Former President Ronald Reagan was credited as saying, “The most dangerous words in the English language are ‘I’m from the government, and I’m here to help.'” When the coronavirus pandemic enabled the federal government to shut the country down, Republicans and Democrats alike were quick to approve multi-trillion-dollar spending bills without any idea how to pay for these stimulus and relief packages. Even toward the end of the COVID-19 public health crisis, a case of Bidenomics resulted in more unnecessary expenditures that added fuel to the inflation fire. A new study reveals the economic doctrine might have contributed to the spike in prices at the local grocery store.
Bidenomics and Your Dinner Plate
The current administration’s enormous expansion of the Supplemental Nutrition Assistance Program (SNAP) may have hiked supermarket prices by as much as 15%, according to a new study by government watchdog Foundation for Government Accountability (FGA). In 2022, the US Department of Agriculture’s SNAP spending advanced to an all-time high of $119 billion, a dramatic increase since the start of the 21st century. This means that monthly food stamp spending is around $11 billion, up from $4.5 billion before the pandemic. Because President Biden bolstered SNAP benefits, the decision “will cost taxpayers $250 billion over the next decade and has heavily contributed to soaring grocery prices,” the study noted. This is partly due to the stimulus leading to an artificial boost in consumer demand.
“Congress should repeal President Biden’s unlawful food stamp expansion and ensure this type of executive overreach cannot happen again. In doing so, Congress could save taxpayers more than $193 billion over the next decade,” the report said. “USDA cooked their books to hike food stamp benefits by 27% — the largest permanent increase in program history. And they bypassed Congress to do it. Data show the Biden administration’s overreach led to massive spikes in grocery prices. They’re feeding inflation, not stopping hunger.”
Grocery store prices have eased since the double-digit peak last year, slowing to an annualized rate of 3.6% in July, according to the Bureau of Labor Statistics’ July consumer price index. Despite the slowdown, many kitchen essentials remain elevated and have seen a renewed upward trend, from bread to beef to bananas.
Banking on Disappointment
Will the banking system ever return to normal? In the near term, it could be unlikely, particularly after credit agency Moody’s downgraded ten banks and Fitch Ratings warned that it could do the same to dozens of financial institutions, including JPMorgan Chase. But hard data may matter more for anyone observing the financial sector.
According to fresh Federal Reserve data, companies continued to tap into the Bank Term Funding Program, with the emergency lending facility climbing to a new record high of more than $107 billion. Deposit outflows added to growing concerns as total bank deposits plummeted for the second consecutive week by $49 billion.
Yet again, this makes Washington’s reassurance that the banking system is safe, sound, resilient, and well-capitalized confounding. The data, the industry warnings, and the Eccles Building’s proposed capital requirement reforms suggest that something is rotten in Denmark.
Don’t Be Crude
The past three weeks have been incredible for US crude oil production. After seven straight months of flat and below-trend growth in output, the Energy Information Administration (EIA) reported that domestic production reached 12.8 million barrels per day, up from 12.2 at the beginning of August. But it might not be an opportune time for the energy sector to sing “Happy Days Are Here Again.”
The Baker Hughes Oil Rig Count, a measure of the number of active drilling rigs in the country, tumbled to 512 for the week ending August 25, down from 520 in the previous week. This represented the tenth drop in 11 weeks, and the figure has plunged since the late 2022 peak. In addition, the Baker Hughes Total Rig Count, including natural gas drilling, slipped from 642 to 632.
US output may enjoy one last jolt, but the statistics point to lackluster volumes heading into 2024. This could be bad news because every market analyst expects a global supply deficit later this year. Of course, Iran may prevent a dramatic jump in energy prices since Tehran is accelerating domestic production (three million barrels per day) and increasing exports (1.54 million barrels per day). Plus, the White House is reportedly working on a plan to ease sanctions to allow more Venezuelan oil to enter global energy markets.
Meanwhile, the Biden administration is being sued by Chevron, the state of Louisiana, and the American Petroleum Institute after the federal government shrunk the size of the area offered in the Gulf of Mexico for development.
This is Bidenomics in action: Foreign countries, even when heavily sanctioned, can increase energy activity, but US firms still face the wrath of the state. As the superstars of TikTok say, make it make sense.
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