AMAC Exclusive – By Ben Solis
President Ronald Reagan once compared inflation to a violent mugger, a scary armed robber, and a hitman that preys upon someone’s life.
If he were alive today, Reagan would be loudly sounding the alarm about the new mugger on the loose as inflation steadily gets worse. The Bureau of Labor Statistics reported last month that inflation rate rose to 6.8% last year, the highest level seen since 1982. 2021 also ended with six straight months of price increases in sectors like food and housing, including a 57.5% increase in the price of gasoline between November 2020 and November 2021. In short, Americans are paying significantly more for basic goods and necessities now than they were just a year ago, struggling to make ends meet even as the Biden administration continues to pump money into the economy, further devaluing Americans’ paychecks.
To understand some of the primary causes of rising inflation, we must understand the interplay between the amount of money in circulation, the amount of credit extended to borrowers, and the development of new and affordable energy supplies.
As Nobel Prize-winning economist Milton Friedman taught, an increase in the money supply as new credit-based upon factors such as new wealth creation and productive business endeavors will enhance and accelerate new capital formation while keeping inflation low. Consistent with that understanding, the consensus of many economic historians is that the American economy was able to rise to extraordinary heights after John D. Rockefeller’s oil company provided “oil for the poor man” that was “cheap and good.” Put another way, government policies that encouraged capital investment (low taxes and less regulation) greased the wheels of the American economic machine, while cheap, reliable energy provided the fuel to supercharge the engine.
During his first few hours in the White House, President Joe Biden took the exact opposite approach to both Friedman’s principle for expanding the money supply and Rockefeller’s example of how expanding affordable energy can lift up the poor (and everyone else). With executive orders that revoked a permit for the Keystone XL Pipeline and ended oil and gas exploration on public lands, thus destroying U.S. energy independence and once again leaving the country at the mercy of foreign suppliers, Biden paved the way for dramatic hikes in energy prices and rising inflation.
But the price hikes didn’t stop with energy. The black clouds that formed over the White House after Biden’s inauguration are now storming across the American heartland and beginning to envelop the rest of the world, robbing the poor and middle class of their ability to make a living. Mr. Biden famously declared during the 2020 presidential campaign that his policies would help the poorest of the poor. Instead, the inflation monster unleashed by President Biden and Democrats in Congress is making the poor poorer, which happens anywhere inflation is on the rise. A few examples illustrate how:
Karen Dixon, who works at a warehouse near Knoxville, Tennessee, received a pay raise this year, but her expenses increased faster. Her $1.75 per hour raise is offset by higher health insurance costs and costlier food and gas.
A pastry business owner in Stockbridge, Massachusetts, James Lawson, is facing higher food prices – of an average of 25 percent – reducing his monthly production of croissants and wedding cakes. His business suffered 30 percent to 40 percent losses compared to the previous year.
Jack Bernstein, a farmer in California, learned that the California Tomato Growers Association had increased the price per ton of tomatoes to $105. That represents a 24.3 percent increase in the price per ton from earlier in the year – but any potential revenue gains were erased by rising production costs due to inflation.
To make inflation matters worse for hourly workers, President Biden also signed an executive order requiring all federal contractors to increase their minimum wage to $15 an hour. This one step alone has triggered a significant expansion of the money supply, contributing to the explosion in inflation. Moreover, this hike in the minimum wage is leading to crushing labor costs for small businesses, forcing many of them to close or shed workers. Large firms will now opt to replace some workers with robots and amortize these capital costs over time, while smaller firms cannot. This dynamic will impede economic growth, not boost it, and drive the few remaining mom-n-pop shops out of business. It will also lead to more unemployed Americans, not greater job opportunities.
In December, the University of Pennsylvania Budget Model indicated that the Biden inflation required that the average U.S. household spend around $3,500 more in 2021 to achieve the same level of consumption of goods and services as during the Trump era.
The good news is that at least we know what first steps are required to defeat the inflation monster, even if it is unlikely Biden and the Democrats will change course. First, Biden needs to reverse the anti-fossil fuel and anti-American energy policies he has imposed since the start of his term. There will be no greater boost to the economy, manufacturing employment, and to the taming of inflation than setting producer and consumer expectations that abundant, low-cost energy is encouraged and supported by federal laws and regulations. Second, Biden must identify and remove every disincentive to work that has been added to the federal register since his arrival in office. More working Americans will ease inflationary pressures from high welfare spending. Third, Biden can announce that he will abandon all efforts to raise taxes as well as impose a freeze on new economic regulations. Tax and regulatory certainty for business will drive greater investment spending in personnel and material to more speedily remove supply chain bottlenecks that are also contributing to inflationary pressures.
If he can find the political will, Mr. Biden can catch and cage the deadly hitman of inflation about whom Ronald Reagan had presciently warned and perhaps stave off looming disaster in the 2022 midterms. But given the administration’s seemingly complete capitulation to the anti-capitalist strain of leftism now so popular with today’s liberals, such a turnaround at this moment seems unlikely.
Ben Solis is the pen name of an international affairs journalist, historian, and researcher.
This isn’t just a Biden issue per se, as any Democrat President, with control of Congress as well, would implement pretty much the exact same economically unsound policies as the people controlling Biden have been doing at this stage of where the country is now. The end goal being to ultimately move the country towards a socialist system, where the government controls and dictates pretty much all aspects of the economy and human existence. It is who they are have been for literally decades, whether the majority of American people ever truly understood that reality until now. A big part of that transformational process is devaluing the purchasing power of the dollar and eventually eliminating the middle class. So stoking inflationary pressures is an essenttial part of the transformation process.
The current levels of inflation and disruptions to our economy were all quite predictable based upon the policies that the Democrat Party laid out in 2020. They literally handed us their playbook for all of this, when they provided the 110 page Democrat Party campaign platform on their web site in early 2020. So no one should be shocked or outraged that what they promised to do has resulted in exactly what anyone with a true understanding of economics would expect their policies to yield.
The Democrat Party has always believed in tax and spend and tax some more, so they can spend more as they grow the size and scope of the government ever larger and mmore powerful. They have consistently wrapped their arguments for this strategy over the decades in nonsensical terms of “for the children”, “to save the planet”, “social, economic or racial justice”, etc., all in order to win support from a large segment of the public that frankly lacks any deep understanding of economics, history or science. So now, as the Democrats are literally so close to achieving their goals and their actions are becoming far bolder and much more open, we are being treated to yet another repetative article on why what is happening is really bad for the American people.
The way to deal with most problems effectively is to prevent them from happening in the first place. Virtually none of the negative events of the last year had to happen. They are all the direct result of allowing the steal of November 2020 to stand. Choices have consequences with higher than necessary inflation simply being one of them.
The second to last paragraph is a big part of the solution needed to help improve the economy and to get back on course BUT the Biden handlers are not interested in this course of action. This solution is not in the current playbook since the downfall of the American economy is needed to bring about the ELITE’S agenda of world order and power. Things are just going to continue to get worse until the people wake up and time is getting short ever so rapidly.
Open the pipeline at home and let the oil flow and inflation will drop. Why pay OPEC and priase them for producing more oil at $80 a barrel when we have plenty here at home? Over 6,000+ items are produced from a derivative of oil. Wonder why inflation? Printing monopoly money is also a major factor. Credit card junkies and losers for America!
I don’t think the man can tie his shoes without help. I just pray that we survive until the mid terms.
Biden and his leftists buddies will never do anything to give prosperity and freedom to the American people! Their whole game is to control everything and everyone! And the end game is to STAY in that power position forever – Democrat leftist for infinity! To think they would do otherwise is fantasy!
Sorry, Mr. Solis, but Biden is not the legitimate president and is incapable of the role (as planned). The Pelosi, et al administration is currently running the White House and is intent on and behind the destruction of the United States. As such, your recommendations, though thoughtful, are futile.
It,s always confusing to confuse or integrate inflation with supply and demand.
Inflation is the increase of money in circulation and credit.
When you enact deficit legislation you have to increase the money supply and credit to pay for it.
At that point the smokey inflation genie is out of the bottle and almost impossible to get it back in.
Who wants to pay more taxes and receive less govt money to surplus balance the budget to pay down the debt.
The changes in specific prices of goods and services are in direct response to their supply and demand. They can go up or down during inflation but, unfortunately, large and sustained inflationary pressures will tilt the line upwards over time for everything.
Many of the destructive things happening to our nation right now CAN be overcome. But it CANNOT happen under this current administration and any other administration like it that may follow.
It’s easy to defeat inflation, THROW OUT joebama and ALL the traitorous democrats!
Decrease inflation..open the spigots at home. Over 6,000 items are produced from a derivative of oil. Wonder why high prices at the shelves? Why pay OPEC $85 a barrel for oil when we have it right here in the U.S. This admin a party of destruction!