Home Analysis It’s the economy, Joe

It’s the economy, Joe

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It’s the economy, Joe
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Good afternoon,

President Joe Biden will fly out of New Castle tonight after a long Martin Luther King Day weekend.

The President  and First Lady Dr. Jill Biden spent part of Sunday packing veggies at Philadelphia’s  food bank as part of the Day of Service – a key  part of the  commemoration of the life of Dr. King.

He  returns to D.C. with two major  headaches – inflation and Covid-19. There are other  issues that include rising turmoil and the Middle East as well as  Russia massing troops at the border with Ukraine.

Global tensions are nothing  new. But it has been three decades since the last presidents wrestled with rising prices across the board. Those presidents were Jimmy Carter and Ronald Reagan.

Carter was unpopular when he left office as the brakes were put on inflation, with many of us paying 16% interest on a car loan. 

The last inflation battle

The same was true in Reagan’s first couple of years . Tax cuts helped Reagan, although many  say it widened the gap between rich and poor – a disparity that  Dr. King pointed  out during his life.

Reagan’s  successor, George Bush did not get a second term, due to a small recession and the campaign of Bill Clinton, which famously used  the term “It’s the economy, stupid.”

Over the next three decades  trade policies under a succession of presidents  led companies to move production offshore. Also, competitors emerged in other nations and ended the market domination enjoyed by giants such as DuPont and GE.

Consumers benefitted, but many workers in manufacturing, mining and other areas either retrained  or took  positions that sometimes paid less and came with fewer benefits.

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Manufacturing moves offshore

Along the way, Delaware lost thousands of jobs in the auto industry as production was shifted to the Sun Belt and the middle of the country where shipping costs were lower.

The clout that came with having the same number of U.S. senators as California and Texas had evaporated in the financial meltdown of 2008.

Inflation remained in check as pay increases remained around the cost of living and unions lost their power.

In the meantime, stock market gains  aided the wealthy or financially savvy. Savings accounts generated  virtually no returns, sending more people to Wall Street or simply living paycheck to paycheck.

Technology also helped in improving productivity, but led to fewer entry level jobs. 

Along came Covid 19 and the natural response among all affluent nations was to widen the safety net and pump money into the economy, the classic formula for inflation.

With the economy springing back,  supplies tightened and  employers raised wages in an effort to get people off the sidelines.

An aging population did not help with many taking early retirement, aided by a gains in their 401 (K) retirement plans that were the result of the recovery.

The final blow on the pricing front  came  from a broken  supply chain that has led to shortages and soaring shipping costs.

Adding to the misery is the Omicron variant, which is keeping many Americans (and a few who don’t want to work) at home. While less serious overall, it is clearly a factor in packing hospitals already struggling with staff shortages.

Biden was late in responding  to supply chain crisis

The Biden Administration and the government  in general should have responded more quickly to the supply chain crisis and been better  prepared for a faster spreading  strain of the virus.

It did not help that politics and  reared its ugly  and contributed to a  sizable percentage of the population remaining defiantly  unvaccinated.

The Biden team  also took the easy way out by automatically blaming the oil companies for gas price increases. That’s nothing new with presidents  Instead, the administration  should have done more to deal with supply chain problems in that industry.

Biden also repeated the mistake of  past presidents by saying that Covid as well as inflation will go away soon.  Both the virus and inflation are persistent and will require decisive actions  as  well as a degree of patience –  an area where Americans do not excel.

It may mean the current “build back better” legislation should more effectively  target ways to get people back into the workforce.

Barring a miraculous turnaround, Biden will pay the price when it comes to the  mid-term elections.

But that’s what happens when you end up with the most powerful position in the world and find your options are limited and come at a high cost. – Doug Rainey, chief content officer.

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