Joe Biden's big cookbook for inflation
Joe Biden says we must pass his huge slush-fund social-spending package now in the works in Congress in order to reduce inflation.
Since when does throwing money at anything reduce inflation? Did Obamacare reduce health care costs? Did all the cash thrown at higher education, such as federal student loans, reduce college tuition?
If they pass free daycare and pre-K education, then as sure as the sun rises, those prices will skyrocket because the providers will have a captive audience.
Treasury secretary Janet Yellen says inflation will drop magically to 2% next year. We know that earlier this year, she and others said the current inflation in the system is just transitory.
White House chief of staff Ron Klain and others say that since these slush funds are "paid for," they aren't inflationary.
They claim these slush funds are "paid for" by pretending that the new entitlements will last a few years and then be paid with all the revenues from tax hikes on "the rich" over ten years. Of course, that's a lie, too. They are actually offering tax cuts for the rich, and then pretending these tax cuts for the rich, which involve raising the SALT deduction, are a revenue-raiser by playing with dates.
The Galaxy-Brained Reason Democrats Might Pass a Massive Tax Cut for the Rich
It's entirely possible that the Build Back Better Act will end up spending more money on a tax break for rich orthodontists in New Jersey than fixing American health insurance or curing child poverty.
But thanks to the magic of Congressional-budget scorekeeping, this same tax cut, while morally unjustifiable on its face, might actually raise money on paper, which Democrats could then use to "pay" for other parts of their agenda.
They are lying that this is paid for.
It is worthless when Nobel Prize–winning economists and journalists campaign for the bills since they have no idea what is in them.
Why does anyone trust CBO estimates on anything? They just went along with Democrats to claim that Obamacare would pay for itself:
They also falsely estimated that Trump's tax cuts would cost trillions when revenues are rising rapidly. Those tax rate cuts really are paying for themselves.
Remember that the CBO is funded by Congress, and the average pay of CBO employees is over $132,000 a year. They are members of the swamp who know where their bread is buttered.
Another costly part of the slush funds is the demand for prevailing wage on all projects. Democrats claim they are for freedom of choice but don't believe that people have the right to not join a union.
Another study, based on interviews with contractors, concluded that the rule raises costs by about 26% percent. Estimates for New York peg the increase at 13-25%, and a separate report in Nevada found even more significantly inflated costs.
The racism behind prevailing wage
New York State's first prevailing-wage law, passed in 1894, aimed to limit competition from lower-paid Italian and other immigrant workers. But the targets of the law quickly shifted as many African-Americans moved to New York from the South during and after World War I, generating a dramatic increase in African-American construction workers.
Many New York construction unions, led by the electrical workers Local 3 and the plumbers Local 2, adamantly refused to admit African-American members. The electricians' charter specifically limited membership to white males.
As a consequence, African-American workers who were excluded from those and many other building trade unions had no choice but to work for less than the union wage. Fearing competition from these workers, the unions pushed legislation to expand prevailing wage protection.
The federal Davis-Bacon law, passed in 1931, has a similarly sordid history. It originated with Long Island Rep. Robert Bacon, who was angry that a crew of African-Americans from Alabama were employed on the construction of a federally-funded hospital in his district. Multiple statements in the congressional debate before passage of Davis-Bacon refer to the need to deal with "cheap colored labor . . . in competition with white labor across the country."
There are four main things that are causing the inflation spike today: oil prices; the cost of labor; the rules on COVID; and the big one: central banks, which keep rates artificially low near zero. "Inflation is always and everywhere a monetary phenomenon," as Milton Friedman adamantly said.
Oil essentially affects everything we do. Every product derived from oil or transported with oil is affected. When its price rises, it cascades through the economy.
A Partial list of the over 6,000 products made from one barrel of oil (after creating 19 gallons of gasoline)
When Biden stopped the Keystone XL pipeline and ordered a halt to drilling on federal lands, it sent a message to the market and foreign producers that they had lost control. When Democrats call oil companies "evil" and seek to destroy them, it sends a message to the market. When everyone talks about stopping the use of oil on television and beyond, it sends a message to the market.
And now Democrats wonder why the oil companies aren't investing in additional production. Their policies are the major contributor to the price hike:
Meanwhile, the COVID lockdowns caused substantial damage to small businesses. When businesses could finally reopen, they had to compete with high unemployment subsidies and raise wages. The inflated wages and costs will stick causing substantial short- and long-term inflation.
The COVID mandates have been costly and greatly reduced productivity.
Vaccine mandates have also distorted the labor force availability. The CDC can't find where unvaccinated people who have had COVID are spreading the disease, so why is the Biden administrating requiring them to get vaccinated or get fired?
COVID is spiking in Minnesota, Vermont, Illinois, and other very restricted areas with mandates while continuing to decline in Florida, where it is at the national low infection rate. This proves that masks and mandates aren't the solution, so why do so many continue to pretend they do?
It is extremely hard and costly to get and keep workers, yet the Biden administration, the CDC, and power-hungry politicians are making it harder and more expensive with the mandates of the vaccine or tests.
The big one, though, is the Federal Reserve, the central bank of the United States. "Inflation is always and everywhere a monetary phenomenon," as the great economist said.
What happens when central banks keep interest rates artificially low, near zero?
Savers get punished, and a significant number of investors seek alternative investments. They chase the value of commodities, stocks, real estate, and other assets up until someday they bubble and collapse.
The prices inflate to values that can't be supported by fundamentals. People are in hog heaven until the collapse. The stock market collapse in 1929, the tech bubble in the late 1990s, and the housing bubble of 2008 are good examples that people, including the "experts," should learn from. Somehow, they think it will be different this time.
The central banks are also buying substantial debt from the government and the private sector, which keeps rates artificially low and inflates prices.
Biden said he inherited a deep recession, he brags that the economy is rising rapidly, he brags that there are more jobs than at the beginning of the pandemic, and he brags that wages are growing faster than inflation. These are all lies.
The truth is that the economy was growing rapidly when he took over, and the economy slowed to only 2% growth in the third quarter.
Inflation is compounding because productivity has declined rapidly, and policies have greatly pushed up the cost of hiring.
Unit labor costs jumped in the third quarter, rising at an annual rate of 8.3%, far more than in previous quarters.
Together, these factors help explain the steep drop in productivity, which decreased at a seasonally adjusted annual rate of 5% between July and September. That's the sharpest decline since the second quarter of 1981[.]
Biden and others are claiming that employees are getting substantial wage increases. But a significant percentage of workers have not received a wage increase this year and may demand bigger raises for next year just to keep up with runaway inflation, which will compound the problem.
Social security recipients make an average of less than $1,600 per month due to this Biden inflation, and they have not received an increase this year. They will get an increase of around $100 per month in January, and Medicare will take more than $20 of that for Part B. If they are lucky, the other $8 will pay for their increased gas, utility, and food costs. They certainly will not have enough to increase demand on other stuff.
That is how we end up with stagflation.
Most inflation today is cost-push inflation. Oil prices, labor costs, and fuel costs are spiking because of rules and regulations, not increased demand. The Federal Reserve is throwing fuel on the fire by making borrowing cheap to pay for the inflated costs.
Instead of addressing the problems, Democrats are throwing gasoline on the fore with more regulations, higher taxes, and massive slush funds.
Trump's low taxes and lessened regulations gave us good economic growth, low inflation, energy independence, record low unemployment, record low poverty, rapidly increasing government revenue, and rapidly rising wages for those at the bottom. He achieved that despite the constant effort to destroy him and pure Democrat and NeverTrump obstructionism.
If the Democrats cared about good results instead of power, they would support Trump's policies instead of trying to destroy them. It is a true shame that most journalists are supporting this economic suicide of the greatest country that has ever existed.
Image: Screen shot from a camera aimed at a television set, processed with FotoSketcher.
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