Several weeks ago I read a wonderful column by my old pal Gerry Baker of the Wall Street Journal. It was titled, “Did Biden Peak on Inauguration Day? Covid confusion, Mideast chaos and the threat of inflation — He doesn’t have many victories to point to.”
That question is reinforced by the Journal’s Kim Strassel, in a column Friday titled “Biden’s Agenda Hits a Senate Wall: The Parliamentarian nixes Schumer’s plan to evade the filibuster via ‘reconciliation.’” Much of the economic and stock market outlook for the remainder of this year and next would be determined by responses to these questions.
The economy is in great shape — or at least that’s my take. I’m now referring to it as the extended vaccinated Trumpian V-shaped recovery. The only real damage Uncle Joe Biden has done really is the $300 federal plus-up on unemployment compensation. More than half of the states are knocking that down, but that has slowed the recovery of the labor market.
Both the number of jobless seeking employment and the percentage of the workforce that is unemployed or discouraged fell in the May report, while real incomes rose sharply. The rest of the story, based on the vaccinated reopening, is a boom — consumer spending, manufacturing services, leisure and hospitality, business investments in new plants and equipment and technology and trucking.
There are some delivery delays because of the surprisingly rapid rate of economic recovery, and some individual price increases from ultra-depressed levels. Despite the pessimism from conservatives who want to discredit President Biden and leftists who want to discredit President Trump, the facts are that the economy is doing very well — after big tax cuts, minimal regulation, energy independence, and tough trade deals all under the prior administration.
If Uncle Joe’s policies — I’m calling them his plan for a Green Workers’ Paradise — get through, then the outlook is going to turn poor: stagnation, growth recession with big inflation. If his pre-Soviet, Bulgarian approach is enacted into law, we will devalue the dollar and choke off the supply-side of the economy.
Wait a second, though — are those policies going to get through? That’s what Gerry Baker and Kim Strassel are asking, and a couple of weeks ago, when the Senate parliamentarian allowed only one 51-vote reconciliation package, I myself started getting interested in the possibility that these far-left policies just might not make it across the finish line and that the forces of growth and good and prosperity would eventually prevail.
The congressional Republican Party is completely united against the high-tax Green Workers Paradise. Increasingly it’s the Democratic congressional caucus that is divided over key issues like massive tax hikes destroying the fossil fuel energy economy.
Or like vetoing ID and eligibility so as to nationalize elections. Like permitting the Group of Seven, the European Union, and the Organization for Economic Cooperation and Development, or other multilateral globalist institutions, to dictate American tax or climate policies.
There’s also a revolt going on around the country against critical race theory, itself a racist concept, canceling our culture, wokeism in the schools and everyone else, defunding the police, and the idea of equity replacing equality. At least from my perspective, there’s growing optimism in the air because there’s new pessimism among the Democratic Party. Right now not doing stuff is good because the stuff they’re talking about is not good.
Finally, there is what the Journal calls Janet Yellen’s “Global Tax Surrender.” This is not only about giving away our tax sovereignty. It’s also about jacking up our taxes on top of what Uncle Joe already wants to do, and it’s not only about a new global minimum tax.
It may also be about a new windfall profits tax. That’s according to Dan Clifton of Strategas Research. As the G-7 finance ministers merrily build a new high-tax highway, rest assured that Communist China will not be part of the higher taxes. Why? One reason is they’re too smart.
As for us, in some sense Ms. Yellen seems to be trying to make up for lost competitiveness that she will incur from raising the corporate tax to 28% and putting a 21% minimum tax on United States profits overseas. She’s succeeding in getting the other big countries to raise their taxes, too, though at the end, we may be taken to the cleaners because foreigners won’t do what we want them to do.
The whole story is bad enough. But they want 130 countries to raise taxes on investment, capital formation, and job creation. Some analysts think the digital sales tax threat to U.S. tech companies has been dropped in favor of a nasty excess-profits tax. I sure hope Ireland holds the line with their 12.5% corporate tax rate. In economic terms, though, this whole process will damage world recovery from the pandemic.
From Mr. Kudlow’s Fox News broadcast.