The latest inflation data was released on June 10th
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.
