Everything happening in our fractured nation today seems so worrisomely reminiscent of America’s last lost decade — the 1970s.
For those who don’t remember, the late 1970s under part-time President Gerald Ford and then, much worse, under President Jimmy Carter, were one economic and national security setback after another.
The witches’ brew of 7 percent to 10 percent inflation by 1979 and ever-increasing tax rates — which rose as high as 70 percent — drove the economy into a ditch. Real family incomes cratered under Mr. Carter because inflation rose so much faster than take-home pay. Interest rates soared and homes became unaffordable. Gasoline prices tripled. Mr. Carter blamed Big Oil and “invested” in pipe-dream green energy alternatives that went bankrupt.
Every time inflation rose, the economic whiz kids in Washington assured us the high prices were just temporary. (They didn’t use the term “transitory.”) When prices kept rising, Mr. Carter blamed corporate greed and installed price controls and windfall-profits taxes — which only made problems worse. Mr. Carter had the worst record of inflation in modern times. President Biden is right behind him.
We saw student protesters occupying the offices of college presidents. Race riots turned our inner cities into powder kegs.
Because America was so weak at home, our enemies abroad capitalized as Soviet tanks rolled into Afghanistan and troops into Nicaragua, and Iran held Americans hostage.
Federal spending and debt soared, and the private sector started shrinking.
His response to the bad news was to point the finger at Americans and lecture them to turn down the thermostat, put on a sweater, or learn to live with less. (Even Mr. Carter didn’t threaten to abolish air conditioning and gas heat.)
Interest rates on mortgages skyrocketed to 17 percent, and buying a home became financially out of reach for most Americans.
The new term that slid into the American lexicon was “stagflation.” The term refers to the combination of high prices and sluggish economic growth.
Does any of this sound familiar?
Biden’s Prescription
Mr. Biden’s prescription for the US economy isn’t to reverse course. It is Carterism on steroids. More price controls, higher taxes on the rich and businesses, $2 trillion more in spending on programs like student loan “forgiveness,” green energy subsidies, and mortgage relief programs.
The tax rate on investment would soar well above 50 percent. As former Trump economist Larry Kudlow has put it: “Biden thinks he can tax America to prosperity.”
On energy policy, he’s doubling down on his commitment to “net zero” fossil fuel production and will command people to buy $70,000 electric vehicles made in China.
“Unappreciative” Americans
When most Americans say they are financially worse off, he doesn’t feel their pain. He shames them for not appreciating the wonderful things he’s done and the virtues of “Bidenomics.”
That message is a little tone-deaf, given that Americans are worried about ’70s-style stagflation making a comeback. Inflation is trending back up, while growth in gross domestic product just slowed to a 1.6 percent trickle.
Mr. Biden’s response is that Americans are unappreciative, and we are all selfish for not wanting to live with less or give up our gas stoves and SUVs to save the planet.
In his famous “malaise speech” in the summer of 1979, Mr. Carter spoke of a national “crisis of confidence,” and he lectured Americans about too much “self-indulgence” and learning to consume less and conserve more. He even talked about “threats to democracy.” Instead of inspiring the nation, he put the country in a funk.
Like Jimmy Carter, President Biden offers four more years of austerity, sacrifice, and bigger, more intrusive government. That platform won the incumbent Jimmy Carter 41 percent of the vote in 1980.
Four Radical Reforms
Ideas no one in Washington’s swamp will want to adopt
It was exactly 50 years ago that the liberal post-Watergate Congress, dominated by Democratic big spenders, passed a new set of budget rules called the Budget Reform and Impoundment Control Act.
This law has been a complete and unmitigated disaster. In the 50 years since its passage, the budget has been balanced four times and unbalanced 46 times. This was by design. Despite being called a “budget reform” law, it was intended to grease the skids for new spending.
To that extent, the law worked.
This year, Congress hit a new low. Even with record-high deficits of nearly $2 trillion a year, Democrats and Republicans on Capitol Hill held hands in bipartisan agreement to spend $95 billion on a foreign aid bill for Ukraine and Israel without a penny being paid for with offsetting spending cuts — even though the flabby budget now exceeds $7 trillion.
Members of Congress should wear T-shirts that read “Stop us before we spend again!”
So, I’d like to suggest four commonsense ideas about when citizens should impose a fiscal restraining order on Congress and the White House.
Bring back presidential impoundment authority.
The president — like the CEO of any company — should have the power to suspend spending on programs if it is deemed unnecessary. Presidents from Thomas Jefferson — who used the power to stop some shipbuilding for the military — to Abraham Lincoln to Franklin Roosevelt — who used the authority to end New Deal programs as we entered World War II — to Richard Nixon exercised this control. In a $7 trillion budget, there are thousands of instances where money authorized by Congress is no longer needed.
So let the president cancel it.
Establish a supermajority vote requirement to raise taxes.
President Biden wants to balance the budget with $4 trillion of economically disastrous tax increases and no spending cuts. But the spending is out of control, not the tax revenue. Any tax increase enacted by Congress should require a two-thirds vote in both houses to be approved. This is what many well-run state governments require, and there should be similar safeguards in Washington.
Eliminate subsidies to millionaires.
This is an idea that the late great economist Walter Williams and I proposed more than a decade ago. The idea is that no individual with an annual income of more than $1 million should be eligible for federal aid payments. No business entity with more than $1 billion in annual revenue should be eligible for federal corporate welfare subsidies. This would have rendered the so-called Inflation Reduction Act, with its tens of billions of dollars in handouts to green energy and semiconductor companies such as Intel, null and void.
Issue ‘budget stamps.’
This simple idea would effectively require a balanced budget each year. The concept was originally proposed by then-Reagan administration economist John Rutledge. Under this plan, the government would issue a special blue currency called “budget stamps” to all recipients of federal spending — much in the way that food stamps are issued to the poor. The value of budget stamps, however, would fluctuate with the amount of excess spending authorized by Congress — much as the dollar fluctuates in value every day relative to the price of gold or other currencies.
Recipients of federal assistance, federal employees, and those who run federal agencies would receive $6 trillion in budget stamps this year. (Interest on the debt is excluded.)
But that money in total would be worth only as much money expected to be collected in taxes that year. So, if the tax collections were estimated at 90 percent of the spending, then every budget stamp would be worth 90 cents, not a dollar. The bigger the expected deficit, the less that a budget stamp would be worth.
This would create competition for dollars between agencies and programs. Each dollar allocated to foreign aid would be one less dollar available for the Pentagon, Social Security recipients, defense contractors, green energy programs, bilingual education, and sugar subsidies.
Deficits would be impossible since the government under the new rule would be incapable of spending more than it took in. Because Congress’ salaries and staff would be paid in budget stamps, Congress would have a financial incentive to cut unnecessary and wasteful spending.
Conclusion
Almost no one in the Washington swamp will like these ideas, which is all the more reason to adopt them.
Stephen Moore is a visiting senior fellow at The Heritage Foundation and a co-founder of the Committee to Unleash Prosperity. His latest book is Govzilla: How the Relentless Growth of Government Is Devouring Our Economy. A version of this piece was first published in the Washington Times.
