Under Bidenomics, inflation is the gift that keeps on taking
By: Kevin Cochrane, Opinion Contributor (The Hill)
Those Biden bucks everyone was given to celebrate stealing an election are now worth 80 cents. If your million dollar 401k hasn't grown by $200,000 during Biden's time in office then you're losing money to inflation. That $400,000 house now has to sell for $480,000 just to keep up with inflation. And don't be surprised that a $50,000 Ford F-150 costs $60,000 three years later just to keep up with inflation. What Biden's dollar could buy when he took office now costs $1.20. If you don't believe then check it yourself.
We all know Biden screwed the pooch. But that should allow these phony neoliberal economists to get away with gaslighting the public. Anyone that quotes Friedrich Von Hayek is lying. And the tropes about labor and productivity are nothing more than neoliberal bullshit. The United States no longer works for its money. In the modern neoliberal fantasyland, our money is working for us; we don't have to do one damned thing.
What these neoliberal Hayekian shysters fail to tell the unwashed masses is that inflation is their friend; inflation is how these neoliberal middlemen make their money. The insidious problem with neoliberal economics is that inflation begets inflation. Those higher real estate values begets higher property taxes, higher insurance premiums, and higher interest payments. And in our financial times, neoliberals use the Federal treasury like a magic money tree. The flimflam is that every one of those deficit dollars spent requires taking a dollar out of the economy to cover the debt. Neoliberals make their money off the inflationary spread. These neoliberal carny barkers will point out that foreign governments are buying that Federal debt and 'investing in America'. We're just supposed to sit back and live off the grift.
Joe Biden is a neoliberal. Biden has followed the neoliberal playbook, pushed the neoliberal buttons, pulled the neoliberal levers, and has totally screwed up the US economy. Now the neoliberal economic gurus are trying to protect their skim with Friedrich Von Hayek platitudes that are only relevant in an unproductive economy. And we're supposed to believe that Biden's pandering patronage is going to rebuild a productive economy? Biden's incentives means the investors have already gotten theirs; they don't have to work for anything.
S E E D E D C O N T E N T
"History is largely a history of inflation," Nobel-winning economist Friedrich Von Hayek wrote in 1960, "usually inflations engineered by governments for the gain of governments."
Today, these words are truer than ever. During the almost four years we've lived with "Bidenomics," consumers have seen the cost of ordinary purchases increase by more than 15 percent due to inflation. That's an additional expense of $9,000 per year for the average household.
Reflecting on the past can often be illuminating. During the four years of the Trump administration, the Consumer Price Index saw a meager 1 percent increase. Critics may argue that the deflationary impact of COVID skews this figure, but even excluding it, the overall price level would have only risen by about 2.5 percent. What's the key difference? The answer is one word — "government!"
Under the current administration, deficit spending by the government has surged by over 40 percent. The Treasury runs a deficit when the amount it spends exceeds the amount it collects in taxes. The difference is borrowed by selling bonds. But most big government do-gooders don't understand the connection between increased government spending and inflation.
To oversimplify things, the macroeconomy is one giant circular flow. Your wages cost your employer some of her profits, but they become another's profits when you buy something. Banks intervene in this flow by taking what you don't spend on things and loaning it to others to buy things. It's all pretty stable until the government steps in and starts spending money it doesn't have. The result is inflation.
When you do your job — that is, when you produce something — you are paid by your employer for that production. Economists like to call this "revenue product." As long as the value of your revenue product is at least as much as what you are paid, everything keeps humming along fine.
But when the government engages in deficit spending, an imbalance arises. More money is spent than the goods being produced. The difference is the inflationary increase in the price level.
In March 2021, Biden signed the American Rescue Plan Act — a $2 trillion boondoggle. Without getting mired in its mismanagement and outright fraud, it pumped all that money into the economy without producing anything.
According to our circular flow idea, that should cause inflation. And here are some "back-of-the-envelope" statistics that show it did.
In the twelve months following its signing, personal income increased by 3.7 percent while worker productivity (output per hour) decreased by 1.5 percent. Adding those together we get a delta of 5.2 percent. During that same period, inflation increased by (you guessed it) 5.3 percent. It's funny, but not funny.
But wait. We're told that's not the case, and that greedy corporations are causing inflation. Corporations may be greedy, but they shouldn't take the fall for this one.
Yes, things at Walmart cost more today than they did four years ago. But that doesn't tell us whether those price increases are a cause or an effect of inflation. The way we have to think about it is to question whether Walmart is making more money today than in the past, adjusting for inflation.
During the Trump years, Walmart returned a cumulative average of 18 percent per year on its investment. During the Biden years, it returned the exact same 18 percent. So no, it's not greedy corporations. It's not wages rising more slowly than productivity. Rather, it's the government causing inflation through deficit spending.
At the same time, we hear from the administration about its supposed "war on inflation." You'd think if they were genuinely earnest about it, they would do something. And they did.
The Inflation Reduction Act was pushed through Congress just over a year ago. By its name, you'd think that, finally, something was being done.
But to what end? This bill calls for almost another $1 trillion in government spending. Here we go again.
Kevin Cochrane is an economist, former senior banking executive, and visiting professor at the University of the West Indies in Barbados.
Tags
Who is online
512 visitors
In our neoliberal economy inflation results in paying more taxes, paying more for insurance premiums, paying more for interest, and just giving more money to middlemen who do nothing productive. Look at how much money is collected by a 10% sales tax as inflation increases prices. If the value of a house increases due to inflation then the owner will pay more for property taxes and insurance premiums. For an economy based upon finance (and debt) inflation only results in more inflation.
But, abortion!
Twat inflation? Everything costs more under Bidenonmics.
Trump is toying with the idea of replacing income tax with tariffs. Someone with at least one quarter of a brain needs to teach him something about economics. Yet here are the usual suspects pretending that inflation is solely the fault of Biden and that somehow it will magically melt away by electing one of the most spectacularly failed “businessmen” in the history of this country.
Trump says he intends to rule as a dictator! The MAGA are making a last stand on inflation as retailers are slashing prices. Perfect!
Maybe you should be educating Biden and the Democrats on what increasing taxes during inflation does?
Anyone with at least one quarter of a brain knows that. Which leaves out Biden and Democrats it seems.
Oh, I see, doubling or tripling the price of everything imported into a country that relies heavily on imported goods is preferable to a slight increase in taxes. Don’t quit your day job.
The US current problem is our economy is growing too fast!
There are worse problems. I hear things are horrid in Russia.