious way to invoke an economist who died 15 years ago Tuesday, but it appears to be Biden shorthand for his preference for big government action over market modesty.
Outside this editorial page and some Friedman fans such as our friends at Reason magazine, it didn’t get much attention. But Mr. Biden’s swipe at the University of Chicago monetarist may be coming back to haunt him. After only 10 months of President Biden, Americans are today facing the worst inflation in 31 years.
No doubt most people couldn’t explain M2 or quantitative easing. But they know inflation when they see it, because it hits them in their everyday lives.
It hits them when the price of heating jumps from $574 to $746, which is what the U.S. Energy Information Administration reckons it will cost to heat the average American house this winter because of the 30% hike in natural-gas prices. It hits them in the extra $20 it takes to fill up a Chevy Malibu. It will hit them at their Thanksgiving tables, with frozen turkeys going for an average 22% more than last year, according to the Agriculture Department.
All this is hard for politicians to spin. It’s also why Americans aren’t likely to have their inflation concerns alleviated by reassurances that it’ll all go away next year—often from the same people who didn’t see it coming in the first place.
Friedman called inflation a “hidden tax,” “taxation without representation.” He meant that inflation acted as a tax in a way that was both sneaky and a double whammy: The nominal increase in a worker’s paycheck pushed him into higher tax brackets even as inflation meant that what he had left bought fewer goods and services.
Once let loose, moreover, inflation becomes difficult to contain. When Federal Reserve Chairman Paul Volcker took on double-digit inflation in 1979, he cured it. But the price was 20% interest rates and a recession—and Jimmy Carter’s loss to Ronald Reagan in the 1980 election. Not a happy thought for Mr. Biden.
Though today’s inflation is nowhere near the levels of the late 1970s, the Biden-Carter analogies grow stronger. What a comedown for a man who a few months ago was hailed as a transformational president in the mold of FDR. With each day Mr. Biden, like the hapless Mr. Carter before him, seems to persuade more Americans he simply isn’t up to the job.
Mr. Carter’s fecklessness was highlighted by his inability to persuade Iran to free the American hostages it held captive over the final 444 days of his administration. And by the infamous lines at gas stations. And by the double-digit inflation that finally led him to appoint Volcker.
For his part, Mr. Biden owns a humiliating withdrawal from Afghanistan. So dysfunctional is America’s southern border that his hand-picked czar, Vice President Kamala Harris, doesn’t want to go anywhere near it. Meanwhile Mr. Biden’s latest expression of presidential resolve—a claim that inflation is now a “top priority,” which he vows to tackle “head on”—will only make him look weaker if inflation nonetheless persists.
There are other areas where Friedman’s ghost haunts the president. Probably Friedman’s most popular saying was that “there’s no such thing as a free lunch.” But Mr. Biden is now trying to sell Americans the biggest “free lunch” in history: his Build Back Better bill, which will certainly spend more than the $1.75 trillion Democrats claim.
“The fact of the matter is, my Build Back Better Agenda costs $0—and it won’t raise taxes on anyone making under $400,000 a year,” Mr. Biden claims. Friedman might have pointed out that if inflation is the problem Mr. Biden now admits it is, it’s already taxing plenty of Americans earning less than $400,000.
Then again, perhaps Mr. Biden is reconsidering. In a Nov. 10 speech at the Port of Baltimore, he invoked the humble pencil to illustrate the complexity of supply chains that combine raw materials that are then delivered to the American consumer as a finished product. It sounded like a crib from Leonard Read’s famous essay “I, Pencil,” or from a Friedman clip on the pencil from his “Free to Choose” TV series. Needless to say, both Friedman and Read went unmentioned.
Maybe the White House and its supporters are right that inflation will go away as the pandemic recedes and the supply chain sorts itself out. Mr. Biden must hope so. Because if inflation doesn’t go away, Americans are going to wish Milton Friedman really were running the show.
https://www.wsj.com/articles/milton-...er-11637014161