American voters are down on the Biden economy. But they should be careful what they wish for, because the Republican alternative isn’t sounding a whole lot better.
At the third debate for Republican presidential candidates on Nov. 8, five GOP contenders got to air their ideas for improving on Bidenomics. They all want to lower inflation, as does President Biden himself.
Most of the Republicans focused on energy. Sen. Tim Scott of South Carolina would revive the Keystone XL pipeline Biden killed as one of his first acts as president. Former South Carolina Gov. Nikki Haley would repeal the federal tax on gasoline and diesel. Former New Jersey Gov. Chris Christie would quickly resolve the Israel-Hamas war to relieve price pressure on oil.
Beyond that, Florida Gov. Ron DeSantis would tear up all of Biden’s orders and regulations. Tech bro Vivek Ramaswamy says he would “increase the supply of everything”— energy, housing, labor, etc.— while claiming, “It takes a CEO in the White House who actually understands this.”
Missing, of course, was Donald Trump, who leads all other candidates in Republican polls by such a large margin that he can afford to forego a prime-time bickerfest. So what’s Trump’s economic plan?
Trump wants to cut taxes even more than he did in 2017, add a new 10% tariff on some or all imports to the United States, produce more fossil fuel and of course cut regulations. For good measure, Trump said during a Nov. 9 interview that he would use federal law enforcement power to go after political enemies, because he feels they have done that to him.
Voters sometimes cheer simple-sounding political ideas, then sour on the candidates if they get elected and enacting those ideas turns out to be a lot harder than advertised. Biden himself suffers from that problem. He ran for president promising to restore working class prosperity, while failing to anticipate high inflation that would sap the typical paycheck. The result is a very weak approval rating of 40% or so, even though Biden has boosted labor unions and signed legislation favorable to American workers.
Republicans could be setting themselves up for a similar comedown. While promising to make the United States an energy powerhouse, here’s something Republican presidential candidates don’t mention: America already is. Domestic oil production hit a new record high in October, and it’s likely to continue drifting higher. US natural gas production is already at a record high, and also going higher. The United States is the world’s top producer of both commodities.
Americans can rightly wonder, well, if we produce so much energy, why are gasoline prices 30% higher than they were under President Trump in 2019, before COVID hit? There are several reasons. Energy trades in global markets and worldwide supply got tighter during the recovery from COVID in 2021 and 2022. So prices went up. Then Russia’s invasion of Ukraine added a “fear premium” to oil prices, while also prompting major shifts in world oil flows.
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Leading up to 2020, some drillers were overproducing and losing money because prices were too low. So they’ve now reined in production. There’s also been a slight decline in refining capacity in the United States during the last few years, which can create a bottleneck for gasoline when demand is strong, and push pump prices up even if oil prices are stable.
None of that is a campaign one-liner, and the shorthand is simply to blame Biden if energy costs go higher. But if a Republican had four years in the White House starting in 2024, there’s no reason to think any new policy would magically lower energy prices. Even if a president gave the oil and gas industry every possible regulatory break, there would still be incentives to keep supply tight, because more supply means lower prices, lower profits, and the risk of a bloodbath like the industry suffered in 2020. And no Republican presidential candidate has so far offered a serious plan to address climate change or the adverse consequences of a warming planet, as Biden has by signing into law the largest set of green energy incentives in American history.
Green-lighting the Keystone XL pipeline would begin a drawn-out construction project still subject to regional permitting snags. If ever built, the pipeline would benefit Canadian companies moving Canadian oil to US ports for refining and possible export. But it wouldn’t bring new oil to the global market and it’s dubious to suggest it would have any effect at all on American gasoline prices.
Haley’s idea of repealing the federal gas and diesel tax would bankrupt the Highway Trust Fund, which pays for road repair and construction. Would we just let all federal highways go to rot, as a result?
Resolving the Israel-Hamas war, as Christie advocates, would be lovely. If only a US president had the power to pacify one of the world's most volatile regions.
Ramaswamy’s call for more supply of everything assumes the federal government has remarkable power to manipulate the free market, with no adverse consequences. You’d think a CEO would know better.
Trump’s idea for a 10% tax on imports would hit consumers directly. Trump was always lying when, as president, he levied his first batch of tariffs on imports from China and said Chinese producers would pay for them. They didn’t. They passed the cost to American consumers or devised workarounds, such as shipping their products to the United States via Vietnam to escape the tariffs.
As for more Trump tax cuts, maybe Trump hasn’t heard that the whopping national debt of $33.4 trillion is finally starting to bite by pushing long-term interest rates higher than they would otherwise be. That is making mortgage, car loans, and most other types of borrowing more costly. Trump fibbed in 2017 by saying his tax cuts would produce so much excess growth that federal receipts would skyrocket and the tax cuts would pay for themselves. Instead, the national debt grew $2.4 trillion the first two years those tax cuts were in effect and by $8 trillion during Trump’s entire presidency.
The debt has grown under Biden, too, so it’s not like he has all the answers. But the economy we actually have isn’t so bad compared with the fantasy economy Republicans want voters to believe in.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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