The Daily Signal - Stephen Moore on Inflation and America's Ailing Economy

Episode Date: June 15, 2022

Everyday Americans are feeling the wallop on their wallets from unchecked inflation. From gas prices to food prices, the country is experiencing unprecedented levels of economic woes. But who is to blame for this disaster? “I think that there are two co-conspirators in this economic crime. And one is the Biden administration, for spending so much money,” says economist Stephen Moore, a visiting fellow at The Heritage Foundation. “And then the second would be the Fed for being so late to the game in recognizing that this inflation was real and not transitory, and taking steps to combat it.” Although the government could take steps to address inflation and dodge a recession, Moore says, it’s unlikely that the Biden administration will act properly. “I think, actually, that if you had the right set of policies put in place, we could avert a recession. We could get back on a good path,” Moore explains. “I think what worries me, and also worries the financial markets, is there’s not a hint out of this White House that they’re going to change strategies. None.” Moore joins “The Daily Signal Podcast” from Heritage’s recent Resource Bank conference to discuss America’s economy and how we can get back on track. We also cover these stories: The man accused of planning to murder Supreme Court Justice Brett Kavanaugh reportedly texted his sister, who convinced him to call 911 from Kavanaugh’s neighborhood and turn himself in to police. Three Pennsylvania state lawmakers, all Republicans, begin impeachment proceedings against Philadelphia District Attorney Larry Krasner, who they say is soft on crime. A new poll by The Washington Post and the University of Maryland finds that a vast majority of Americans are against transgender athletes, or biological males, competing in women’s sports. Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Daily Signal podcast for Wednesday, June 15th. I'm Kate Trinko. And I'm Doug Blair. Everyday Americans are feeling the wallop on their wallets from unchecked inflation. From gas prices to food prices, the country is experiencing unprecedented levels of economic woe. Heritage Foundation visiting fellow Stephen Moore blames the Biden administration and the Federal Reserve for our current troubles. He joins Richard Reinch today on the show to discuss America's economic issues and how we can get back on track. But before we get to Richard's conversation with Stephen Moore, let's hit our top news stories of the day.

The man accused of planning to murder Supreme Court Justice Brett Kavanaugh texted his sister, who reportedly convinced him to call 911 and turn himself into the police. The suspect was arrested last Wednesday near Kavanaugh's home in Maryland with a backpack containing a gun, a knife, and burglary supplies, among other things. Fox News reported that Montgomery County Police Chief Marcus Jones said, The suspect arrived by taxi and observed the U.S. Marshals. They turned around to contemplate his next move. This is when he texted his sister and told her of his intentions. She convinced him to call 911, which he did.

It is unclear what exactly the text between the suspect and his sister said. Three Pennsylvania Republican lawmakers are fed up with leftist Philadelphia District Attorney Larry Krasner. so they've announced that they're going to begin the impeachment process against him. Krasner, first elected in 2017, is one of the liberal prosecutors around the country who receive significant financial support in his election from an organization also funded by George Soros, the Hungarian billionaire who has been open about his desire to change the criminal justice system. The three Pennsylvania House members are representatives Josh Kale, Torin Ecker, and Tim O'Neill,

A press release on Kale's site says that since 2022 started, there have been nearly 1,000 people injured or killed by gun violence in Philadelphia, with over 220 people murdered in the city. In a statement, O'Neill said, across the country, people are standing up to unchecked and uncontrolled violence and lawlessness, allowed because of radical politicians in district attorney's offices, like Larry Krasner. Just last week, city businesses said they are thinking of relocation. because of spikes in crime. Philadelphia is Pennsylvania's major economic engine, a tourist attraction, and the birthplace of our freedoms. If unchecked crime is keeping businesses and tourists from visiting and locating in Philadelphia,

it impacts Pennsylvania as a whole. Krasner, who comfortably won re-election last fall, was dismissive of the impeachment effort. In a statement reported on by NBC's Philadelphia affiliate, Krasner said, Pennsylvania House Republicans want to distract you, from their decades of failed governance that have led to greater economic inequality and the current crisis of gun violence as they have encouraged the flooding of our communities

with deadly firearms. A new poll by the Washington Post and University of Maryland found that a vast majority of Americans are against transgender athletes or biological men competing in women's sports. The poll found that 55% of Americans are opposed to allowing men to compete in high school women's sports, Well, 58% are against men competing in women's college and professional sports. Just 30% of Americans say men should be able to compete at any sporting level in women's sports. The poll also indicated that 70% of Americans believe transgender athletes have a competitive advantage over women. Now stay tuned for Richard's conversation with Stephen Moore as they discuss America's economic crisis.

Are you looking for quick conservative policy solutions to current issues? Sign up for Heritage's weekly newsletter, The Agenda. In the agenda, you will learn what issues Heritage Scholars on Capitol Hill are working on, what position conservatives are taking, and links to our in-depth research. The agenda also provides information on important events happening here at Heritage that you can watch online, as well as media interviews from our experts. Sign up for the agenda on heritage.org today. Hello, I'm Senior Fellow at the Heritage Foundation, Richard Grinch.

Today I'm talking with Stephen Moore at the Heritage Resource Bank Conference in Nashville, Tennessee. Stephen Moore, welcome to the Daily Signal podcast. Hi, Richard. Great to be with you in the great city of Nashville, Tennessee. I should mention a Stephen Moore visiting fellow at the Heritage Foundation, also the author of Govzilla, Trumponomics, and a former journalist with the Wall Street Journal. Stephen Moore, as we think about the current economic situation, perhaps we're already in a recession. we're also told perhaps we'll be thrown into a recession by Federal Reserve raising interest rates to deal with the inflation caused by rather insane monetary fiscal policy. Is the best solution to the point the problems we're in now, the Federal Reserve raising interest rates or there are other better policy solutions that we should arrive at to deal with this crisis?

Well, that's a wide-ranging question. let me start by saying that I do think it's pretty clear, and we've been saying this at Heritage for the last year, and I've certainly been saying it in all my interviews that the match that really lit this forest fire of higher inflation was the out-of-control spending. People forget we spent a couple trillion dollars on COVID under Trump, and then Biden came in and spent $3 trillion more. So you just flooded the zone with all of these dollars, almost like dumping dollar bills out of helicopters. Well, it's as obvious as the sun rising in the east and setting in the West that that's going to cause inflation. And so it was pretty self-evident that that was going to happen except nobody in the White House thought it would.

And so we have an inflation crisis. It is really damaging the finances, especially of middle and the financial. lower-income families. When you have five to six-dollar gallon gasoline, when you've got six to seven dollars for a gallon of milk, when you see the cost of transportation rising so quickly. And incidentally, I should say, because I do travel all over the country. And people come up to me and, you know, they'll recognize me from Fox or CNN, and they'll say, you're that economist. And they'll say, why do you keep saying inflation is only eight to eight and a half percent? You know, if you say, well, I'm paying 70 percent more for gas. I'm paying 30 percent more for food. I'm paying 20

percent more for rent, you know, my inflation rate is a lot more than 8 percent. So people are feeling squeezed by this. And I think that there are two co-conspirators in this kind of economic crime. And one is the Biden administration for spending so much money. And then the second would be the Fed for being so late to the game and recognizing that this inflation was real and not transitory and taking steps to combat it. I was going to ask you, I think maybe you've, answer this question, why is inflation so dug in? And I think your response is because we increase the money supply. We were told it was going to be transitory, and yet it continues. Yeah. And I don't see any real end in sight. I do think that inflation may come down a little bit

from 8.5% to maybe 6%, you know, which will be an improvement, but that's still a lousy number. I mean, for the last 30 years, we've had inflation in the 2 to 3 to 4% range, which is kind of where you want it. And a state. dollar is Steve Forbes and Larry Kudlow and Art Laffer has taught us. You want, why do you have a currency? You want a currency because it retains its value and it's stable in value and it can be used as a means of exchange. And so when the dollar weakens, you know, inflation is essentially like a form of devaluation. It devalues your currency. Well, somebody's shown me anywhere in the world where devaluation has led to, you know, happy results. All I see is devastation from

devaluation. So now, it's not just the Fed that needs to act here. Certainly they do, and they've been behind the curve. They have to raise rates a lot more than they have. But we also, remember, the reason they call us supply siders is because we believe in the supply side of the economy, that is the production of goods and services. So that's why we want to cut taxes, reduce regulations, get government off the back of businesses, so they can produce more. more output. And when you get, as Art Laffer would say, if the economy produces more apples, then the price of apples goes down. It doesn't go up. So that's the part of the equation. I don't think the Biden administration people get. In fact, they're talking about higher taxes.

Well, how in the world are you going to get businesses to produce more goods and services if you're raising taxes on them? So that's going to actually make the inflation problem worse. They're also talking about price controls on energy companies, on pharmaceutical companies, on the meat producers, on the poultry producers. Well, we know from the 1970s that when you impose price controls, all that does is cause shortages of goods and services. That's why, you know, in the old Soviet Union, you could go to the, you know, grocery store, but you'd not find anything on the shelves.

And we already have those shortages happening here in the United States. So price controls would make that worse. So not heating the, you know, fundamental signal that prices send, and also the prices themselves distorted by what the government's done, intervening in the, the market, not to go back to the Fed. It does seem also, we've got a fundamental problem in the Federal Reserve nearly two decades of emergency policy from the Fed in terms of trying to hold rates down and allow capital to move freely to, you know, purportedly uphold the economy. How do we get the Fed disciplined again and acting in a regular manner and not like an own,

its own independent part of government, which it is, but it's now doing things that are really wrecking the economy at large. Well, you know, this is also a wide-ranging question. We could talk for about a half an hour on that. But I'll say this, that, you know, as you know, I was nominated by Donald Trump to be on the Federal Reserve Board, and I didn't make it on the board, but if I had, I'd be raising holy hell over there right now. Maybe that's why they didn't want me on the board, because they all drink the same Kool-Aid over there. And so they really do think things like government spending stimulates the economy. We know at Heritage, and I think most of the people listening, to this show know that, you know, government spending is bad for the economy, not good for the

economy. It makes it, you know, as Milton Friedman saying, the government can only spend a dollar by taking a dollar away from you. Look, Jerome Powell just got reappointed to the Fed. And I think the vote was like 80 to 20 in the Senate. What? You know, we're rewarding him for a pretty dismal record. You know, that's like, you know, rehiring a coach that loses 15 out of 16 football games, you know? And so I think that, you know, basically Congress deserves some of the blame here too and for not holding the Fed accountable. I'm with Steve Forbes more and more often that I think we should move towards a rules-based monetary system, not have what's happening now with the Fed just makes up the rules as they go along.

Well, Steve Forbes says, why don't we have a gold standard. Now, I don't know if the gold standard is the right way. I would certainly be better than what we have right now, but some, I'd like a commodity standard. Let's look at a market basket of what's happening with wheat, what's having a corn, what's happening with coal, what's happening, and seeing what's happening to those prices, if those prices are rising, then that means you've got to pull back on the money. And this isn't really that complicated. And the Fed makes it too complicated because they think they're kind of the wizard behind the curtain and Wizard of Oz. What about something like a monitor a standard, a la Milton Friedman, even John Taylor, the Taylor rule in terms of adding control and the discretion of Federal Reserve.

I'm a rules-based guy. So I think that I'm not sure that that rule, you know, the Taylor rule, I'm not sure. You know, by the way, if we have the Taylor rule, you'd be raising rates by not 50 basis points, but by 500 basis points. You know, that's how out of, you know, out of skew our monetary policy is right now. Now, look, I don't want to sound too, you know, draconian here. I think actually that if you had the right set of policies put in place, we could avert a recession and we could get back on a good path. I think what worries me and also worries the financial markets is there's not a hint out of this White House

that they're going to change strategies, right? None. And I want to ask you that also. I mean, unleash energy production, unleash, you know, to the extent of federal government, can, all sorts of goods and services coming into the economy. Instead, we find, as you say, price controls ostensibly because they say corporations are milking this situation we're in for profits, which I find laughable. And there is not a whiff, not a hint, even, as you say, of moving in that direction. Have you been surprised at the intransigence of this administration on unleashing supply and production? This is an administration that is really, unfortunately,

run by left-wing ideologues who don't know anything about the economy, but they have an agenda. And they're full speed ahead with this agenda to move towards a more progressive policy set with much bigger government, more federal government control of our lives in every way. And they haven't gotten off that. So I lived through the Clinton years. I was here in Washington. And, you know, Bill Clinton's first two years in office, very much like Biden's, were a disaster. And then the Republicans swept into office. And to his credit, Bill Clinton moved to the middle. And we actually had a booming economy after that. We actually balanced the budget. We did capital gains, tax cuts. We did welfare reform. I don't see any inclination of Joe Biden being capable of doing that. And that's, I think, what's really spooking. You know, the stock markets lost $8 trillion in the last four months. I mean, the negative wealth effect of that has been enormous. So,

The good news is Republicans obviously will take control of the House and very, very likely take control of the Senate. And so you'll have a regime change. But you need the president to be on board. And I'm really worried when, you know, Biden loses control of Congress, he's going to try to govern through these regulatory agencies. And look at the people he's put in place in the Securities and Exchange Commission, the FTC. All of these people are pretty radical leftists. And so, you know, it pains me to say this. but I, you know, I work for Trump as an economic advisor, so I'm biased.

I'll admit that. But I really do believe that if Trump were still president and we had stuck with his policies, the economy would be booming right now. And that's what's so tragic about this. You know, if there's any lesson that we've learned from, you know, Joe Biden's first, what, 15, 16 months in office, it's that policy really does matter. You know, you can, it's amazing how quickly. Biden and these progressive policies have screwed things up.

When Trump left office, the inflation rate was 1.5%. How do you go from 1.5% to 8.5% in 14 months? How do you do that? You mentioned energy. That's the issue I worked on with Trump and as well as tax policy. We were actually exporting our oil and gas because we were producing so much. Now we're producing less oil and gas, even though the price is doubled. This is a result of really bad policies.

And if anything good can come out of this, hopefully Americans will see the lesson that big government liberalism and progressive policies don't work. You used to term from the old days, so maybe the old is new. You've set a supply-side revolution. Talk about that. Obviously, the Republican Party,

if it wins in November, faces President Biden faces the administrative agencies. what should their message to voters be? What should their policies be? The Republicans, yes. I can't tell you how many times people come up to me. And not conservatives, just, you know, average Americans working, you know, people who just aren't really even in that involved in policy and politics will say to me, you know,

I didn't really like Donald Trump very much. I didn't like his annex. I didn't like some of the things he said and the way he acted. But I really liked his policies, right? And I think people are starting to see that. There is Trump, the person, and then there's their Trump. the policies. Well, let's put aside how you feel about Trump the person. His policies were incredibly effective, right? And, you know, secure the border, American energy insecurity,

cut taxes, reduced regulations, you know, put America first. Those policies were quite effective. So what I want to see Republicans do is continue to talk about pursuing those policies. I would just add a couple of things that I think should be high priorities right now, obviously cutting government spending is the single most important thing right now. I mean, we're not going to get control of inflation until we bring this massive debt finance spending down. And I got to tell you, I'm not sure Republicans are going to do that. You know, I mean, Republicans voted for not all, but some of Biden's thing. We just had a $40 billion Ukraine relief bill. Now, would I have voted for that? Probably, you know, we're all for the Ukrainian freedom fighters. But my good friend,

Rand Paul had an amendment in the Senate saying, okay, let's pay for this. Let's take 40 billion for, even the Republicans wouldn't vote for that. So I hate to tell folks this, but to think that Republicans are going to be our salvation, well, maybe they will, but, you know, sometimes they're not much better than the Democrats. You know, a final question, labor supply. How does one incentivize that? I mean, it's really been an incredible experience for many Americans to go to their stores, favorite places to eat, and to wait because there aren't staff and many other businesses. Airlines, if you fly, it's across the board. That also unanticipated, I think, and also, you know, an effect of government intervention.

Yeah, I mean, it's a good news, bad news story. The good news is we have 10 million open jobs, so that means there are a lot of jobs out there. The bad news is the businesses can't fill the jobs. I mean, I'd rather have 10 million open jobs than 10 million, you know, unemployed people. Nonetheless, then the question is, why aren't Americans taking these jobs? And I think it's just basic, you know, supply-side economics is all based on economics is all about incentives. And we so expanded the welfare benefits. And we got rid of work requirements, something Robert Rector at Heritage worked on and was a pioneer on.

And the welfare reforms of the 90s had a profoundly positive effect. And I think a lot of people realize both Obama and, and Biden just eviscerated all of those. They got rid of all the... By the way, that was a Democratic president, Phil Clinton, who signed that into law. So we've got to get back to... We all want a social safety net.

We're a rich country. We don't want people to go hungry. We want people to go homeless. But you can do it in a way that's structured towards getting people back into the workforce. So we're not doing that right now. Stephen Moore, thank you so much

for joining this on this edition of the Daily Signal podcast. Thank you very much. And that'll do it for today's episode. Thanks so much for listening to the Daily Signal podcast. If you haven't already, please be sure to subscribe to The Daily Signal Podcast on Apple Podcasts, IHeartRadio, Spotify, and Google Play.

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