How to stop Stagflation now

 

The latest inflation data was released on June 10^th and the news is getting worse.   Prices increased 8.6% in May – the largest increase since the country started Christmas shopping in 1981. Making matters worse is the fact that the economy contracted by 1.4% in the first quarter of 2022.

For those of you who are new to this type of party – meaning you are under the age of 50 – this is called stagflation, and it is the worst of all economic developments.

Stagflation first reared its ugly head in the United States in 1971 and stayed there for over a decade.

Nixon tried wage and price controls (see Elizabeth Warren’s current call for the same) only to create shortages and black markets.

Jimmy Carter tried to spend his way out of trouble, only to see the ‘Misery Index’ - the sum of inflation and unemployment – reach a record that has never been broken.

Now it is Joe Biden’s turn to either look like a savior or share the dunce cap worn by his predecessors.

If he is serious about fighting stagflation – without seeing a Federal Reserve Bank created recession, do it for him – he needs to do just one thing.   That is, he must immediately take measures to increase the overall supply of goods and services in this country.  To do that, he must ignore his party, overturn Trump’s bad ideas and have the courage to be unpopular until non-inflationary economic growth reappears.

First, President Biden has to inform the climate change zealots that now is not the time to worry about how much ice is in the Artic in the year 2417.    He should announce, immediately, that permits for oil drilling on federal lands that have gathered dust for the past two years will be approved while all federal regulations that are currently rushing us towards a fossil fuel-free society will be tabled.     Notice that as gas prices have crept towards $5 per gallon, the oil companies are not acting like they used to.   In the past, high gas prices would have led to a flurry of production increases everywhere crude can be found. 

Not now.   Biden and his climate change minions have scared the oil and gas industry into sitting on proven reserves and barely budging the production needle.  He needs to tell them – yesterday – to drill, drill, drill.   This will help increase supplies, lower prices and offset what has been lost from Russia’s war against Ukraine.

Second, he needs to open the borders – and they need to be wide open.   There are currently over 2 million fewer immigrants in the U.S. than we would normally have because of Trump’s lousy understanding of the value immigration has in a modern economy. That, plus the slowdown that occurred during the height of the pandemic has created a terrible labor shortage that has fueled skyrocketing prices for homes, food and everything else.     We need more people and since Americans do not seem eager to go back to work, we need to get them from anywhere and everywhere.

Third, Mr. Biden needs to call off Donald Trump’s trade war with the planet and announce that there will be pressure on Congress to eliminate all tariffs on all goods that are produced in any country on the planet that wants to sell to us.   The elimination of tariffs would help offset a great deal of the supply-chain issues that have kept prices high and would create more competition, lower prices and economic growth.

Finally, while there is nothing Joe Biden can do to undo his inflationary $1.9 trillion stimulus package from 2021, there is a message he can send to Wall Street that would be helpful.   That is, that government spending – across the board – will be cut.  That means corporate welfare, social welfare and every other category in between in order to show some measure of inflation-fighting fiscal discipline.

If all this sounds like some ridiculous fairy tale that would never happen, well, that is true.

That is why many economists are now saying that this decade – yes, the decade – is going to look a lot like the 1970’s, minus the polyester and disco music.

Paul Bell - Legendary Oklahoma football coach - and father figure

 Today, Paul Bell, my high school football coach in Hugo, Oklahoma (1981-83) passed away.

Words cannot describe how much Coach Bell meant to me and the thousands of other young people he impacted during his time as an educator and coach.

In the 1970's he was the coach of Eufaula, OK high school where he shaped the careers of legends like J.C. Watts and the Selmon brothers.

The number of All-State and All-American players he coached is staggering.   He had players who ended up in the NFL Hall of Fame and who were considered candidates for President of the United States.

But he also had a far greater impact on the players he coached by being a true father figure.

Eastern and Southeastern Oklahoma is a hard part of the world to grow up in.   When I was a kid, the fathers of that era were not the type to hug a lot or say "I love you" with great, or any, frequency.

Paul Bell was different.

It was not uncommon for him to finish an important football, or life lesson, and look you right in the eye and say, "I love you."  

You knew pretty quickly that he meant it by the way he fought for us, taught us and molded us into men.

The molding could be tough as hell though.

Coach Bell grew up in Depression-era Oklahoma, worked in the oil fields, served in the military and was a champion boxer and undersized guard for his national championship college football team.  He was a hard-nosed, no-nonsense man that I seriously doubt many of today's NFL, college or highschool kids could have tolerated.

He was not shy about loudly correcting stupid things we did and did not tolerate laziness.  

From his two-a-day practices in Oklahoma's summer to his fourth quarter drills that made you wish you were 1,000 miles from his practice field, when he put us through conditioning drills you knew it was meant to last a lifetime.

And a lifetime it has lasted.

There have been many times when I have been in the proverbial 4th quarter of work, parenting, coaching or being a husband.   I cannot count the number of times that I have felt Coach Bell's influence when I needed to finish strong or outwork someone else.   His tough love shaped my character and helped me understand the difference between excellence and mediocrity.

Late in his life I would take my sons to his home and he treated them like they were his own.  He laughed with them, showed them football drills and asked them questions about their interests and their lives without ever bragging about himself.

He also never discussed something with me or any other player that is also a testament to his character. Coach Bell was let go by Hugo after three seasons.   Years later we found out that one of the the biggest reasons for his dismissal was his decision to have the first African-American quarterback in school history take the reins for our team.  This was a hugely unpopular decision with the people in Hugo who had power and influence over the school board even though it was the right one for our team.  That quarterback ended up taking Hugo to back-to-back state playoff appearances his junior and senior year.

This, and countless other stories about him are sure to circulate in the days ahead.

Paul Bell's legacy is one of character, discipline and dedication to young people while showing them it is fine for a tough guy to show love and kindess at the same time.

Thank you, Coach Bell.

I love you too....

How President Biden can Fight Inflation

What follows is my Op-Ed in today's Orlando Sentinel

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Readers of this paper who are under the age of 50 do not recall the last time the United States experienced a rapid increase in the price of, well, everything. 

Recently the latest inflation data was released, and the report was staggering.  Last month, prices rose by 7% - the largest increase since 1982.  This figure represents an acceleration of upward pressure on prices that has been taking place since the end of the short-lived, but severe 2020 recession. 

Left unchecked, every American who receives an increase in their wage or salary in 2022 better hope that it approaches double digits, otherwise they will only be able to say, “Thanks for cutting my pay” to their employer. 

Yet, it does not have to be this way.   There are steps the Biden Administration, Congress and the Federal Reserve Bank can take today to prevent a disastrous repeat of the 1971-82 period when a new term, “stagflation” reared its ugly head. 

Inflation takes place when the demand for goods and services increases at a faster pace than suppliers can produce.  Stagflation occurs when the overall supply of goods and services declines.   Stagflation is the worst of all economic evils because when supply falls throughout a nation it not only pushes up prices, but it also leads to a recession and higher unemployment. 

What we are seeing today is, for now, demand increasing extremely fast while supply is slightly falling, or depending on the sector, barely increasing. 

This problem has been created by several sources.   

First, the Trump and Biden Administration, to fight the economic dislocation caused by the pandemic, sent out trillions of dollars in stimulus checks, whether you needed it or not, to boost demand and shore up consumer and business confidence.  That coincided with drastically expanded unemployment benefits and monthly tax credits paid out to families, even if their finances were on solid footing. 

Simultaneously, the Federal Reserve Bank, adjusting for inflation, has provided the nation with negative interest rates throughout 2021 and today.  If you have a 3% mortgage payment, with inflation of 7% you are paying negative 4% interest to your bank.   This has help fuel an explosion in home buying like the pre ‘Great Recession’ binge of the early 2000’s. 

On the supply side of the equation, both Presidents Trump and Biden have fueled rising input costs of production with their economically absurd foreign trade policies.  Neither of these gentlemen have subscribed to the centuries-old belief that free trade leads to economic growth, prosperity, and lower inflation because of a steady flow of products and competition. 

Instead, we have seen an increase in tariffs on most of our trading partners which forces them to raise prices while allowing American companies, who now have less competition, to follow suit with their own increase in prices. 

Moreover, economists keep pointing out the  dramatic expansion in government spending has led to historic reductions in the labor force.  In many cases, throughout 2021, government benefits paid far more than work so people simply pulled out of the labor market.  This further decreased the supply of goods and services and has contributed to our current state. 

It cannot be overstated that the pandemic has led to supply chain issues that neither Trump nor Biden could have foreseen or fixed quickly.  Yet, there are some things that President Biden could do now to help 2022 look more like the previous 40 years. 

First, he must avoid pushing for an even greater expansion of government spending that creates disincentives for people to work.   Second, he needs to reverse Trumps’s anti-immigration stance and make it far easier for people to enter the country join the labor force. 

Third, his current regulatory agenda that has drastically increased the rules, paperwork, and expense of owning a business must be reined in.   Every new regulation is a cost.  Every cost gets paid for when we go shopping. 

Fourth, unlike his predecessor, Mr. Biden needs to openly work with the Federal Reserve (see Ronald Reagan and Paul Volcker) to raise interest rates now – and by a large enough amount to slow the irrational growth of demand we are seeing. 

Whether Mr. Biden has the political courage to do this is uncertain. 

What is certain is that if he does not, this decade is going to look a lot like the 1970’s - and no one should want that. 2 Orlando Sentinel