Biden's Economics

Floor Speech

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Mr. SMUCKER. Mr. Speaker, I rise today to discuss something that has been on my mind--discuss an issue that we have been talking about and we have been holding hearings in both the Budget Committee and the Ways and Means Committee, and that is the state of our economy, which I would characterize as the dire state of our economy, which I believe--I will demonstrate with some charts this evening--is due to the reckless budgetary policies of this administration.

What I am talking about is today we have inflation at 8.6 percent, which is the highest level in over 40 years. We also have a GDP, or gross domestic product, the total output of our economy that is shrinking in the first quarter. It shrank 1.4 percent. We may well be on the way to a recession if the second quarter shows that it is shrinking as well.

So there is no better time than right now to renew our Nation's commitment to fiscal responsibility, and to make a difference in the lives of the people that we represent.

Let's talk a little bit about inflation. Food prices are up 10.1 percent. Real wages--that is the difference between inflation and the rise of wages--are down 3.4 percent as of today, meaning that the average family is facing an effective pay cut of $1,500 just this year.

Everyone knows gas prices are at their highest ever with average prices in my hometown of Lancaster, Pennsylvania, now exceeding $5 a gallon. Overall energy costs, home fuel oil, and others included, is up 34.6 percent.

Unfortunately, as I will point out tonight, the spending policies enacted and pushed by the Biden administration and by Democrats in Congress are really responsible for driving inflation and are certainly--even if you don't agree with that--they are certainly saddling future generations with debt. Someone will pay the price for the massive debt we have now, and unfortunately, that will be our kids and grandkids and future generations.

It has been said that Congress has a habit of only addressing problems when we reach a crisis--only addressing issues when we reach a crisis. That crisis may have already begun right now. We are in a pretty tough spot in our economy at the moment and people are feeling it every single day. We must step up to begin to address this.

Every Member of Congress, I am sure, has talked to their constituents and can share stories about how their constituents are impacted by rising prices. I can tell you myself, growing up as a child, I experienced what it was like to have it be difficult for my family to afford food.

I was one of 12 kids. My father was first a farmer and a roofer, my mom was a stay-at-home mom. I can tell you about a stressful time for my mother was going to the grocery store. The reason for that is because she knew she would not have quite enough money to buy everything that she thought she needed.

I remember walking with her up and down the aisles and she was calculating in her head how much she was putting in the cart. She was very concerned that she would get to the register and be embarrassed that she would have to put some things back. Today, people are feeling that.

I hear in my district, for instance, my constituent, Lamar, he put the impact of inflation in clear terms. He tells me that he spends more now but has less. He is doing with less. Paul says he is sadly giving up on his hopes of retirement at this time. Tim said he has to choose between gas and groceries every week. Lavern is 66 years old and had to go back to work to help out his children and his grandchildren now, though the impact of inflation on future debt will mean, as I mentioned earlier, that his grandchildren will be paying the cost of the reckless spending that we are seeing now. They will be paying for that for decades.

We have all heard from our constituents. We have heard their outcries. We have heard them talk to us about needing to rein in inflation. I think it is time that we take it as a wakeup call. Let's identify the causes of inflation and work to mitigate them.

That is one of the reasons that I wanted to get up and speak tonight because we have had debates in both of the committees that I mentioned about the causes of inflation--and that is not just a political debate--it is not just because. It is because the only way that we can begin to solve it is to understand the root cause of inflation, what led to where we are now, and then what we can do to change it.

It is going to take leadership at all levels of government to address not only inflation, but the $30 trillion now in debt, and trillions of dollars in deficits as far as we can see and as far as the Biden budget projects.

I am a businessowner, not an economist, so I can't even say that I have all the answers. What I can tell you is that I believe that capitalism, freedom, and free enterprise have made the United States the most powerful Nation in the history of the world and has provided more opportunity than ever before in the history of humankind. I think returning to those core values can help lead us--will help lead us--out of this mess.

First of all, there is a chart I will show you. Inflation does not arrive randomly. There are forces that cause inflation. Every time we have seen inflation in our history there are forces that cause it.

In this case, we have had things that are outside of our control, Democrats will argue, and the President blames inflation on COVID-19, supply chain disruptions, Russia's invasion of Ukraine, the big bad oil and gas companies, and other things. I don't know what the next thing is that he will be blaming inflation on. I agree, they have certainly played a role in causing inflation.

However, those challenges are the same challenges that every other country across the world has faced and they do not explain why inflation in the United States spiked earlier and is much worse than what we are seeing in other countries.

This chart shows the annual core CPI inflation compared to OECD, which is sort of peer countries, the Organization for Economic Cooperation in Development Countries. It shows how inflation spiked starting roughly the beginning of 2021 and far exceeded that of a comparable country. What caused that?

I have another chart that puts a little finer point on this. This shows that inflation started about the time that Biden took office and really accelerated after the passing of the American Rescue Plan, which put trillions of dollars in spending into our economy.

Now, I showed that chart today in a hearing in the Budget Committee to Mr. Stephen Moore of the Save America Coalition, and he agreed that the clear difference between what we saw in the past chart, the blue line, and the other countries, the clear difference was the stimulus that was provided, the increase in demand that was provided by inserting trillions of dollars into the U.S. economy through the American Rescue Plan Act.

Mr. Speaker, I include in the Record an article I wrote, an op-ed that was published in The Hill on how President Biden's policies have caused and will further fuel inflation. [From The Hill, Mar. 31, 2022] Biden's Spending Plan Will Further Fuel Inflation (By Rep. Lloyd Smucker)

Americans are concerned about the economy. A recent NBC poll indicated that only 33 percent of Americans approve of President Joe Biden's handling of the economy. Inflation is now at a 40-year high and has families concerned about their financial well-being as they gather to review their budgets around the kitchen table.

Democrats try to dismiss inflation as a mere nuisance for Americans who have to cut back on so-called ``luxuries.'' When my constituents point out that gas is too expensive, Democrats shrug and tell them to buy a Tesla. The Penn Wharton Budget Model concluded that inflation disproportionately impacts lower income Americans who have to pay an even higher percentage of their income on necessities like food and transportation. The latest consumer price index report shows prices for food are up 7.9 percent, gasoline prices recently reached record highs. We need to help the Americans who can't afford to put gas in their car, let alone buy an expensive new electric car.

Inflation isn't just an economic term; it has real world consequences for the constituents that I represent. In my district, I think of Connie who at 70 years old is looking for a part-time job to help make ends meet because of the higher cost of everyday necessities. I think of Tim who told me he must decide between buying gas or groceries. I think of Lynne who told me that she and her husband are planning to put off retiring because of higher prices.

These kinds of stories are commonplace as inflation strains family budgets across the nation. The Biden administration claimed inflation was ``temporary'' and now places blame on everything except his reckless spending. We know that the left's irresponsible spending has accelerated inflation past harmful levels. A study from the Federal Reserve Bank of San Francisco concludes that Biden's spending led to higher levels of inflation.

As the saying goes, an organization's budget is a statement of its values. Now that President Biden released his Fiscal Year 2023 budget, albeit seven weeks past the statutory deadline, we can see clearly that this administration puts wasteful, inflationary spending before all else. While the president preaches fiscal restraint, this budget puts forth policies reaffirming the president's tax-and-spend march towards socialism.

Biden's proposed budget would spend $5.8 trillion next fiscal year. His proposal would continue to pile on to the national debt, which eclipsed $30 trillion earlier this year. By their own estimates, his spending plan will add nearly $15 trillion in new debt over the next decade, with annual budget deficits of at least $1 trillion per year.

The Biden administration continues to live in an alternate reality when it comes to their inflation predictions. Their budget report estimated the consumer price index (CPI) would increase 4.7 percent for 2022. The most recent reading from the Bureau of Labor Statistics reports that CPI is up 7.9 percent over the last year. In last year's budget, they predicted only a 2.1 percent change in CPI for 2022, far off the mark from the high levels of inflation that we're experiencing.

Buried deep within the administration's remarks in the ``analytical perspectives'' the Biden administration believes that inflation will return to its long-term trend in 2023 despite ``considerable uncertainty'' and their efforts to continue the White House's messaging blaming Russia for increased inflation. They have spent nearly a year deflecting that their policies contribute to inflation, but at least the administration is no longer parroting that inflation is temporary.

From what we've read in Biden's first two budget proposals, Americans should remain concerned about his dangerous levels of spending, what it means for the future financial health of our nation, and what it means for the future of inflation levels. Our $30 trillion national debt significantly impacts the next generation of Americans. Continuing to run trillion- dollar deficits and adding more to our mountainous debt further endangers our future.

While President Biden and congressional Democrats have tried to move on from their months-long public feud on spending, House Republicans are united in our fundamental principles of working to renew fiscal sanity in Washington through a limited government, pro-growth tax policy, and strengthening our free enterprise system to create opportunities for Americans to live the American Dream. We will exercise robust oversight of President Biden's spending spree to hold this administration accountable. We will continue to fight against wasteful spending ballooning our debt and deficit. House Republicans will work to put America's fiscal house in order.

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Mr. SMUCKER. Mr. Speaker, March 2021, the Biden administration and congressional Democrats rammed through $1.9 trillion in deficit spending, and only a small portion of that really went to solving problems and helping people that needed help through the pandemic--that helped to defeat the pandemic. Much of this was not needed and only served to fuel inflation.

By the way, they were warned by many economic experts. We warned them. Republicans on the Budget Committee and the Ways and Means Committee warned Democrats at the time this was passed in early 2021 that we would see exactly this result. We were relying on the forecasts of many economists who were saying exactly that, who were warning the administration of that at the time. Not just Republican economists, by the way.

There is a name that many of you will know, he is a former Obama and Clinton economist, Treasury Secretary Larry Summers, warned that the American Rescue Plan would be the biggest macroeconomic mistake in 40 years, and it would cause inflationary pressures of a kind that we have not seen in a generation.

Again, Larry Summers, a very well-respected Democrat administration economist warning that we would be seeing the inflation that we are seeing now, over a year ago, when the American Rescue Plan was passed.

Just recently a study by the San Francisco Federal Reserve confirms that prediction, attributing the American Rescue Plan for at least three points of the current 8.6 percent. Mark Goldwein of the Committee for a Responsible Federal Budget, CRFB, described the American Rescue Plan as ``pouring gasoline on the fire,'' in terms of an already stimulated economy.

In my discussion with CBO director, Phillip Swagel, during a House Budget Committee hearing last month, he also agreed--head of CBO--that the American Rescue Plan Act pumped trillions of dollars into the economy that artificially fueled demand and ultimately drove today's inflation crisis.

So what happened?

We had far too much cash in the economy and far too much demand.

I will show you, Mr. Speaker, something that my Governor in Pennsylvania said. Governor Wolf tweeted that he wanted to send more money to people all across Pennsylvania after jobs were open and people were back to work because he said, ``States are swimming with cash.''

They have an unusual problem in Pennsylvania right now today. This is the week they are finishing the Pennsylvania budget, and they have more money than they know what to do with. Much of that came as a result of the American Rescue Plan, and it was excess money that wasn't needed in the economy.

So those funds would have been far better used paying down the deficit, paying down the debt, and not fueling inflation by artificially boosting demand. So it really is unfortunate because this hurts my constituents, and it hurts people all across the country that the White House did not heed the call of experts sooner and did not take steps to reduce the impact of inflation.

For a while the White House instead said that inflation would be transitory, and now just recently Secretary of the Treasury Yellen and Fed Chairman Jerome Powell backed off that argument and agreed that they were wrong, and that inflation was not transitory. We have a real problem dealing with inflation at this point.

Secretary Yellen said in a Ways and Means hearing just last week: ``I think I was wrong then about the path that inflation could take.''

One of the sad things about inflation is that it impacts different people differently. The White House has claimed that inflation and the economy's challenges that we are seeing today are high-class woes reserved for the rich. But instead, it is the people on the lower end of the economic scale who are making less money who are impacted more than any others by inflation.

The Penn Wharton Budget Model concluded that inflation disproportionately impacts lower-income Americans who have to pay an even higher percentage of their income on necessities like food and transportation, the price increases for which outpace the general inflation rate.

As I mentioned earlier, the White House tries to blame multiple sources: corporate greed, gas companies, Russia, and whatever else may be as a source of inflation. But I think that only serves to deflect blame, obscure the truth, and prevent us from coming to an agreement where we can then begin to solve this.

I think the President became more interested in inflation after seeing his plummeting approval rate. He is now talking about inflation being a top priority of the administration. In fact, just recently he wrote an op-ed in The Wall Street Journal titled: ``My Plan for Fighting Inflation.''

I will talk just briefly about that. He begins the op-ed by arguing that our economy is actually in great shape, which strikes me as being about as out of touch as you can get. He apparently isn't talking to the constituents whom I talk to on a regular basis.

He lays out three points for combating inflation.

One, well, it is the Fed's job; two, his energy policies and build back better agenda will fix it; and three, a supposed newfound commitment to fiscal discipline.

In the op-ed he said that he welcomes debate on his plan. And maybe tonight that is what we are doing. We are debating what really are the ways that we can combat inflation and whether his plan really will work.

So let's talk about the Fed because the President's first point was arguing that it is the Fed's responsibility to control inflation. And the President, again, has spent 1\1/2\ years pushing policies that fuel inflation and then points to the Fed to fix the problem.

Now, I do agree that the Fed has a role in controlling inflation, and essentially the tool they have will be to raise interest rates to try to slow down the economy. But we all know that raising rates will be required, which they are doing now. Tomorrow they are talking about a 0.75 percent increase in the Federal rate, which is a significant increase, and they are talking about doing that multiple times. So it has significant consequences on our economy both in the short and long term.

What do I mean by that?

It makes it more expensive for businesses to borrow money. It makes it more expensive for individuals to borrow money. We are seeing home mortgage rates go up significantly already that will continue to do that, and hundreds of thousands fewer people today are able to afford to buy a home when they could have done so when they were lower. So there will be a decrease for demand of goods and services which, again, is an attempt to tamp down the economy to decrease demand and decrease spending.

The other entity that is affected by rising interest rates is the Federal Government. We are $30 trillion in debt. This chart shows what will happen as interest rates are being raised. By just raising one- half of a percent--you see the first line--will increase interest costs over the next 10 years by $1.3 trillion. Going up 2 percent will increase interest costs by $5.3 trillion over the next 10 years.

Now, let's put that in perspective. That would be, under the President's plan, 1.5 times our current Medicare spending, 1.4 times our current defense spending, and 11 times our current veterans' healthcare spending. So every single dollar that we have to pay in additional interest costs will be taking dollars from programs that help people across the country and will be taking dollars out of our economy.

Increasing national debt is also a threat to our national security. Mr. Speaker, I also wrote an op-ed in May that was published in The Washington Times.

I include in the Record the article. [From the Washington Times, May 17, 2022] When the Balloon Pops: Inflating Our Debt and Undermining Our Security (By Rep. Lloyd Smucker) OPINION:

Twelve years ago, Joint Chiefs of Staff Chair Adm. Michael Mullen famously warned, ``the most significant threat to our national security is our debt.'' At the time, the nation's federal debt was roughly $13.5 trillion. Congress and our government have completely ignored Mr. Mullen's warning; our national debt has now surpassed $30 trillion and is growing exponentially.

China now owns $1.1 trillion of that debt, the second- highest total among foreign sovereign governments, a clear threat to our national security. If current trends continue, that number will increase to $1.7 trillion over the next decade.

Mr. Mullen recognized the tangible risks rising deficits have on our nation. Every dollar spent servicing our debt, meaning dollars spent paying the interest on the debt already accrued, are dollars not spent on funding national priorities. Currently, the Congressional Budget Office estimates that we will pay an average of $543 billion per year on just the interest for our nation's $30 trillion-plus in national debt.

President Biden's Fiscal Year 2023 Budget only worsens the problem. Under the president's proposed spending plan, interest payments would jump to an average of $756 billion per year, meaning $2 trillion more in total interest payments over the next 10 years than currently projected.

Our country would be paying over $1 trillion in interest payments to service the debt by 2031. To put that in perspective, by 2031, we would pay 1.5 times our current Medicare outlays and 1.4 times our current defense budget on interest payments. As Undersecretary of Defense Comptroller Michael McCord agreed during our discussion at the House Budget Committee, the increasing burden of mandatory interest payments threatens to crowd out discretionary spending priorities, such as our defense budget.

Mr. Mullen warned us that our debt would soon reach a point where we spent more paying off interest than funding our military, risking our national security. Under the president's budget, that warning will be proved true in 2029. Given that China owns an increasing amount of our debt, those interest payments will directly fund the interests of an economic, and perhaps military, adversary.

Unfortunately, rampant, irresponsible federal spending has compounding consequences on our economy.

Mr. Biden and House Democrats are wreaking havoc on our economy and fueling inflation. Spurred by the $1.9 trillion American Rescue Plan Act, the inflationary impacts of which were forecasted and have been confirmed, our government ran a $2.8 trillion deficit in 2021. The results of this massive spending influx by the federal government have been immediate and drastic: The Bureau of Labor Statistics reports that the consumer price index for all items rose 8.3 percent over the past year, near the highest level in over 40 years.

Inflation not only harms our economy in the immediate future but also has long-term impacts on the cost of servicing our debt. In March, in an attempt to tamp down Mr. Biden's inflation, the Federal Reserve Board raised benchmark interest rates by 0.25 percentage points. On May 4, the Fed raised interest rates an additional 0.50 percentage points, the largest single increase since 2000. These rate hikes will have a ripple effect across our economy, including on servicing our national debt. As inflation persists this year, the Fed is expected to continue to raise rates at least 5 more times this year, with rates expected to surpass 1.9 percent.

The Committee for a Responsible Federal Budget, a nonpartisan nonprofit research organization, reports, ``If interest rates are 50 basis points (0.50 percentage points) higher than projected, average annual interest costs would increase by $94 billion per year.'' Even higher interest rate hikes will have even more devastating impacts. If interest rates were to exceed CBO's projections by 2 percentage points each year, similar to the Fed's expected actions for this year, our nation could spend an additional $3.7 trillion servicing our debt over the next decade.

This does not even factor in expected spending increases under Mr. Biden's budget--this is just the impact of what has already been spent. My Republican colleagues on the House Budget Committee have prepared an analysis titled ``The Consequences of Higher Interest Rates to the Federal Budget,'' which provides an even grimmer outlook on the long- term impacts of rate hikes on our nation's fiscal strength.

The Biden administration's spending increases the debt from the outset, and the Fed's response to control inflation by raising rates balloons the cost of our debt even more. Our national security will falter. America will be forced to fund China's rise. Generations yet to be born will be paying the price for Mr. Biden's inflation. It is long past time for Congress to step up and rein in this out-of-control spending and inflation.

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Mr. SMUCKER. The article lays out how increased inflation ultimately undermines our national security.

China, perhaps our greatest adversary of the next decade, now owns $1.1 trillion of the national debt. That is the second highest total among foreign sovereign governments, and increased dependence on China is a clear threat to our national security.

If the current trends continue, China's portion of our national debt will increase to $1.7 trillion over the next decade. Interest payments as they rise will mean more income for China and will directly fuel China's growth making them a stronger economic and military adversary.

Twelve years ago, Joint Chiefs of Staff Chairman Admiral Michael Mullen famously warned: ``The most significant threat to our national security is our debt.'' That was 12 years ago. The most significant threat to our national security is our national debt.

At that time, by the way, the Nation's Federal debt was roughly $13.5 trillion. Now it is at $30 trillion and growing.

What could be even worse is if our lenders lose faith in the ability of the United States to pay back and make good on those loans. If they essentially lose faith in the credit of the United States, that would be what we call a sovereign debt crisis which would have a major economic impact in the United States affecting every single American.

By the way, that is not merely a hypothetical. We have seen major nations face sovereign debt crises. In 2009 Greece's budget deficits totaled 12.7 percent of its GDP. By 2012, Greece's debt-to-GDP ratio was 160 percent. Under CRFB's analysis our debt held by the public will reach 126 percent of GDP by 2032 with the anticipated increased interest rates. If we don't change this trajectory, this will put us well on the way to a fiscal calamity like Greece has experienced not long ago, just a few years ago.

So it is long past time for the U.S. to get our fiscal house in order and abandon the reckless budgetary policies that sank the Greek economy at that time.

Let's talk just briefly about energy, Mr. Speaker, another big factor in the rising prices that we are seeing. This chart sort of blows me away. Average prices of gas in my hometown right now exceed $5 a gallon. Think about that, Mr. Speaker. Just a year and a half ago, 2 years ago, no one would have imagined that we would be spending $5 per gallon. You see the same kind of increases in home fuel, Mr. Speaker, heating costs, and so on. And the President blames oil and gas markets for that high inflation rate, and he focuses on the role of Russia in driving those.

But do you know what is amazing, Mr. Speaker?

Under President Trump when President Biden took office, our Nation was energy independent and becoming a net exporter of oil in 2019. Some of the very first actions that President Biden took were to halt drilling on Federal lands and to stop the Keystone pipeline. Even as prices went up, the administration doubled down on limiting the supply of our drilling. No new permits were approved. So it is a classic economic formula. They dramatically increased demand and reduced supply which led to the prices that we are seeing now.

The President just put out his new budget. He says that now--really the first time I think since he has been in office--it is important to reduce deficits. I welcome that. I think it is important that we reduce deficits. We have to reduce the debt long term. He claims credit for reducing the Federal deficit by $1.7 trillion this year due to the expiration of spending in the American Rescue Plan which, by the way, is all deficit spending. He says that this reduction demonstrates a newfound commitment to fiscal discipline.

Now, let's just look at that for a little bit.

If I eat 10,000 calories today--which is way more than I need--and tomorrow I eat 5,000, well, that won't make me a model. It doesn't mean that I am on any kind of a diet.

Look at this plan. This is the President's budget straight from his budget documents. I get it. There was an anomaly during COVID. It was a challenge for all of us, and the deficit went way up during COVID. But look at the deficit before COVID which is the second bar on the left side.

And then coming out of COVID what happens?

Do you see--if you take out the two COVID years which was an exception, an anomaly, do you see deficits declining at all?

No. In fact, they are going up every single year.

That is not fiscal responsibility. In fact, I call it swamp math, to say that we are reducing deficits when this is exactly what it looks like in their budget plan. It is swamp math.

Mr. Speaker, if you set one foot outside the beltway, I can tell you that every single American who looks at this does not believe that we are reducing deficits in any way.

I don't mean that as a knock on the administration. Well, I guess I do mean it as a knock on the administration.

But what I really mean to say is that we have to get serious about implementing policies that will drive growth and that will result in lower deficits over time, or we will be going down that path of fiscal calamity.

Besides this, the other thing that the President is calling for, still calling for, is what he calls the Build Back Better plan. This is outlined in his budget.

Now, I call it build back bankrupt because it continues to put us on a path of a potential sovereign debt crisis. It certainly continues to build debt for our kids, our grandkids, and future generations.

The build back bankrupt plan imposes new taxes, 36 new taxes, on Americans and dramatically increases spending beyond what you see here. This is what they want to do, while they are claiming to do this, which they are saying is reducing deficits. It makes no sense whatsoever.

One of the other things I want to mention--I am running out of time here.

It has just been recently that we have had this economy working on all cylinders, and we could be doing that again. This economy could be in a far different position if we implemented policies similar to what were done under the Tax Cuts and Jobs Act under the previous administration.

Just before COVID hit, we were seeing the impact. Almost every measure you could possibly take showed that the economy was working for the American people. By the way, middle-income American, the average household income increased by $6,000 per year. That is a real impact. People were feeling it, compared to a $3,500 drop in real wages during this administration.

The TCJA boosted workers' paychecks. Income and wealth inequality fell. Real wages for the bottom 10 percent, by the way, grew nearly twice as fast as the top 10 percent. Real wealth of the bottom 50 percent of households rose three times faster than that of the top 1 percent.

Despite the challenges that we face now, I think hope is not lost. I am optimistic that if we implement the right policies, America can once again work for the American people. We need to be committed to that. We need to have a discussion about what policies will work.

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