Simple Actions to Reduce Inflation

To suggest people are suffering from high inflation is one of today’s great understatements.

To make it worse, the Federal Reserve is raising interest rates faster and by more than previously expected – almost guaranteeing a recession.

Under normal and usual circumstances, the Fed raises rates to slow down an overheating economy which in turn is causing intolerable inflation – more than the target of 2% or less a year. This time, inflation was not caused by an economy growing too fast, but by our government spending too much, followed by policies – particularly aimed at fossil fuels – that exacerbated the upward movement of the inflation needle. Faced with a recession and high inflation at the same time is what economists call stagflation. It’s an anathema– and it’s not pretty.

Our White House has suggested all kinds of reasons for current, runaway inflation starting with private actions, COVID, greedy corporations, the war in Ukraine and Vladimir Putin. Only people stuck on some anti-capitalism, anti-free market ideology – and the ignorant – would buy any of that nonsense.

Our President is saying there is nothing he can do. That’s true only when he means there is nothing he will do. Reality is he and his Congress have played a major role in creating inflation, and it only seems appropriate for he and Congress to address and fix it.

It’s not complicated. But it starts with our government admitting and owning its major role in the problem. If that first step could happen what follows are the things our government – outside the Fed – can do immediately to harness inflation.

1. Cut government spending

Every day our government is spending more money than it has. To do so it needs to print more, thereby increasing the supply of money – which in turn creates inflation. After years of deficit financing, and major off-the-budget spending, the national debt at the beginning of fiscal year 2022 – October 1, 2021 – stood at $28.4T. By February 14, 2022, the debt hit $30T when the new $1T+ infrastructure bill was signed – off budget. Our debt to GDP ratio is now 128.1% – meaning our debt is 28.1% more than the total the US value of all the finished goods and services produced in a year. Countries that carry a debt to GDP ratio like ours are generally considered economically unstable – and the interest paid on the huge debt can cripple the government’s budget. This situation not only needs to stop, but it also needs to be reversed.

BTW, the national debt 20 years ago, 2002, was $6.2T, 57% of GDP.

2. Encourage oil and gas exploration and production.

Unchallenged by our Congress, President Biden has issued EOs to shut down pipelines for oil and gas and has removed millions of acres of land and sea from oil and gas exploration and production. In a unilateral attempt to execute the Green New Deal and eliminate the use of fossil fuels, he has put the cart before the horse. Look, everyone would like to see the country use renewable energy and remove fossil fuels from our grid. The problem is the technology of solar and wind energy is not at a point where those resources can deliver the energy we need. So, what’s happened is the supply of fossil fuels has been reduced while the country is still dependent on them for electricity and transport. The demand for energy is far above the current capability of solar and wind which at last count provides about 10% of our electrical generation. So, the President has blown up the prices of fossil fuels – meaning it costs more to drive to work and deliver food and other goods to market. Little wonder a major culprit of our current inflation is the reduction of fossil fuel production.

3. End Student Loan forgiveness and the moratorium on payment thereof.

This goes with #1, but every time the President decides to forgive a loan the government has made to a student, it adds to the collective, national debt. No one person should have the power to nullify a contract not made by that person and no one person should be able to increase our collective debt without our approval.

4. Repeal new environmental restrictions on infrastructure

The Biden administration has reimposed federal regulations that require burdensome and unnecessary environmental review of major infrastructure projects such as highways, pipelines and oil wells. These restrictions make infrastructure projects more expensive – often too expensive to pursue – curtailing job creation and economic activity. The infrastructure bill cited earlier has played a role in increasing these rules and regulations.

We could throw in more actions that could be taken, such as working to end the Russia-Ukraine war, the suspension of tariffs on certain goods, repeal the Davis/Bacon prevailing wage rules, repeal new ethanol rules, and suspend the Jones Act requiring goods shipped between U.S. ports to be transported on ships that are built, owned, and operated by United States citizens or permanent residents.

But the 4 actions outlined above are things that this administration could do today to relieve current inflation – and it’s crushing impact on the lives of many Americans.

A note here, economics is a social science. It’s about how consumers and businesses feel about their personal, economic situation. If circumstances and/or government make those expectations less than positive, we have an economic growth problem.

Instead of our government telling us we need to bite the bullet and swallow what it’s doing, it needs to address the problems.

We need our government to bite the bullet and do what needs to be done in the interest of the country and its population.

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Have a great and prosperous week.

Hug somebody.

SPIDER Bites

With the EU now making Ukraine a candidate for admission into NATO, it removes the one thing that would have stopped the conflict in the first place and makes ending it more remote – and escalation more likely. The US voting population is split on our involvement despite big support from both political parties.

Caterpillar is joining hundreds of companies that have moved to lower tax states with business-friendly policies. CAT announced it’s moving its Deerfield, Il headquarters to Irving, TX later this year. Droves of major, high-profile companies have left the likes of New York, New Jersey, Illinois, and California for states like Florida, Texas, and Tennessee with lower taxes and fewer regulations.

A second Japanese court ruled same sex marriage as unconstitutional last week, keeping Japan as the only major industrial country that does not allow the practice.

Title IX of the Education Amendments of 1972 states: “No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance.” Now the Biden administration announces that ‘gender identity’ will be part its enforcement of that law. Why would women and girls compete in sports against biological males from this point forward? So much for feminism, and so much for a level, and equal, playing field for females. I think I’m a woman today. Done. I’m a woman – and I get that scholarship.

No surprise, a suit challenging Florida’s anti-WOKE law was brought to court last week. The legislation, passed earlier this year, prohibits any teaching that could make students feel they bear personal responsibility for historic wrongs because of their race, color, sex or national origin. It also blocks businesses from using ‘diversity, inclusion and equity’ training that could make employees feel guilty for similar reasons. The suit alleges the law inhibits free speech.

Saturday President Biden signed a bipartisan gun control bill which will do nothing to address the latest mass shooting in an Uvalde grade school – the supposed catalyst for the action. So, what else is new in Washington? It will immediately be challenged as unconstitutional.

Speaking of gun laws, for many in favor of more of them were devastated by the SCOTUS ruling on Thursday re: NY’s law on carrying. To them I lament: ‘Sorry the Constitution happened to you.’

Of course, ‘ditto’ applies to the SCOTUS decision to overturn Rowe v. Wade, which sends the abortion issue back to the States where the people’s representatives can vote on it. Abortion is not even hinted at in the Constitution – and privacy, the basis for the original decision in 1973, was a bridge too far. BTW, calls to abolish the Supreme Court sounds like insurrection to me.

Now President Biden wants Congress to fight ‘Putin-caused inflation’ by suspending the 18 cents/gallon federal gas tax for the summer months. Brilliant!