ALL THE TALKING HEADS are blasting away at Joe Biden and the Federal Reserve for their mismanagement of the economy, but there’s a third villain — the dysfunctional Congress, which will spend the rest of this month debating tax increases, hardly the best medicine for a shaky economy.
ACTUALLY, A COUPLE OF SPENDING BILLS COULD BE MODEST POSITIVES, but Mitch McConnell wants to block funds for U.S. computer chip manufacturers and a modest spending bill (we know that lavish spending last year was inflationary, but the deficit is falling so dramatically that some new spending probably would be helpful).
DON’T ROCK THE BOAT: McConnell and the Republicans don’t want to do anything significant between now and the Nov. 8 election (other than pass basic spending bills, which probably will be combined in a massive omnibus package that will be addressed in December).
McCONNELL IS CONTENT to run out the clock, providing very little new spending — except for defense, where a bidding war is underway to see which party can spend more (Pentagon outlays will top $800 billion in the next year or two).
THE DEMOCRATS, AS USUAL, are divided, as seemingly endless talks between Chuck Schumer and Joe Manchin have failed to produce a compromise on a modest Build Back Better bill.
THE DEMOCRATS HAVE SPENT MONTHS debating potential tax increases, which look increasingly unlikely — especially the mind-numbing global minimum tax, which has hit another snag in Europe. Some tax hikes, on the very wealthy and highly profitable corporations, are possible, giving the GOP still another battle cry: why raise taxes if a recession looms?
BOTTOM LINE: Washington over-did the stimulus in the past two years, and now seems determined to over-do the restraint.
MONETARY POLICY is dangerously restrictive, and fiscal restraint will persist in Congress, where the concept of new spending has fallen out of favor — and will become even tighter after the Nov. 8 election, which is very likely to return fiscal hawks to power in the House.
HANGING OVER THIS POLICY PARALYSIS is the stunning free-fall of the Biden Administration, which is deeply unpopular and out of gas. Joe Biden has more than two years left in his first — and only — term, seemingly enough time to get something done on Capitol Hill. But Congress is just as dysfunctional as him.
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