The Biden administration’s economic policies — as implemented as well as proposed — to tame hyper-inflation and to avoid a possible looming recession stand in stark contrast with basic accepted economic theory and represent exactly the opposite of the course that needs to be taken, according to U.S. Rep. Patric McHenry, R-Hickory.

To that end, McHenry said, “The number one thing Congress could do to fight inflation is to stop spending money.”

He made the remarks during a keynote address to the Asheville-based Council of Independent Business Owners during a July 29 meeting via Zoom.

McHenry, who serves North Carolina’s 10th District, is the ranking member of the influential House Financial Services Committee.

“McHenry has addressed CIBO many times,” a CIBO meeting promotion noted. “The information he presents is always relevant and timely... Get the scoop on what’s happening in Washington and how it will affect the way we do business.”

In introducing McHenry, CIBO President Buzzy Cannady, who served as the meeting moderator, said, “Congressman McHenry is serving his ninth term in Congress. He has served on the House Financial Services Committee.”

With a smile, Cannady added, “He (McHenry) has never voted for a tax increase.”

McHenry opened his talk by thanking Cannady for his introduction and noting, “I appreciate the friendship of CIBO, I do... Thanks for encouraging honest dialogue. Where we (might) disagree on public policy, we should be able to do so without losing relationships” — and he said CIBO, through its wide-ranging speakers, offers — importantly — such an opportunity.

In addressing the condition of the U.S. economy, McHenry said, “So, outside of inflation, we would have had a very nice GDP (gross domestic product) number,” in a reference to the number released on July 28.

(According to Newsweek.com on the latest U.S. GDP number, “The United States saw worse economic growth than seven other major economies in the second quarter of 2022, according to an analysis of government statistics.

(“On Thursday figures from the Commerce Department revealed the U.S. economy has shrunk in two consecutive quarters, the standard definition of a recession.

(“America’s GDP, which measures all the goods and services the country produces, dropped by an annualized rate of 0.9 percent in the second quarter following a 1.6 percent drop in the first three months of 2022.”)

“But,” McHenry pointed out,” underlying this stuff, you have food prices up 10.5 percent, the highest since 1981… and 80 percent of the American people say inflation is the biggest issue facing the United States.”

For an average American family of four purchasing a basket of food, it is “$5,200 (annually) more expensive today than one year ago,” the congressman asserted. “The (soaring) cost at the tax pump is basically a tax. Those things are just sucking money out of real productive use in our economy.

“So energy policy in the last few years,” which he said could be summarized simply as “not allowing U.S.) refineries to process,” has had “a devastating effect on fuel prices.”

McHenry then asked, rhetorically, “So what’s the answer to inflation?”

To that question, he listed the following three answers:

• “Sound money, which means the Federal Reserve needs to get out of its policy of the last few years.”

• “Sound federal spending…. We can’t spend like ‘drunken sailors.’ If we could get back to spending like ‘tipsy sailors,’ we’d still be better off.”

• “Overreliance on China for our supply chain. .. We’ve shifted from friends to enemies” with China. “We need to re-orient our supply chain” away from China.

McHenry then asserted, “Many Democrats and Republicans know we need to reorient away from China and Russia,” which clearly are enemies of the U.S.

“So those are some of the big issues,” the congressman said, as he he shifted into a a discussion and analysis of U.S. banking and finance issues.

“We have parts of the tax cuts and jobs act are expiring year-over-year,” McHenry said. “We need to fix the problem, so businesseses can immediately ‘expense their costs.’ And raising taxes on businesses is not the right thing to do in these internationally taxing times.

“One of the things on my committee will be how to allow easier access to capital for small businesses. 

“Eighty percent of small businesses say they’ve had severe supply chain disruptions. So we need changes to get us through these choppy waters,” McHenry said in concluding his address in about 15 minutes. The congressman noted that he wanted to leave the remainder of his alotted time (45 minutes) to address questions from CIBO members.

Cannady, the moderator, then posed a number of questions — submitted by CIBO members — to McHenry for the remainder of the meeting.

First, Cannady asked, “Can you point to a few items in the Inflation Reduction Act that might negatively affect small businesses — the Manchin-Schumer Reconcilation bill?”

With a laugh, McHenry replied, “Well, it was called the ‘Build Back Better’ bill for a year and a half…. but (U.S. Sen. Joe) Manchin (D-W.Va.) didn’t want the $5 trillion in spending — which McHenry noted is “more than the federal government spends in one year... But now my Democratic colleagues now call it the ‘Build Back Manchin’ bill... Now it’s about $800 billion — the third-largest spending bill in United States history...”

Next, McHenry ripped the “electric vehicle tax credit,” which, he said, is intendend “to make them (EVs) the competitor of choice in many makes of cars.”

After a pause, he said, “The biggest issue to the question is about tax increases… Yes, there are tax increases here. There are increases on ‘carried interest,’ which they do away with… We have to look at the language of that to see how it works. And we now have a new minimum tax on corporations to see how that works.

“With the alternative minimum tax meaning, if you’re a ‘C corporation,’ it means you need to keep two sets of books. And so I think that’s going to have a negative impact for our competition.”

With a smile, McHenry said, “Fortunately, they are not raising taxes on the personal (tax) code — I think it’s good they’re not going to raise taxes on families.”

Nonetheless, he added, “The $800 billion is not going to help things. We’re just spending more money.”

Next, Cannady asked, “Regarding the cost of fuel, is it true fuel (that is) being released from our national reserve — is going to other countries?”

“Yes — because we have a bidding process open to all,” McHenry replied. “There was a Chinese company that bid highest — and got a big chunk of our petroleum reserve... It was the result of a design failure by the administration.”

However, McHenry asserted, “That’s not the key issue now for our gas prices. The key issue is we have constraint of refinement... The big challenge is our refining capacity. 

“Number one, businesses under this (Biden) administration have not been able to increase their refining capacity. Number two, we have an increased the cost of trucking refined fuels. That’s much more expensive today. Everyone knows the lack of availability of truckers…. Instead of transporting oil by truck or train, letting it flow through pipelines would be a solution....”

For Western North Carolina and adjoining areas, “When the Colonial Pipeline is running well, it does a good job for our region.. But when it isn’t… It’s a multi-faceted problem, made worse by regulation.”

Cannady then asked, “You’re saying the refinery business is slow to recover because of government regulations? You’re saying we can’t change?”

No,” McHenry answered, noting the was saying that “the Biden adminisation has a different view on this” than does the congressman and many industry experts.

Cannady asked, “If (House) Speaker (Nancy) Pelosi visits Taiwan, what do you think China will do?”

“I’ve not visited Taiwan,” McHenry replied. “But previous speakers (of the House) have visited Taiwan. And many members of Congress have visited Taiwan. What the Biden adminisatration is doing to the speaker of the House is the damnest thing I’ve ever seen. I don’t care what China says.

“We’ve had a very tight relationship with Taiwan.

“The fact that they (China) are giving her (Pelosi) a very hard time about visiting a trusted ally is absurd, but it tells me this administration does not have a good policy in place for dealing with China.”

McHenry said a “good policy” in dealing with China is to say and show “that we’re not going to be cowed… buillied…. by China.

“Perhaps you’ve never heard a Republican defend Nancy Pelosi, but we’ve been talking in a bipartisan way about this.

“Question  number two ... is China going to invade Taiwon? I don’t know. We’ll find out together. From open-source intelligence-gathering sources, we know there are huge challenges and that China doesn’t have the logistical support (now) to pull this off.

“However, in several years, that likely will change. We need to have sufficient boats (Navy warships) in that area to be ready. We shouldn’t let China roll over its neighbors and our allies. We should give the ability for the people of Taiwan to fight for themselves — through weapons and systems. There’s a lot of thought going into this right now.”

Next, Cannady asked, “(Rep. Chuck) Schumer’s new language on chip-making in China… It seems like it allows China to export to us.. What’s up on chip production?”

McHenry answered, “We had a bill ($282 billion) passed that is intended to bring microchip-making — and other high-tech manufacturing— back to the United States. I don’t think this bill will do that.

“We fell behind in the manufacture of chip-making because we had a company lacking an incentive to invest.

“Over 90 percent of the latest generation of microchips are manufactured in Taiwan — then, 5 percent in China and 5 percent in the United States.

“What threw us behind was a lack of brainpower. The top brainpower in the world on chip-manufacturing is in Taiwan.

“The language that originally was in the bill was that any company that does this can’t do business with China. Now, they’ve watered down the language....”

Cannady asked, “In your opinion, will the Federal Reserve continue to raise interest rates?”

Responding, McHenry answered, “If this week, you add (together) the chips bill and the Manchin bill, you’ve got $1.3 trillion in new spending. I think that is a major issue.

“The number one thing Congress could do to fight inflation is to stop spending money,” he said, adding that “the Federal Reserve is absolutely committed to whipping inflation with all of their powers possible.

“Number two,” he said, “after supply chain issues, energy policy is a big part of the equation.”

Cannady asked, “Has the GAO (General Accounting Office)” been so influenced by politics in its assessments that its reports are biased? “Which are the sources you can trust for economic information?”

“No,” McHenry replied, “the Government Accountability Office hasn’t put out a report” that is deliberately innacurate.
“They have economists who review spending and government policy.”

The congressman added, “The OMB (Office of Management and Budget) and the GAO are a little bit more political, so people are more skeptical.”

As for WNC and the Charlotte area, “We’re under the Richmond Fed, with a couple of little banks down in Charlotte — and they do a good job....

“The economic situation — you’ve got to go to a bunch of governmental sources to get the full picture. Even then, people debate” on what the facts are.

Cannady then asked about America’s “commitment to Ukraine against Russia.”

“I think we should not have a limited commitment to Ukraine against Russia,” McHenry answered. “I think we have to provide further weapons, so that Ukraine can defend itself.

“We need to make it clear what actions we might take if Russia continues its aggression.

“It’s a small amount to support this effort — and we’re the biggest ‘funder’ — to stop Russia’s aggression.

“There’s some concern about how long we’ll keep our commitment. But it’s still a significant amount of human aggression and tragedy.”

For a final question, Cannady asked, “Do you anticipate the (Biden) adminisration will cancel student loan debt?”

“Well,” McHenry replied, “those with student loan debt are disproportionately people (now) with advanced degrees and and (rank as) higher income-earners. It’s an issue of the base of the Democratic Party, which is most affected by this.

“It’s an issues of 18-, 19- and 20-year-olds getting into debt. I think a lot of this is about the affordability of higher education, I think we need to get at root causes. I think it’s more likely than not that the (Biden) administration” will make a move to try to cancel student loan debt, McHenry said, in concluding the question-and-answer session.