Republicans, conservatives, and business interests are using the fact of recent rising prices to attack legislative proposals to increase government spending. They argue the recently passed $1.8 trillion ‘American Rescue Plan’ (Covid Relief Plan) by the Biden administration was too generous. And proposals to spend on Infrastructure ($2.2T) and American Families ($1.5T) will only stoke consumer spending and boost inflation further.
They and their mainstream media friends are arguing that fiscal stimulus putting money in the hands of households is driving up prices. In other words, consumer DEMAND is now causing prices to rise sharply, they argue.
But is it? Or is the problem of rising inflation a business SUPPLY problem?...
Demand remains rather weak judging by the trend of retail sales. In addition, the saving rate is still elevated. Prices rises can be traced to supply shortages owing to the effects of the pandemic, e.g., on employment as well as bottlenecks, e.g, semiconductors are affecting new car production.
Inflation Myths and the US Economic Rebound 2021
Jack Rasmus, professor of political economy, St. Mary’s College, Moraga, California
Inflation is always, everywhere a lack of competition problem.
ReplyDeleteSupply shock due to pandemic.
ReplyDeleteHere with the “Myth!” again...
ReplyDeleteDoes.... not.... work....