Last Wednesday, the Federal Reserve once again raised interest rates by 25 basis points – the 10th consecutive rate increase as inflation remains a persistent problem. While President Joe Biden and congressional Democrats have blamed everything from COVID-19 to former President Donald Trump for the crisis, mounting evidence points to Democrats’ obsession with the “greenification” of the U.S. economy as a major source of the inflation facing the country today.
Some economists were optimistic last week that the Fed’s most recent rate hike could be the last amid persistent market turmoil and renewed pressure from lawmakers to back off. Mark Zandi, chief economist for Moody’s Analytics, said, “the bar for [the Fed] to raise rates again any time soon is high.”
Fed Chair Jerome Powell also hinted that this most recent rate hike might be the last, while still leaving the door open to raising rates again in June and pushing back strongly on suggestions that the Fed could be lowering rates by the end of the year. “It will take some time,” Powell said regarding the question of when inflation will come down. “And in that world, if that forecast is broadly right, it would not be appropriate to cut rates and we won’t cut rates.”
But even Powell’s guarded optimism may belie the stark reality facing the U.S. economy in the months ahead. As renowned economist Milton Friedman once remarked, inflation is a result of inaccurate assessment of the true cost of government policies as much as it is a result of government spending itself.
That indeed seems to be the case with Democrats’ “green subsidies,” which have been packed into all of the spending bills passed over the last two years. As the Wall Street Journal reported in March, the green subsidies in the inaccurately-named “Inflation Reduction Act,” which the Congressional Budget Office estimated would cost $391 billion, are now predicted to cost a staggering $1.2 trillion – meaning that inflation analyses used by the Fed woefully underestimate the scope of the problem.
In addition, Biden’s increasingly onerous environmental regulations are forcing companies to adopt expensive and inefficient changes to their business practices, drastically increasing costs across virtually every sector.
All of those costs will be directly passed on to American taxpayers in the form of inflation. The biggest winners, meanwhile, will be domestic and foreign companies and interest groups who have the environmental movement’s stamp of approval.
Biden’s big handouts to “green” companies couldn’t have come at a better time for them, as the environmentalists’ grip on corporate America through “environmental, social, and governance,” or ESG investing, was beginning to slip.
Amid pressure from conservative lawmakers and declining profits last year, many of the world’s biggest investment firms began quietly reversing course and buying up stakes in coal, oil, and natural gas companies. In a 2022 public letter, BlackRock, which holds $10 trillion in client funds and was a leader in the shift toward ESG investing, touted its $260 billion investment in fossil fuel companies around the world.
Investment group AQR Capital Management has also predicted that the classic balanced portfolio of 60 percent stocks and 40 percent bonds will return just two percent annually after inflation within the next decade – less than half the average profit generated annually over the previous century. This declining return is a direct result of a left-wing political agenda rather than a company’s actual performance and financial success driving investment.
As it turns out, ESG investing is so unprofitable that many banks have fossil fuel companies in investment portfolios ostensibly dedicated to “green” entities. A report by think tank Common Wealth last year found that BlackRock, State Street Global Advisors, and Legal and General Investment Management had almost $1 billion invested in companies involved in oil, gas and coal across their ESG ETFs.
As ESG funds struggled to turn consistent profits, the Biden administration was forced to swoop in and offer a taxpayer-funded bailout to the green industrial complex. The cost of this bailout is the inflation that crossed nine percent last year and still sits more than three times above the Fed’s target rate of 2 percent.
Nicolai Tangen, chief executive of the world’s largest sovereign wealth fund, has predicted that the global obsession with the “greening” of the economy, a phenomenon now led by the United States under Biden, will mean that high inflation is a permanent fixture for the foreseeable future. He explained that companies benefitting from economically ineffective and inefficient projects through applying for green subsidies has fundamentally flipped free-market principles on their head, an arrangement that is sure to invite economic chaos.
Green subsidies are also raising costs for Americans in other ways. According to professor Brenda Schaffer, a research faculty member at the U.S. Naval Postgraduate School, the reason for the world’s current energy crisis is divestment from fossil fuel companies despite their continued profitability. This has led to an artificial increase in fuel and energy costs, which has in turn driven prices of other goods higher.
Nonetheless, the Biden administration has continued to plow ahead with its far-left green agenda. In a viral exchange with Louisiana Senator John Kennedy last week, Biden Deputy Secretary of Energy David Turk couldn’t even provide an answer for how much it would cost to make the United States “carbon neutral.”
The estimated cost, as Senator Kennedy informed Tusk, was somewhere in the neighborhood of $50 trillion dollars. But if the last few years are any indication, the real price might be the financial well-being of tens of millions of ordinary Americans.