Joe Biden’s Economic Dunkirk

Just after Ronald Reagan won the presidential election in November 1980, economic adviser David Stockman wrote a memo warning the president-elect that he faced an “economic Dunkirk” thanks to the disastrous economy he was inheriting.

Among Stockman’s warnings was that the Carter administration had set a “ticking regulatory time bomb” that would blow up the economy.

“They have spent the past four years ‘tooling up’ for implementation through a mind-boggling outpouring of rulemakings, interpretative guidelines, and major litigation – all heavily biased toward maximization of regulatory scope and burden,” Stockman wrote.

Stockman – who would later serve as head of the Office of Management and Budget and ended up losing Reagan’s trust – had that part wrong. While Carter was a disaster as president, at least he showed an ability to learn on the job. And so late in his term, Carter embarked on a deregulatory campaign to fight inflation. Among other things, he freed the trucking and airline industries from onerous government mandates.

“Carter gave Reagan the phenomenal gift of deregulation. Combined with the (Reagan) tax cuts that largely took effect in 1983, the economy went on a growth tear,” wrote Brian Domitrovic, a scholar at the Laffer Center, in Forbes. “All the capital that Reagan freed up via his tax cuts found room to roam in the deregulated world which Carter had set up.”

Reagan continued Carter’s deregulatory push and for more than a decade the economy prospered like never before.

Fast forward 44 years and Stockman’s dire warning about regulatory time bombs and an economic Dunkirk is about to come horrifyingly true.

That’s because, unlike Carter, President Joe Biden is unable or unwilling to learn in office. And so, instead of deregulating the economy to fuel growth and lower prices, he is smothering it with an unprecedented number of new and massively expensive rules and regulations.

Rules that will:

• Force car owners into inconvenient, expensive, range-deficient EVs.
• Impose emission standards on large trucks that, the industry says, will be “the most challenging, costly and potentially disruptive heavy-duty emissions rule in history.”
• Sharply raise the cost of drilling for oil and gas on public lands and raise the cost of water.
• Make it nearly impossible to get permits to expand or build new facilities in most areas of the country without violating impossibly strict clean-air standards.
• On and on the list goes.

To quote Stockman, if these time bombs aren’t immediately defused by the next administration, they will “sweep through the industrial economy with near gale force, pre-empting multi-billions in investment capital, driving up operating costs, and siphoning off management and technical personnel in an incredible morass of new controls and compliance.”

The problem is that getting rid of regulations — no matter how disastrous they are — can be a time-consuming process. Agencies have to write new rules to overturn old ones, and must make sure they follow the letter of the law in doing so.

In his 1980 memo, Stockman said avoiding an economic Dunkirk required “an initial administration economic program that is so bold, sweeping, and sustained that it totally dominates the Washington agenda (and) holds promise of propelling the economy into vigorous expansion and the financial markets into a bullish psychology.”

Reagan delivered.

It will take even greater levels of boldness today. And while there is hope for such a comprehensive program under the return of Donald Trump, if Biden wins in November there will be no rescuing the economy this time.

— Written by the I&I Editorial Board