Report: Inflation impacting Minnesotans more than national average
Americans have had their incomes hit hard by inflation over the last three years, as Figure 1 shows, with the annual change in the Consumer Price Index rising from 1.4%…
Earlier this month, the Bureau of Labor Statistics released figures showing that, over the previous year, prices had risen by 7.5 percent, the fastest year-on-year rate since February 1982. Because of this, data released the same day for real earnings — that is, adjusted for inflation — showed that real average weekly earnings were down by 3.1 percent over the year. People are earning more, but it will buy them less.
So it was no surprise when, in his State of the Union address last night, President Joe Biden announced: “…my top priority is getting prices under control.” Sadly, the rest of his remarks showed that he has no idea how to do that.
One way to fight inflation is to drive down wages and make Americans poorer.
This is incoherent nonsense. Lower real wages are, as the data show, a consequence of inflation. Getting inflation under control is how we get real wages growing again.
I have a better plan to fight inflation.
Lower your costs, not your wages.
There speaks someone who has spent their entire working life in politics. A business looking to maximize profits will always be looking to reduce costs, inflation or not. And the owners of those businesses will tell you that reducing costs is usually more than a matter of simply deciding: “Hey, the President said I should lower costs. Gee, I guess I should.”
Make more cars and semiconductors in America.
More infrastructure and innovation in America.
More goods moving faster and cheaper in America.
More jobs where you can earn a good living in America.
And instead of relying on foreign supply chains, let’s make it in America.
This reheated ‘America First’ economic Trumpism is, apparently, how President Biden suggests businesses lower their costs, and here we come to the real economic illiteracy of his plan.
As noted, if buying American was cheaper, businesses would already be doing it (assuming the foreign alternatives are broadly similar in all other respects). If they are not, it is because buying American is actually more expensive. Indeed, the Peterson Institute estimates that “Buy American” and similar domestic purchase policies “increased US domestic procurement costs across federal and state governments by 5.6 percent in 2017, costing US taxpayers an additional $94 billion.” In other words, President Biden’s big idea to bring inflation down will actually push prices up.
The Biden administration has no idea what to do about inflation. This has been evident for a while, but last night’s hopeless address showed that Americans can expect little help from them with the cost of living.
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