Inflation Is A Problem, But Not Caused By White House

Anytime there are economic pains felt across the nation the attempt to pin the blame on the occupant of the White House is the first action taken by the party out of power. Politically, I totally understand that phenomenon. Except in a few cases, however, that is not a logical way to view the factors that move the economy.

One instance of cause and effect between a president being reckless and the economic downturn which followed was in the 19th century. In 1832, Andrew Jackson ordered the withdrawal of federal government funds from the Bank of the United States, an institution he railed about and carped on endlessly. His actions are noted for what resulted during the Panic of 1837.

The consequences of the international implosion of so many aspects of numerous economies due to the pandemic were always going to be followed by some degree of inflation. Just based on the struggle to align all the parts of the supply and demand sectors would doubtless prove problematic. Regardless of who ruled in China, Germany, or Washington.

In the newspaper today a few solid paragraphs written by Josh Boak of Associated Press put some logic to the larger issue of inflation angst.

Consumers account for most U.S. economic activity, meaning they steer much of what happens with their collective choices. Their role tends to get overlooked in political speeches, which generally reduce the economy to talk about jobs, factories and other forms of production. Biden has gone so far as to say that his policies to promote port upgrades and domestic manufacturing will lower costs by improving production, a long-term fix to an immediate problem that can be reduced, simply, to demand exceeding supply.

“Fundamentally, the problem right now is the opposite of stagflation — it’s regular inflation driven by an economy operating at or even above its potential, with consumer demand outstripping the capacity of the economy,” Stevenson said. “I’m hoping that people stop digging into their savings and cut spending a little — not enough to slow the economy, but enough to slow the price increases.”

Stevenson also acknowledged that gas prices in particular might be driving the broader dissatisfaction, such that overall inflation could fall and do little to calm public anxieties so long as prices at the pump are high.

“Cars seem to be important to people’s sense of control and high gas prices for some might feel like losing your ability to just hop in your car and go where you want,” she said.

Despite the spike in prices, consumer spending increased faster than inflation during the first four months of this year. Whether consumers can maintain such robust spending will largely determine how the economy fares in the coming months.

I do not expect anything other than the continued political heat about inflation right through the midterm elections. Yes, if the GOP were in power the Democratic pols would be singing the tune the GOP now is using in races nationwide. None of that is shocking.

But it does underscore what I preach with frequency. Along with civics and history, our nation needs more time spent on economics education, too.

WIN: Whip Inflation Now

Here is another reason to pay heed to how books are aligned in your home library. Moving them about will perhaps give you an idea for a blog post. (I simply could not allow this space to be taken over today by the slap heard around the globe. Not giving an inch of this blog to drama queens and angry man-boys.)

Putting my White House Press Secretary books in a new order meant I had to move Ron Nesson’s book, It Sure Looks Different From The Inside, and of course, thumbing through it again was warranted. President Gerald Ford, like President Joe Biden today, was dealing with high inflation across the nation.

Ford had a plan to deal with inflation. Whip it.

On page 75 Nesson writes that Ford was earnest bout the WIN program, based on the home-spun notion that the average citizen, in little ways, could help whip inflation.

As I searched for a few photos about WIN on the internet I came across attempts to enlist people at planting a local garden to stave off high food prices. Given the small size of the seed packets, it seemed like terrace gardens were in mind. Back home in Hancock during this time period, like the years before and after, we had a massive garden with at least 40 potato plants each summer, rows of corn, tomato plants galore, and everything else that could grow in soil.

The reason to write this post, other than a trip down memory lane, is to alert us to the road we have traveled many times before, and the fact we made it through. We always do. High gas prices are not a new feature of life, nor the grousing about them.

The pandemic was most unsettling and for far too many deadly. The undermining of our economy from COVID remains staggering. But if we are smart we can traverse around new variants rather than needing to bluntly marshall the populace through them. Vaccines are still the best route to a robust economy.

Thankfully, in the United States, Africa, China, South America, and most of Europe, it can be said that we can be counted as among the fortunate ones. We can all say our homes are not being shelled by Russian invaders.

All of a sudden inflation is not so pressing.

And so it goes.

Inflation Not Issue With Democrats’ Job And Revenue Generating Proposals

The news has lately been filled with stories about price increases from gasoline to beef. But just as many stories have been reported that airlines are selling tickets galore and sales are percolating at stores. This morning the lead story above the fold in The Wall Street Journal was titled Shoppers Increase Spending, Despite Inflation.

U.S. consumers withstood rising inflation to power a burst of shopping ahead of the holiday season, with big retailers reporting higher sales and expectations for a solid finish to the year.

Sales at U.S. retail stores, online sellers, and restaurants rose in October by a seasonally adjusted 1.7% from the previous month, the Commerce Department said.

While it is possible to track the reasons for inflation since the pandemic, the supply chain disruptions, and the unemployment numbers or as it has also been termed the “mass resignations’, it must be noted why we must not throw away the chance to advance our society with policies that have been long sought. We need to understand that these proposed initiatives are not inflation-inducing.

When it comes to the Build Back Better legislation some partisans who desire to undermine President Biden rather than listen to the strong support from the public, as polls show, have used the fear of inflation as their rhetorical tool. But the facts and logic are not on their side.

This week at the signing of the massive and much-needed infrastructure bill Republican Senator Rob Portman spoke words that did not make as much news coverage as they warranted. His message was clear. Investing in jobs and revenue-generating ideas is a path towards a strong US economy.

“It represents a long-term investment in our nation’s hard infrastructure assets that will create hundreds of thousands of jobs, and make us more efficient, more productive and more competitive against other countries like China. Importantly, economists agree that by investing over time in hard assets, it adds to the supply side of the economy, and will be counter-inflationary at a time of rising inflation. And it does all of this without raising taxes on the American economy as we are coming out of the pandemic. In contrast, the partisan tax and spend Build Back Better plan will increase inflation through massive stimulus spending and hurt the economy through massive tax increases.

While it is easy to locate the latest screed from the likes of GOP Senators Ted Cruz or Ron Johnson it obviously makes far more sense to listen to the words of economists and learned individuals. Such as Mark Zandi who for years has been read and heard in this nation about economic matters. He is now the chief economist of Moody’s Analytics.

The hair-on-fire discourse over high inflation is understandable, but it’s overdone. … My inflation outlook could be Pollyannish, but only if inflation expectations — what investors, businesses, consumers and economists think inflation will be in the future — rise. If there is a widespread view that inflation will remain high, workers will demand higher wages to compensate and businesses will ante up, believing they can pass along their higher costs to their customers. This vicious wage-price spiral was behind the persistently high inflation we suffered 30 years ago. But there is no evidence that this is happening today.

All of this refutes the notion that the government spending and tax breaks to support the economy through the pandemic, including the American Rescue Plan this past March, are somehow behind the higher inflation. These factors certainly gave a boost to demand last spring, but that faded when the Delta variant gained momentum this fall. There is also no good way to connect the dots between the Build Back Better agenda, which is currently being debated in Congress, and higher inflation. The legislation provides support for public infrastructure and various social programs, and longer term, it is designed to lift the economy’s growth potential, which will ease inflationary pressures.

The fact is that inflation fears are being used by Republicans to confuse a certain segment of the nation and undermine the sitting president. They are not interested in, or understanding of the popular support for housing programs, climate-change policies, and a plethora of other matters contained in the Build Back Better legislation.

Fear may get them a headline now, but the nation is deserving of progress that history will long record.

And so it goes.