“Without COVID, we would not be facing this ‘supply shock’ induced inflation.”
— Chris Carosa, Forbes Magazine
In 1999, business journalist Barry Lynn was in Taiwan, which now produces 60 percent of the world’s semiconductors. While he was there, an earthquake, the worst since 1935, hit the island nation. Many factories were destroyed and all shipping (air and sea) was suspended.
Lynn describes the result: “Within a few days, all these factories in California and Texas shut down, because the supply chains were broken.” Lynn warned governments and CEOs that this same thing could happen if a crisis like this came around again, but no one listened.
This time it came in the form of a pandemic, and factories all across Asia either shut down, or, like in China where the virus was contained early, they switched to making personal protective equipment.
This supply chain problem, starting in early 2020, is worldwide, and President Joe Biden, who was not yet the Democrat’s nominee, obviously had nothing to do with it. It is just as absurd to blame the Dutch prime minister for the record number of cargo ships waiting to unload at Rotterdam, Europe’s largest port.
British car production has dropped by 27 percent in the year ending in August, and plants making Volkswagens, Fords and Opels have closed for lack of semiconductors and other parts.
For lack of infrastructure improvement in the U.S., ports, warehouses, trucking and railroads simply do not have the capacity to handle the nation’s critical transportation needs. Repeatedly, the Trump administration declared that infrastructure improvement was imperative, but nothing was ever done.
On Nov. 5, a $1.2 trillion infrastructure bill was passed in Congress with only 32 Republicans in both houses voting in favor. Instead of falsely blaming Biden and the Democrats for supply shortages, the GOP should be praising them for the $47 billion for upgrading railways, sea and airports.
Many Americans had excess cash during the pandemic, and they started buying a huge number of things online. Too much money chasing too few goods here and in Europe has caused an upswing in inflation. Once again, Biden is not the cause.
With regard to Biden’s social infrastructure legislation, economist Paul Krugman predicts: “It won’t be a significant inflationary force; if anything, more spending on infrastructure would help alleviate inflationary pressures over time.” In fact, inflation after the March 2020 $1.9 trillion CARES Act did not rise or fall appreciably for the rest of the year.
Currently, the principal driver of inflation is high energy prices, and that is why gas has been so expensive. OPEC controls the oil supply, and U.S. presidents have learned that they have little control over prices.
Inheriting the deepest economic downturn since the Great Depression, the Obama-Biden administration brought down annual budget deficits from 9.8 to 3.1 percent. If Trump hadn’t failed miserably in handling the pandemic, his fourth-quarter deficit of 14.4 percent would not have been as large.
Trump’s deficit was also high because there were no new taxes (Republicans would have balked) in the $1.9 trillion CARES Act, which, among other things, issued $1,200 stimulus checks. You will recall that Trump wanted $2,000 instead.
The Build Back Better bill will pay for itself, and, therefore, it will not add to the deficit, which has already dropped to 12.6 percent under Biden. Paying for new spending is the primary reason that budget deficits have been lower under Democrat presidents.
Using data from the Office of Management and Budget, I’ve calculated the difference in Democrat and Republican post-war administrations, and it is 2 percent in the Democrats’ favor for reducing increases in the national debt.
Trump added $7.8 trillion to the debt by increasing spending by $800 billion and by dramatically reducing revenue with huge tax cuts. The cruel irony is that the GOP is refusing to raise the debt ceiling on debt that their huge budget deficits have added to the national debt. Contrary to what the GOP says, the spending that the Democrats plan to balance with tax increases is not included in this effort.
As deficits rose during the Trump administration, Republicans willingly raised the debt ceiling three times. Why has it been decades since Democrats have had honest political opponents?
Nick Gier is a professor emeritus at the University of Idaho. Email him at firstname.lastname@example.org.