• Tips gratefully accepted here. Thanks!:

  • Recent Comments

    William on The Upcoming Supreme Court…
    djmm on The Upcoming Supreme Court…
    jmac on The Upcoming Supreme Court…
    William on The Upcoming Supreme Court…
    jmac on The Upcoming Supreme Court…
    William on The Peasants are Revoltin…
    Ivory Bill Woodpecke… on The Peasants are Revoltin…
    Ivory Bill Woodpecke… on The Peasants are Revoltin…
    thewizardofroz on The Peasants are Revoltin…
    William on The Peasants are Revoltin…
    riverdaughter on The Peasants are Revoltin…
    William on The Peasants are Revoltin…
    Lethe on A thing that happened.
    jmac on The Peasants are Revoltin…
    thewizardofroz on What was the point of voting i…
  • Categories

  • Tags

    abortion Add new tag Afghanistan Al Franken Anglachel Atrios bankers Barack Obama Bernie Sanders big pharma Bill Clinton cocktails Conflucians Say Dailykos Democratic Party Democrats Digby DNC Donald Trump Donna Brazile Economy Elizabeth Warren feminism Florida Fox News General Glenn Beck Glenn Greenwald Goldman Sachs health care Health Care Reform Hillary Clinton Howard Dean John Edwards John McCain Jon Corzine Karl Rove Matt Taibbi Media medicare Michelle Obama Michigan misogyny Mitt Romney Morning Edition Morning News Links Nancy Pelosi New Jersey news NO WE WON'T Obama Obamacare OccupyWallStreet occupy wall street Open thread Paul Krugman Politics Presidential Election 2008 PUMA racism Republicans research Sarah Palin sexism Single Payer snark Social Security Supreme Court Terry Gross Texas Tim Geithner unemployment Wall Street WikiLeaks women
  • Archives

  • History

    November 2021
    S M T W T F S
  • RSS Paul Krugman: Conscience of a Liberal

  • The Confluence

    The Confluence

  • RSS Suburban Guerrilla

    • Find a river
      But I do not know where she lies And I do not know if she cries Or laughs at me Oh Lord, Oh Lord, Oh Lord I wanna find my baby Oh I wanna find a river.
  • RSS Ian Welsh

    • The Joy of Reading & The Discovery Of New Author (Nero Wolfe Edition)
      I’ve been a big reader since I was perhaps 7 years old. In grade one I actually had remedial English: I’d been taught both whole word and phonics and it had screwed me up. Once I learned to actually read, I fell in love with it, trudging to the library, taking out the maximum and luxuriating in other worlds and other lives. I always find the strivers, attemp […]
  • Top Posts

Inflation, and the “Democratic Economic Paradox”

Politics is politics, and of course a political party is going to rush to blame the other for anything which is going wrong, or is seen as a negative, no matter who or what is actually responsible for it, or whether it is short-term or long-term. Republicans, as always, have the advantage in this kind of thing, because they essentially own the media, and can inundate people with their talking points. What Democrats have in their favor, is reality, but how well does reality fare when the other side tries to overwhelm people with propaganda designed to win elections and power for them?

We have a growing economy, by all reasonable standards. Employment numbers are definitely improving. There is an established ceiling for this; many economists believe that 3% unemployment is the lowest we can get to, given various factors. So those numbers cannot improve too much from where they now are, but there is still room. Wages are up. That is great, except of course when coupled with inflation. People do have more money in their pockets right now, than they have had in some time. The stimulus programs have provided that, and have given many families much more breathing room in terms of being able to put the proverbial food on the table, and have some savings.

But we have inflation. This of course provides a great talking point for Republicans, as they are going to blame it all on Biden. Not the Trump stimulus checks, not the low interest rates that Trump almost forced Fed Chairman Powell to create. Not the massive tax breaks for the super-rich, which gave them the ability to lavishly spend money, which even though there are not that many of them, still had an effect upon things like housing and travel prices.

Not the policies of pouring free money to the banks, with interest rates so low, that many banks stopped taking customer funds, or lowered their interest rates to their current .05% or so. Obama’s Administration had something to do with this, when they tried to deal with the crash of 2008, by wiping out all the losses that banks suffered due to their own greed and recklessness. And the Republicans continued to give immense amounts to banks, with the Fed steadily lowering interest rates for savers, to the point that many of them gave up, and put funds into the stock market instead. That has gone up, which is good, but not helpful for those who don’t want to play that risky game, and who retired hoping for a steady income from interest on their savings. And those who are getting very rich on stocks, obviously have a lot of money to spend, which drives up prices in the aggregate.

What has caused the current inflation? I do not purport to have any great degree of economic knowledge, not the sort that the people on the business stations have–though they seem to vastly tilt toward Reaganomics, “supply side,” “trickle down” arguments. Under them, the rich have gotten much richer, and the poor much poorer; and those in the middle get nowhere, having to run as fast as they can to stay in the same place, as a character said in “Alice in Wonderland.”

We all know that the economy ordinarily does much better, on virtually all metrics, under Democrats. There is immense data to back that up. Even the stock market has done better over the decades under Democrats. The economy has always been Democrats’ best argument for voting for them. All of the major economic crises and calamities have come under Republican Administrations. The “Panics” of the 19th Century. The Great Depression of 1929, lasting about ten years. The Savings and Loan debacle of 1987. The housing crash of 2008. In between, almost all of the Recessions have come under Republican presidents.

There was inflation under Carter, and a good part of that was due to foreign manipulation of oil prices. Gas prices are very high now, and some have speculated that Russia is causing much of it, by deliberately manipulating supply, to damage our country. Again, I am no expert on this aspect, but how could Biden’s policies be raising the cost of gasoline in the last two months? Republicans of course have a general argument that government spending is bad, that the money would be much better used by cutting the already low taxes of rich people and corporations, so that they could…fly to Mars for a lark, or buy their tenth house, or whatever the super-rich like to do.

So now they get to argue that the reason for the inflation spike is Biden government spending? The Trump spending in the stimulus packages is never mentioned. It is Biden’s fault, and if the Democrats stop trying to “build back better,” we will get back to the glory days of Reagan and the Bushes and Trump, when real wages never went up at all.

But logic, or a deeper study of economics, is not really the point. Voters are gong to blame Democrats for the inflation. “Inflation” becomes the lead topic on every news program, replacing for now, ‘the border,’ “civil unrest,” “cancel culture.” All of those will get used, of course.

Jennifer Rubin, long-time conservative columnist who now does a great job in supporting Biden and hammering at Republicans, notes that every news story is slanted to the Republican side, where they get to pick the “issues,” and the Democrats are always on the defensive. This means that we are going to keep seeing pictures of empty shelves at the supermarkets, price stickers, consumers complaining that they can’t buy necessary items or celebrate the holidays. All because of ten months of the Biden Administration, and all those people going back to work? Completely illogical, but the drama effect is there, of course.

Supply chain disruptions are significant, and this has nothing to do with this administration. it is a global problem. The pandemic contributed, and various natural disasters, including to shipping. The administration is working on this, and it will probably improve. But in tine for the elections?, is the question. And that is what almost all of this is about.

Most respected economists, even from the “Right,” believe that the two large bills, one just passed, and one close to being passed, will actually help with supply chains and with inflation. But that is not immediate. The great paradox which Democrats have always faced, is that when they are in power and usually improve economic conditions, then people take it for granted, and think that they do not need to vote for them to fix those things. So they default-vote for Republicans on “culture issues,” which, as we know, are usually wildly invented, and sometimes fascistic from their end, n terms of burning books and controlling what is taught or disseminated.

Ron Brownstein, one of the very best political analysts, writes, “Politically, the question is whether these benefits will kick in quickly enough to prevent a stampede toward the Republicans in 2022, among non-college White voters, and maybe more working-class Hispanics, drawn to conservative cultural messages, and distressed over the inflation spike.”

That sums it up well. And given the limitations of voters, the answer would seem to be, “no.” And then, as far as 2024, I think we will be seeing a very good economy, but since Democrats managed to get the bills passed, people don’t need any more, and are free to vote on invented and dangerous “cultural issues.” Democrats rarely win on those, and why that is, is a very interesting topic, and must be changed, but seems to be the current reality, until some Democrats find a better and more powerful way to message their cultural positions.

Right now, we have to root for inflation to subside. Raising interest rates usually helps, but the Fed refuses to do that. Interestingly, Fed Chairman Powell disclosed that he sold between $1 million and $5 million worth of stock just before the market dropped 4.7% in October, 2020. Republicans are pushing for Powell to be reappointed to a new term. I hope that Biden picks someone else, and does not do what Obama did, in reappointing Comey as head of the FBI, to assuage Republicans. But of course if he does make another pick, the right-wing media will go berserk.

The cycles of economics can go up and down. The hope is always that the longer-term trend is positive, and that certainly seems to be the case now. Of course, there are real people who are affected, who derive no satisfaction from being told that “this will pass,” when they are struggling. My thought is that not that many are newly struggling, in view of wage rises and new job opportunities. But some of course are, and they are going to take it out on the Democrats. Which is exactly what Republicans want. Their ideal economy is one where the rich make all the money, and live the cushy lives, and everyone else is a wage slave. We know that, and have seen it play out under every Republican Administration. I wish that more people would realize it. And of course, the Republicans are very ready and capable of taking credit and electoral gains for the things that Democrats accomplished.