“The best remedy for the current inflation is a combination of windfall profits tax, price controls, and antitrust enforcement to reduce the pricing power of big corporations not higher interest rates that will slow the economy, cost jobs, and reduce wage gains.” — Robert Reich, April 2022.
By Jack Bernard
PEACHTREE CITY, Ga. | Polls show that 89 percent of voters believe that the economy is America’s biggest issue, along with inflation, identified by 83 percent of respondents.
However, contrary to what many Americans believe, the American economy is doing very well. Unemployment continues to fall and is down to a low 3.6 percent And 431,000 jobs were just added in March. The Biden administration has not correctly sold these facts to the voters, a looming problem for them in November. However, inflation is a real and growing problem.
Economists on the left, like Reich, blame corporate greed rather than employee wage increases because of worker shortages. And it is true that in almost all industries, the rise in wages has not kept up with inflation. At the same time, Reich states that corporations are “showing the highest profits in 70 years” and are too powerful. He advocates the remedies in his quote. Other suggestions are cutting gas taxes, as was done in Georgia in response to the Ukraine crisis, and being more aggressive in fixing short-term supply chain problems.
But, while acknowledging that factory production was down because of the pandemic, and that there were fewer truckers, Steven Rattner, a treasury official under Obama, disputed the severity of supply chain issues. Rattner places a large part of the problem on the rise in consumer spending as a direct result of government Covid relief efforts, causing an “overstimulated economy.” He advocated strong action by the Federal Reserve, which controls interest rates and can slow the economy.
Larry Adam, chief investment officer at Raymond James, also believes action by the Federal Reserve will be coming soon. He forecasts three or four rate hikes in 2022. He believes that by year end in December, the problem will be on its way to being solved and lose its current level of importance.
Economist William Hauk of the University of South Carolina believes that consumer spending in 2021 and 2022 was and will be up considerably because of the lessening of pandemic restrictions. He also feels that stimulus checks and other governmental relief overstimulated the economy. But in addition, he places a good bit of the blame on supply chain issues such as production and transportation cost increases.
He further points out that those on a fixed income will have the most problem adjusting to these higher prices at the store and gas pump. Dr. Hauk also related how 14 percent inflation was reined in under Reagan. Paul Volcker, the Federal Reserve Chairman at the time, created a recession. Unemployment went up to 10 percent.
It’s not surprising that inflation is an issue for the public, especially now with Putin’s war jerking up gas prices. The unanswered question is what to do about it without causing Americans pain.
The one thing everyone agrees on is that we need strong leadership to get us through this problem. So far, President Biden has yet to show that leadership to the American public. That fact will come back to haunt the Democrats in November.
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