With his support rating plummeting, President Joe Biden is currently lagging behind former President Donald Trump in national surveys and in a few crucial swing states.
Vox attributes Biden’s declining popularity to the economy, or at least how voters see it. Only 32% of respondents to a recent Gallup poll said they are satisfied with Biden’s economic management.
The White House has gone on the attack, criticizing billionaires and holding corporations accountable for the economic suffering that the public is going through in an attempt to refute the claim that Biden’s policies are to blame.
“It’s time to stop the price gouging,” Biden tweeted. “Let me be clear to any corporation that hasn’t brought their prices back down even as inflation has come down.” “Please, spare American consumers.”
Justin Wolfers, an economics professor at the University of Michigan, noted on social page that this strategy is peculiar for a number of reasons, the most obvious of which being that it makes no economic sense at all.
Wolfers, a senior fellow at the left-leaning Brookings Institution, criticized Biden’s tweet, saying, “This is not only incoherent; it’s unhelpful.” It is illogical since companies should be reducing price increases rather than lowering them in response to decreased inflation. It is useless since there is no other way to return to previous price levels except through deflation, which causes severe economic hardship.
Professor of economics at the University of Maryland Melissa S. Kearney replied with a sad face emoji.
Kearney said, “I’m guessing the economists weren’t consulted on this one.”
The Biden White House clearly ignored the reality that, even though inflation may be decreasing, it is still positive, meaning that prices are still rising and doing so much more quickly than the Federal Reserve’s 2% target. It contradicts economic logic for businesses to lower prices when consumer costs are generally rising.
Biden’s tweet has another flaw in that it blames businesses for inflation that is caused by government policy. The Austrian economist Ludwig von Mises noted that inflation is only a policy in one of his most well-known lectures.
Furthermore, it is evident why individuals are experiencing inflation if we consider recent monetary policy in the United States.
The M2 money supply expanded by the Fed over a four-year period, rising from $14 trillion to $22 trillion at its peak in the summer of 2022—a gain of more than 50% in just four years.
Due to tighter Fed policies, the M2 money supply has somewhat decreased to $21 trillion, but it is still much higher than levels seen before the pandemic.
This is the reason for price inflation, and the Fed’s explanation of the inflationary process serves as proof of this.
On its “Money and Inflation” resource page, the Federal Reserve Bank of St. Louis states that “inflation is caused when the money supply in an economy grows at a faster rate than the economy’s ability to produce goods and services.”
Obviously, the first question to ask is: Why are we printing money if it leads to inflation?
Although employing monetary policy to combat unemployment has always been tricky, the Fed has long maintained that inflation is simply the price we must pay to keep unemployment low. It is true that unemployment and inflation generally have an inverse connection, as the Phillips curve illustrates. Initially, when inflation increases, unemployment decreases and vice versa.
But over time, this relationship becomes weaker, which is why some wise economists—among them Nobel Prize winner F. A. Hayek—thought that utilizing monetary policy to reduce unemployment would unavoidably lead to rising inflation because central banks would have to keep printing money in order to keep unemployment low.
This phenomena has been observed in a number of recent countries, such as Argentina, where the rate of inflation is over 140%. Over the past ten years, Argentina’s unemployment rate has averaged at 8.5%, despite the country’s high inflation rate. Put another way, Argentina is experiencing high unemployment and high inflation, much like the US was in the 1970s.
Although controlling unemployment may be the declared rationale for inflationary policy, its true motivation appears to be facilitating government expenditure. Inflation is a tax, as noted by economists Milton Friedman, the winner of the Nobel Prize, and others.
The government spends money because taxes enable it, and the inflation picture becomes evident when one realizes that inflation is a tax. Extending the money supply is what leads to inflation, but government spending is what drives this process.
Of course, politicians are unable to admit this. So they create ludicrous economic narratives that hold corporations accountable for the very inflation that their policies create.