Larry Kudlow: This is the reason the economy is slumping

President Joe Biden today unveiled his so-called "executive actions" on climate.  

BIDEN: "Climate change is literally an existential threat to our nation and to the world. When it comes to fighting climate change, climate change, I will not take no for an answer."  

A week ago, here was Biden's temper tantrum against Joe Manchin and the Supreme Court: "If the Senate will not move to tackle the climate crisis and strengthen our domestic clean energy industry, I will take strong executive action to meet this moment."   

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A week earlier, he criticized the Supreme Court for deciding in favor of West Virginia and against the EPA. As you recall, the court said government regulators do not have enhanced power for wide-reaching economic impact regulations unless the Congress explicitly gives it to them in the form of statutory legislation.   

Well folks, against all that Biden blarney, his announcement today was a complete nothing burger. It was a bunch of small beer served in tiny cups that will be barely noticeable. So, I'm relabeling his speech "Supremes 10, Biden 0." He wouldn't take them on.   

He may threaten later and throw more Biden blarney at us, but so far it seems like he's beginning to realize that the Supremes took much of his radical climate actions away from him and he's starting to figure that out and that's ok because he's already done enough damage.   

Yesterday was, after all, the one-year anniversary of Mr. Biden's proclamation that the 5.4% inflation last July would be "temporary." Take a listen:   

BIDEN: "Our experts believe and the data shows that most of the price increases we’ve seen are – were expected and expected to be temporary."  

Oops!  The last reading for June was a 9.1% CPI—almost a double —and if that weren't bad enough, for the fist-bumper-in-chief we are at the very least at the front end of a recession.   

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Looks like the first half of 2022 will register a 1.6% average GDP decline with about an 8.5% inflation rate.  That's why he has a 28% economic approval rating in the latest Quinnipiac poll. Not too good. 

And here's a key point: economic decline in the first half of this year has been caused by sky-rocketing inflation, in no small measure self-caused by Joe Biden's obsessive, near religious war against fossil fuels.    

Energy prices jumped way before anybody was thinking about Vladimir Putin invading Ukraine, but all prices are rising across the board now — energy, food, gas, new cars, used cars, housing, services, you name it. Too much federal spending, too much money printing, too much war against fossil fuels, too many regulations, too much big government socialism.  

The reason the economy is slumping is that the inflation tax has caused real worker wages to fall and real retail sales to fall. Manufacturing is declining and housing is tanking. Interest rates have gone up quite a bit, especially in the mortgage market. They may be not quite at their highs, but it’s been a tough first half of the year.   

This is the Biden inflation on the slumping economy. It’s the inflation impact. The effects of Federal Reserve tightening have yet to be felt on the economy – that’s still in front of us.  

So, the great news is that the Supreme Court seems to have shackled Mr. Biden's radical climate agenda. The bad news is the damage has already been done and will linger on for quite some time.   

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Now, here's another thought. For the life of me – I mean, I’m going to be very sincere here – for the life of me, I don't understand why the Republican Party, which is likely to come into power again in the November midterm election, continues to throw in with Democrats and spend, spend, spend.   

They got sucker-punched again yesterday when 16 Republicans voted for a motion to proceed on a nifty little piece of corporate welfare, industrial planning and completely unnecessary semiconductor chip subsidies.   

It's bad enough that that would have cost $76 billion – just the subsidies and the refundable tax credits included in there, which is really more government check-writing to chip companies that hardly pay any taxes. That was bad enough, but now, it turns out Chuck Schumer lured the GOP into a $250 billion trap with slush funds for the Energy Department, slush funds for the Commerce Department, a doubling of the National Science Foundation, and a laundry list of additional spending items, as yet, no one precisely knows, but the common ballpark estimate is $250 billion.  

Let me repeat: $250 billion. Sixteen Republican votes in the Senate. You might ask, what about the pay-fors? Well, will you be shocked if I tell you there are none?  

So, the inflationary federal spending continues – basically on a bipartisan basis. I just find this incredible, and this semiconductor Intel corporate bailout is completely unnecessary. We're going to talk more about that a little bit later in the show, but my question is: does anybody in DC want to stop spending? Does anybody in DC want to curb inflation? Does anybody care that working folks are suffering mightily because of Washington's fiscal extravagance?  

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Right now, the answer seems to be no, no, and no. I'll tell you, folks, you know me. I like to be optimistic. There's a way out of this mess. Freeze domestic spending. Make the Trump tax cuts permanent. Call off the dogs in the war against fossil fuels. Stop this regulatory socialism.  

In fact, do what Ronald Reagan did 40 years ago when I was a mere child and worked for him in his Office of Management and Budget. The Reagan anti-inflation plan was simple: king dollar and tax cuts, sometimes called tight money and tax cuts. We're going to have Dr. Art Laffer on to talk more about those glorious Reagan ideas which seem to be forgotten. Right now, the cavalry is coming. Yeah, yeah, yeah. Question I have is, of course, will they know what to do?  

This article is adapted from Larry Kudlow's opening commentary on the July 20, 2022, edition of "Kudlow."