As I watch the news I hear daily that the major issue for the upcoming election is the economy most specifically it is the inflation that is crippling most Americans.
I do not agree….I agree that inflation is a huge problem but I disagree that the decision on voting will be decided by that problem.
First the big myth is that inflation is a hidden tax…..It is not a taxation but it is taxing….so to oversimplify the phenom politicians like the word “tax”.
Calling inflation “taxes” is simply inaccurate. People pay taxes to governments to achieve certain ends. Even if you think that government is inherently wasteful or lazy or inept and are sure that the pure magic of markets—which, again, were largely responsible for the pent-up supply chain problems that drove inflation—there are actions that happen as a result of those taxes paid. Schools, roads, defense, regulations of markets that have proven themselves when unsupervised inclined to cause disaster, all of this are benefits those taxes pay for.
So the GOP blames the Dems….the Dems blame the GOP…again it is an oversimplification.
First, the most important release from last week was the third quarter GDP data. It showed the economy growing at a 2.6 percent annual rate. This is a very healthy rate of growth and follows small declines reported in the prior two quarters.
The growth also should mean that we are again seeing positive productivity growth after seeing a record pace of decline reported in the first half of 2022. Productivity data are always erratic, and the numbers from the first half should not be accepted at face value (reported growth in the fourth quarter of 2021 was an impossibly high 6.3 percent), but there can be little doubt that productivity in the first half of this year was very bad.
The 2.6 percent growth in third quarter GDP was roughly equal to reported growth in hours in the payroll data, but there was sharp fall in the number of people who reported being self-employed. This should imply productivity growth in the neighborhood of 1.0 percent. We will get the actual figure this week when the Bureau of Labor Statistics reports third quarter productivity data.
A 1.0 percent rate of productivity growth is not great, but hugely better than the declines reported in the first half of the year. Productivity was likely weakened in the first half by supply chain problems, huge turnover, and possibly some labor hoarding. These problems should have been less of an issue in the third quarter, and even more so going forward, as the economy is operating closer to normal in most sectors.
Weak productivity would be a major factor raising costs for businesses and thereby creating inflationary pressure in the economy. If we are back on a normal productivity path, this would be a big positive for inflation prospects going forward.
Inflation and Recession: Where Are We Now?
Since the GOP is hammering Biden on inflation for the mid-terms…..how would they solve the problem?
It’s perfectly reasonable for Republicans to batter Democrats on inflation. Gas prices have fallen way off their June highs, but the rising cost of living is still a problem for Americans from most walks of life, and Democrats are the party in power. That’s politics.
But now that Republicans have chosen inflation—and particularly gas prices—as their number-one issue for this political cycle, it follows that their candidates would have detailed plans to turn things around if they’re elected. That’s governing.
We asked the campaigns of eight Senate candidates in competitive races—J.D. Vance in Ohio; Mehmet Oz in Pennsylvania; Herschel Walker in Georgia; Blake Masters in Arizona; Ron Johnson in Wisconsin; Ted Budd in North Carolina; Adam Laxalt in Nevada; and Mike Lee in Utah—the following:
- What is the candidate’s plan to lower gas prices?
- What is the candidate’s plan to fight inflation?
Will the GOP have all the answers to inflation?
I think not.
I do not believe that giveaways to the wealth will stop the ravages of inflation on us less fortunate….remember the beginnings of the idiotic ‘trickle down economics’? (a look back)
There is a way to hold down inflation….you go to the people that are fueling the problem….corporations…..
By now, you’ve probably heard the good news. After more than a year of surging inflation, gas prices are down, pandemic supply chain snarls are starting to ease, and shipping costs for companies are coming down. But instead of passing on the savings to customers, companies are making a different choice.
Big corporations are choosing to keep prices high for consumers, even as their own expenses, for things like materials and transportation, go down. While the Biden administration and its economic response to the pandemic have become easy scapegoats for those who wish to assign blame for stubbornly high prices, especially as midterm elections draw closer, the facts tell a different story. And ignoring the ways in which corporate price hikes are contributing to higher prices will only prolong the crisis.
This isn’t just speculation. My colleagues at Ground Collaborative and I pored over recent earnings reports from the nation’s biggest companies. We learned that their executives are admitting to the strategy of keeping prices high because it means bigger profits for their companies and massive payouts to their shareholders.
The outcome of the mid-terms will bring little relief for us mere mortals….
Sorry to be a downer.
I Read, I Write, You Know
“lego ergo scribo”
10 thoughts on “It’s Election Time–It’s Inflation”
I’ve talked to friends at length about corporations gouging consumers, being the cause of inflation, and it not being a political issue. All I hear in response is Dem this and GOP that…… very frustrating. A soon to be former friend said taxes are high because of Biden and after showing them we’re still on Trump’s tax plan, they doubled down. I just rolled my eyes and walked away. I can’t fix stupid if they won’t listen.
inflation is an easy excuse for politicians….walking away is the best thing to do for like you say. ‘you can’t fix stupid’. chuq
I rarely worry about inflation. I cannot say for sure but I believe that if you have a diversified portfolio of investments in the hands of a reputable fiscal manager, then some of those investments ride on the back of inflation and are actually beneficial to the individual bottom line. Remember that when prices rise on consumerism due to federal interest rate hikes, those same rate hikes are profitable to the portfolios of the share holders.
You are correct… the election will do nothing in “fixing” the economy. For the most part any sitting president has little effect on the economy in general, and more so in trying to fix inflationary/recession pressures. No one person has a “plan”. The forces at play this time around are the effects of the pandemic shutdown, the near collapse of world-wide distribution and supply chain channels, the war in Ukraine… climate change (costs of disasters), social spending (stimulus money).. a myriad of reasons. The Federal Reserve attempts controls, but even their influence can send the country from inflation to recession, and the other way around. Also, as the war in Ukraine greatly illustrates, the days are long gone where some seemingly minor conflict across the world stands only by itself. It affects the entire world in some form (think crisis theory; the butterfly flapping it’s wings in Siberia, etc.). What generally affects economic course corrections besides the Fed raising interest rates is people will buy less as prices increase and that slows demand down.
To me the biggest election issue is keeping denier MAGA people out of office so they don’t ruin the election process… democracy… further. But the public in general are concerned with the kitchen table issues.. things that affect them directly; threats to democracy can wait.
They say that are worried about those issues….but they vote for lies and misinformation every time and use the other guy as the cause. ……chuq
Yes, and I am totally appalled at the campaign TV ads.. from BOTH sides… AND the fact they run them to gaslight ill-advised voters.. BOTH sides. And I am as astounded that it always seems to work, election after election. Makes one surmise we only have ourselves to blame for the way politics has become.
Totally….the voter votes against their best interests almost all the time. chuq
In my experience, most voters have little understanding of politics and economics. It is easier for them to blame one side or the other, than to bother to learn about why we are in this fix.
Best wishes, Pete.
That is exact right…..it is easier than actually learning something. chuq