“Nobody can be a great economist who is only an economist – and … the economist who is only an economist is likely to become a nuisance if not a positive danger.” So wrote F.A. Hayek over 60 years ago. Not wanting to be a nuisance, I take the great man as my guide today.
America is in an unsettled mood. Gloomy might be a better word. Not a new age of anxiety, but certainly not a sense that all is right in this best of all possible worlds. Some 21% more Americans believe the country is on the wrong track than tell pollsters it is on the right track. Even before the fiasco at Kabul airport, polls recorded a sharp drop in consumer sentiment, with August down a surprising 13% from the July level. Larger declines were recorded only twice: during the Great Recession and at the onset of the economic shutdowns following the outbreak of the pandemic.
Dig a little deeper and learn that that gloom was primarily a Republican malaise; Democrats remained about as cheerful as always, with independent voters somewhere in the middle. Then came Kabul and even some Democrats turned gloomy. President Biden’s approval rating dropped seven points overnight. We Americans often disagree with our Presidents, but we want to respect them. As Richard Nixon proved, and after him Donald Trump, when that respect is gone, so is the man. Biden has taken to television several times to prove that he is either a liar (there are no al-Qaeda in Afghanistan; any American or eligible Afghan who wants to get to the airport is able to do so) or detached from reality. His testiness at being challenged is another sign that Father Time has caught up with his faculties. He is protected only by the horror that he would be replaced by his Vice President – his choice proved the President’s political shrewdness – or that the prospects of the return of his appalling predecessor would be increased.
Gloom Distorts View of Economy
With Americans in so fraught a mood, blips in the economy’s performance become major events. When retail sales fell last month, you would think the recovery had screeched to a halt. If we exclude the 3.9% drop in autos, due to supply constraints rather than a lack of demand, the drop from June to July comes to 0.4%. Although sales in July topped pre-pandemic February by 17%, new demand for houses and cars remain strong, jobs are plentiful, restaurants are booming, the gloom triggered by the 0.4% drop in retail sales remains, deeper than economic reality demands.
Two developments are adding to the feeling that events are in the saddle and riding Americans. One is inflation, always taken as an unsettling sign that the powers-that-be have lost control of events. Prices have been rising rapidly, at a 5.4% annual rate as most people experience it, at 3.5% as Fed economists measure it, still almost double the Bank’s 2% target. We are told this is transitory, small comfort to workers whose wage gains have been wiped out by increases in the cost of filling their families’ supermarket carts.
Then there is the emergence of the Delta virus. Media reports concentrate on the fact that even those vaccinated can nevertheless contract the virus, and it is only in later paragraphs that we learn the vaccinated hardly notice the symptoms of the virus, if they notice them at all. Fear of Delta is compounded by the chaotic government response. The Food and Drug Administration delayed long and pointlessly before declaring the vaccines safe (at this writing, scheduled for today), giving anti-vaxxers an excuse to remain a threat to others. The delay undoubtedly due in part at least to the President’s failure even to nominate someone to lead the agency and its 15,000 employees.
Confused Messages and Cynicism Don’t Help
Add that the Centers for Disease Control seem unable to craft understandable press releases, which many governors choose to ignore, while they, in turn, are ignored by local school boards. Parents are trying to decide which authority to credit, whether to send their children back to school masked or barefaced. The virus is scary enough: confused and confusing reactions by government multiply the fear. Add the dispiriting cynicism created by pictures of Gavin Newsom, Democratic governor of California; Rashida Tlaib, a leader of the Democratic progressive “squad”; Muriel Bowser, the Democratic mayor of Washington dining, dancing, and hobnobbing, respectively, while flaunting their own masking regulations. Do as we say, not as we do, is a message from the party controlling the executive and congressional branches of government that is not likely to lighten the national mood. Unfortunately for the Democrats, Obama’s super-spreader party organized by Obama to honor Obama, made this clear and is forcing the cancelation of planned Dem bashes. The Washington Beacon reports: “What we could do six weeks ago, we can’t do now,” lamented Adrienne Elrod, a former Hillary Clinton adviser. “We have to be so cognizant because Republicans are looking for any reason to call us hypocrites or to call us liars.” But not so cognizant as to cancel a September 30 fund raiser for House majority whip Jim Clyburn, or several planned for the new governor of New York in the Hamptons.
What Does Our Government Want Of Us?
That is not the only instance in which Americans cannot figure out just what their elected representatives want of them, other than their votes. The administration demands that OPEC, the oil cartel, increase oil production to drive down the price of gasoline, up around 40% to $3.23 per gallon this year for regular grade gasoline according to business data platform Statista. Meanwhile, it promulgates rules to rein in fracking and issuance of drilling permits, and promises more controls, curtailing domestic oil production. And the same President who wants more oil for motorists to burn, warns Americans they will “roast” the planet if they don’t give up their gasoline-fueled cars for plug-in electric vehicles. He also has nasty things to say about Putin, whose Russia is now America’s second largest supplier of crude oil, after Canada, and who owes Biden thanks for removing bars to his sale of natural gas to Germany. And for enhancing his power in Central Asia, a power Putin has used to turn down Biden’s request for bases in the Afghanistan region.
There is an economic price to pay for this policy chaos. U.S. companies are sitting on cash hoards of close to $2 trillion. Uncertainty as to which businesses will be allowed to open; what will be done about supply chain bottlenecks; how high the Biden team will raise corporate taxes doth make cowards and misers of CEOs.
More And Worse
Add to the above a dramatic rise in murderous crime; traditional culture under attack; a faltering President showing signs of the effect of the miles he has put on traveling the political highway; a former President with $100 million to roil the 2022 and 2024 elections; a nation taunted by its enemies and held in contempt by the Parliament of Great Britain while the President tells Americans he has yet to hear our allies questioning our credibility.
Democrats say Biden will either be forgiven, or the Afghanistan fiasco forgotten by the time the election rolls around. Jimmy Carter thought that about the Iranian hostage crisis and the failed rescue effort. Biden might be luckier than Carter, especially in his opponent.