On CNBC’s Squawk Box, Portman Reacts to the Federal Reserve Raising Interest Rates, Historic Inflation, High Gas Prices

June 16, 2022 | Portman Difference

In an interview this morning with CNBC’s Squawk Box, Senator Portman reacted to the Federal Reserve’s decision to raise interest rates by 0.75 percent in an effort to combat soaring inflation in this country – an action Senator Portman says is too little, too late. Despite the economy doing well coming out of the pandemic, Democrats jammed through a $1.9 trillion stimulus plan, which was also a major contributor to the historic inflation we see today. Coupled with the Biden administration’s policies from day one to hamper our oil and gas sector – leading to record high gas prices all around the country – this has put a strain on all American’s pocketbooks. Senator Portman made numerous suggestions on how to make headway in combating high prices and soaring inflation. First, we must not put any more stimulus in the economy. Second, deregulate wherever possible to allow the economy to flourish. Third, it would be beneficial to pass the USICA bill in Congress because it be would be counter-inflationary if done properly – leading to an increase on the supply side.

A transcript of the interview can be found below and you can also watch the interview here. 

PORTMAN ON THE FEDERAL RESERVE’S LATEST INTEREST RATE HIKE

“Well, I did hear about what Steve said about institutional reform. And I’m not saying that’s not helpful, in fact, maybe the terms could be staggered even further away from the political calendar. But, Becky, it’s not really about structural reform. It’s about reacting to the obvious situation, which was that a year and two months ago, back when the $1.9 trillion stimulus package was put out, people said, from the right and the left, Democrats and Republicans, famously Larry Summers, but a lot of us said, ‘Look, the economy’s already performing well coming out of the pandemic, all the indications are it will be back at pre-pandemic levels actually by mid-year.’ That was the CBO estimate I talked about on this show, and that’s the Congressional Budget Office, it was an internal estimate. But, also the outside estimates were saying the same thing, ‘this will overheat the economy if you put this kind of stimulus out.’ So, I think it was pretty obvious what was going on. And, at that point, it would have been more helpful had the FED taken action. Having said that, it’s easy to be the armchair quarterback in retrospect. But I think that was the moment — and I don’t think it was necessarily in 2020, but in 2021, early 2021, it was obvious we were seeing a big mismatch between demand and supply. That’s when they should have acted, in my view.”

PORTMAN ON THE FEDERAL RESERVE’S ROLE IN MONETARY POLICY

“Becky, the one exception I would say to that is that now and again the FED just by precatory language can make a difference in terms of policy, including on the supply side. And if you listen carefully at what Jay Powell said this week, I think he was turning back to Congress and saying this is not just about monetary policy, it’s also about fiscal policy, energy policy. He didn’t use those words explicitly, but it’s about policy changes to improve on the supply side. And the situation we’re in is caused by a lot of factors — the pandemic, certainly what’s happening in Ukraine today —but most of it, I would argue, is because of bad policy decisions.

“One, the administration way over-stimulating with the $1.9 trillion package, the biggest spending package in the history of the country, chock full of stimulus, less than half of it having to do with the pandemic. And then, on the supply side, the regulatory efforts this administration has undertaken to add regulations. What they have done to the oil and gas business, which is to stifle production — we’re a million barrels short of where we were pre-pandemic by day, right now, in America. So, we are not reaching our capacity yet. Why? Because the administration gave every signal. And specific policies, like saying we’re not going to produce more on federal lands or in federal waters that, you know, stop the investment on the production side. So, I think the FED does have a role there, and I’d be happy to hear the FED talk more about the responsibility Congress and the administration has on the policy side. I think it’s important that the FED speak out clearly in terms of monetary policy — that’s their job. My point is that they also have another role they can play, which is to say this is not all about monetary policy. We have limited tools that the fiscal policy and energy policy and the approach towards regulations, taxes, stimulus. There’s talk now in Congress about another Build Back Batter plan, that would add more stimulus to the economy. Obviously, that’s exactly the wrong way to go right now.”

PORTMAN ON ENERGY POLICY AND INCREASED STIMULUS

“Well, I saw that the oil and gas companies came back with a 10-point plan, and part of that 10-point plan is loosen the restrictions on developing our energy resources on public lands and public waters, just as an example. So, what the companies are saying clearly is we need to have more certainty in terms of making the investment, and I think it’s going to happen. It’s going to happen more slowly than anybody would like; that’s just the way that the market works. But it’s no wonder when you have an administration that comes in day one and says we’re going to end Keystone XL Pipeline, after billions of dollars of investments on the private side, and then says, with regard to permitting, we’re going to slow things down, including this Waters of the United States effort, and then with regard to public lands and public waters, they say we’re going to have a halt of here in terms of new exploration of production. That sends a very, very strong message, and it was deliberate. It was, in a sense, that we’re going to make this transition from fossil fuels to the new, more renewable, greener energy, and we’re going to do it right now. But unfortunately, we’re not ready to do it right now and certainly not to do it at the time when we have this increase in demand that everyone was predicting based on the increased stimulus. So, I think it was a bad policy decision that’s now affecting middle-class families in my state and around the country. $5 gasoline, eight percent inflation on things like food and clothes. It’s really rough on people. It’s the most punitive tax of all.”

PORTMAN ON BIPARTISAN, BICAMERAL EFFORTS IN CONGRESS

“I think in this case it’s going to be tough to do anything proactive because we are in a political year, unfortunately. I do think there are some things that would help right away. One is to make a decision not to move forward with more stimulus spending right now. This is exactly the wrong thing to do. Everybody should realize that. Second is to deregulate wherever possible. Much of that happened because of the administration; it’s not a congressional act. But in every sector of the economy, there is growing regulation that needs to be pulled back. And then in terms of going forward with this package that is currently between the House and Senate being debated, which is called the Competes Bill or USICA, the House and Senate versions of it, that could help. That could actually be counter-inflationary if it’s done properly which is to say it would increase the supply, specifically of things like semiconductors which is a part of that. So, there are some things that we can and should do that currently is very much in the process because you’ve got Republicans and Democrats trying to work out a compromise. My hope is that the House Democrats are willing to be more flexible because remember that we had a bipartisan bill that came out of the Senate that was already negotiated with Senate Democrats and with the White House and it got 19 Republican votes; we need to stick with that. But that would help somewhat, and it would send the right signal to the markets, saying America is going to do a better job in terms of worker retraining, in terms of specifically ensuring we have supply chains for some of the high-tech products that are so necessary in our economy today, like semiconductors. So, that’s one thing that Congress can do in my view that would help.”

PORTMAN ON RISING GAS PRICES

“Gas prices. You know I filled up my pick-up truck last weekend, I was paying $120, but then I got an earful from others who were filling up their cars and trucks around me. I mean, this is a killer. People who commute to work, people who are on fixed incomes, seniors, young people. I mean I don't know how people can do it, it's taking a huge bite. I had the truckers in yesterday talking about $1,500 to fill up an 18-wheeler, and the independent truckers going out of business because they just can't afford it, they can't just pass that along to their customers. So, I think it's fuel prices, one, and second, food. People are going to the grocery store and looking at the huge increase in the price of basics, trying to downgrade all they can but at some point, it's just impossible. I think that's the number one issue I'm hearing about.”

PORTMAN ON THE 2022 ELECTION CYCLE AND A POSSIBLE RECESSION

“I think we will see a change in the House, maybe a change in the Senate, certainly a change in the House and that will help. Joe, that will put guardrails on the administration, but it doesn't keep the administration from doing things like the regulatory efforts I talked about earlier that are kind of under the radar and aren't a result of legislation. So, the administration has got to look at this inflation issue as an opportunity to deregulate, not to do more stimulus spending, to increase on the supply side to deal with that mismatch between demand and supply, and if they don't do that we're going to see this high inflation going all the way to November. I think we are looking at unfortunately another quarter of negative economic growth which technically is going to mean we are in a recession.”

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