IS BIDEN TO BLAME FOR CURRENT INFLATION?

Before I give my answer to the title question, let’s be sure we understand what I mean when I say “inflation.” To this non-economist, inflation means that prices for goods and services increase at a noticeably higher rate than before, causing some people to experience real hardship and almost everyone to notice.

Now, let’s look at some of the major events causing the increase in prices we are currently experiencing. The major triggering event occurred when demand exceeded supply. There were two possible explanations for this. First, not enough goods were available to meet the demand. This almost always causes the prices of available goods to go up. A good example of this occurred (and is still with us) when new car prices jumped due to computer chip issues.

A second reason for the prices of goods and services to rise is when some event causes the cost of producing the goods or providing the services to increase. This causes consumers to pay noticeably more for the same goods or services than they had been paying. For example, bad weather can cause shortages of goods like fruits or vegetables and prices will climb. Similarly, the cost of services goes up if workers get raises or the cost of goods to provide the services increases, and management decides to raise prices to maintain or increase profit margins. Remember when car prices used to rise because of new union contracts or increased steel prices? Today, we see this happening with retailers, restaurants, and lodging.

Got it? OK, let’s move on. First, a little history. Prior to Covid19, the rate of inflation was less than 2% and most people paid little attention to it. Most economists trace the beginning of the inflationary rise in prices for both goods and services to the Covid-19 virus, the delayed and flawed reaction to it, the effect of these actions on the economy, and the inadequate response of the government to avoid an economic catastrophe. It is important to note that this was not the first time the country had been threatened by a virus with the potential to have a devastating effect on the country. Historical analyses show the country had experienced similar threats from SARS, H1N1, and Ebola but had avoided catastrophic losses. The differences between the influence of these viruses on the country then, and what happened with Covid-19, were the actions and inactions of one man — President Donald J. Trump.

First, against the recommendations of experts in the Center for Disease Control (CDC), he closed down the government unit created after the H1N1 episode whose job was to alert us if some new virus appeared. This prevented us from receiving the early warnings by the CDC that in the past had facilitated actions to prevent previous viruses from having major consequences. Despite his closing, this unit, and replacing experienced, well-qualified people with new, untested, and in some cases, unqualified Trump loyalists, some of the remaining experts in the CDC saw what was coming and attempted to warn us.

It was at this point that President Trump repeated his pattern of jumping in and attempting to micromanage something he knew little about while ignoring the advice of people with real expertise. Published documented audio interviews with him provide unquestioned evidence that he was fully aware that we had a major disaster unfolding. Yet, he acted like it was nothing we should be concerned about. Not only did he refuse to publicly.

acknowledge the problem, but he worsened the situation by first preventing experts at the CDC from alerting the public and then by not allowing them to act as they had done in the past to prevent similar previous virus outbreaks. If this was not enough, he used his position as President of the United States to tout several “cures” and treatments that had been evaluated as unproven (and, in some cases, unsafe) by virtually every reputable expert. Sadly, these recommendations were accepted as “gospel truths” by many of his followers because they came from the President.

Then, during the early days of the pandemic, before vaccines were produced, he refused to endorse or model the only known recommended way of reducing the spread of the disease, which at that time consisted of wearing masks and social distancing. His failure to use his considerable influence to vigorously urge the public to follow both practices helped the virus spread anytime two or more people were together. Until his last day in office, his repeated micro-management, poor leadership, and deliberate misrepresentation of known facts by him personally and by his administrative officials continued to contribute to unnecessary deaths. In addition, as history will show, his actions and inactions caused thousands of businesses to close and millions of workers to be laid off or furloughed. Hit hardest were low-wage employees paid by the hour and people who had jobs that could not be done at home or who had employers who would not allow them to work from home.

When the American people voted him out of office by an “overwhelming” Electoral College vote (a term he used to describe his exact same electoral vote margin over Hillary Clinton) and a seven million popular vote margin, we had vaccines but no workable plan to get them in arms and 400,000 COVID deaths.

When Biden became President he immediately announced that fighting the spread of the virus was “Job One.” Three of his first actions were to make the vaccines easily accessible, to make the vaccines free, and to increase the supply of vaccines so that there were enough vaccines available for all eligible people.

His acute awareness of both the short and long term effects the COVID pandemic was having on workers’ families and the economy caused him to encourage House leaders to write a 1.9 trillion dollar American Rescue Plan bill that was approved in the House by a 220–211 bipartisan vote and in the Senate through the special budget reconciliation process. Almost all economists agree this bipartisan legislation kept our economy from collapsing.

This legislation also provided many unemployed or furloughed workers with enough money to keep a roof over their heads and food on their tables. In addition, the bill provided some recipients a rare opportunity to save money. It did this in three ways. First, taxes on these funds were not immediately taken out of their checks. Two, they could defer rent or mortgage payments, and three, they saved money on transportation costs such as gasoline and public transportation fares. (It is important to point out that the oil cartel ignored the resulting drop in demand for gasoline and elected to maintain their profit targets by not lowering prices.) Workers with children also saved on childcare expenses because their kids were at home with them. The cumulative result of these actions was a drop in their cost of living which resulted in some recipients having more money available than when they were working.

During this time, these workers –like so many of us, grew tired of staying at home. Some of them used their new dollars to shop online or at a few local retailers (like Home Depot and Lowe’s) causing those merchants to report record sales. In addition, some of these workers, and lots of other people, ate out more frequently than before, but by going through drive-through windows or ordering take-out.

As a result, in the early stages of the pandemic, some partially or fully shuttered retailers and some restaurants encountered a problem they had never experienced before. They had customers who were willing to spend money on goods or to buy food through a drive-through window or a curbside order, but they had real problems getting anyone, especially laid-off former employees, to return to work.

There were a number of reasons for these situations. . At the beginning of the pandemic, some former employees were receiving enough government funds or saving enough by not working that they did not need to work. Others, especially those who had experienced a better standard of living during the pandemic, were no longer willing to work for their previous wages. Additionally, some, but especially single parents, were willing to consider returning to work (for higher wages) but now found their child care establishments had closed, or, to get workers, now had to pay workers higher wages. Unfortunately, their new rates were more than some of these former customers could afford.

Because of the large percentage of people who had elected not to be vaccinated, another group of workers, (especially older workers), was unwilling to work in situations where they could not avoid contact with unvaccinated people who refused to follow posted signs to wear masks (some of whom did not take kindly to suggestions to wear them).

As the Biden administration’s accelerated efforts to get free vaccines in people’s arms began to show results, more and more businesses attempted to reopen, if only partially. Unfortunately, for the reasons described above, managers found it very difficult to attract workers or to get them to stay because then, as now, many workers were constantly shopping around for better-paying jobs.

With that history in mind, let’s reexamine the reasons for the quick rise in prices for both goods and services. Remember — prices usually rise when an increased demand for goods creates a gap between the availability of goods and the supply of goods. The larger the gap, the higher the price for available goods. As an example, during COVID, I paid double for low-rated exercise bands because they were the only ones available.

For years, many of the goods sold in America have come from China. Due to their having to follow government orders, many of the factory workers in China had been vaccinated so factories had workers available. As demand increased, these factories were able to quickly produce needed goods. Their ability to begin producing goods immediately had one major consequence. The pent-up demand, coupled with the abrupt rise in supply, led to the need for an unparalleled number of ships to carry the goods. The loading of a large number of previously idle ships, when combined with already working ships, resulted in an unprecedented number of ships having long waits at US ports to be unloaded. These delays caused costs for these goods to rise due to increased storage fees. In case you didn’t know it (I didn’t), goods on ships pay storage fees when they are unable to be unloaded within a contracted time period because it prevents that ship from either unloading and taking on other goods or returning for another shipment.

This well-photographed situation of large numbers of anchored ships was made worse by existing work rules for dock workers. When these issues were resolved, and dock workers began making progress unloading an unprecedented amount of goods, another problem surfaced.

Existing truck drivers were unable to transport the unloaded goods to waiting vendors fast enough. One reason was a shortage of drivers because of increases in the number of drivers who had retired. The second reason pertained to work rules governing drivers.

Let’s examine these two issues beginning with the higher rate of retirements of truck drivers. At the beginning of the Covid pandemic, many drivers were laid off or had their hours reduced because of reduced demand. Some, who had been considering it for some time, thought this would be a good time to retire. Others, because they were concerned about constant news reports saying their jobs would be taken over by driverless trucks, had found other jobs.

The Biden administration worked with the trucking industry to develop some short-term creative ways to increase the number of drivers and they have been working with both trucking companies and unions to alleviate issues caused by cumbersome work rules. However, given the uncertainty about the long-term future of truck driving, this county’s over-dependence on foreign goods, and our shipping goods by trucks versus trains, solving the problem of transporting goods from ports to consumers economically will continue. For now, the gap between driver supply and industry needs has caused driver wages to go up dramatically, thus adding to inflation.

In summary, the inevitable result of higher demand and lower supply of goods, coupled with having to pay more for workers, including drivers, has been noticeable increases in prices for some goods and services.

Sadly, some businesses, whose costs were not as directly affected as others by the factors affecting prices, have taken advantage of the situation and raised prices to price gauging levels. Especially notable examples are baby formula and rent. The latter is largely the result of a housing shortage caused in part by much higher building costs. This significantly increased prices for existing homes and new apartments. The increases in home prices led some potential home buyers to remain in apartments or seek an apartment. The increased cost of building new apartments resulted in predictable increases in rental rates for new units. Unfortunately, some apartment owners were quick to take advantage of the situation and raised rates on existing units.

Additionally, as more people have returned to work by driving, the oil cartel has continued to ignore the laws of supply and demand and, despite increased demand, has not increased supply but has chosen to add to already inflated prices, further adding to their record profits. The result has been a significant increase in the cost of a full tank of gasoline. This one increased cost has had three other outcomes. First, it has dramatically increased living costs for lower-income workers who must show up to work to be paid, and especially so, for those who must drive to and from one or more places of work. Second, it has served as a “red flag” about inflation. Finally, it has given anti-Biden supporters and conservative media a convenient target.

In closing, let’s look at one other less recognized factor influencing inflation. Every year, because of traditional business practices during busy income-producing holidays, many employers have found that to get workers, they needed to raise wages, improve benefits, offer signing bonuses, and be more flexible about work hours. These short-term “fixes” have become the new “normal” and, although they have put more money into the economy, they have added to inflation.

In sum, this non-economist’s answer to the question, “Is Biden to blame for the inflation,” must be an unequivocal “NO.”

Thank you for reading this! I write because I think readers will find what I write informative and thought provoking. Happily retired, I now have the time it takes to take an idea, do the research needed to fully understand it (and not embarrass myself!), make the first outline, then the first draft, then start the rewriting, and, finally, the editing. Then it goes to several friends, including a Ph. D. in English. Then, it’s back to rewriting and editing. Then it goes out to possible readers. What you just read was the result of that process. Despite their help, I assume full blame for any mistakes (and there have been some).

If you are still reading and you found what I wrote worthwhile, you might want to look up my other Medium articles.

One last note. I write to make readers think and because I enjoy it — not to make money. Any income derived from my writing is donated to the local library as part of my annual contribution.

Thanks!

Jim Hammons
“Think Piece” Commentaries