Inflation, Greedflation, Trumpflation: There's A Lot of Flating Going On
When voters are polled on issues, inflation is a top concern and that makes sense. How much things cost us determines how much of our earnings go to necessities and, when prices rise, our wallets get thin. What doesn’t make sense is the idea that Donald Trump would be and was better on inflation than Kamala Harris and Joe Biden. Why? Simply because presidents typically don’t have a lot to do with creating inflation, yet they do have the ability to help ease it. This is how it goes:
Most inflation is caused by there being too much demand for too little supply, which was the case with pandemic inflation. Listen to conservative economists and they will tell you what mainly led to pandemic inflation was too much demand, demand caused by financial stimuluses enacted during both the Trump and Biden administrations. While most of these economists agree that some stimulus was necessary, they believe that we went too far, something which resulted in inflation. While this explanation is conventional wisdom, most economists do not agree and for good reason. The conservative explanation downplays or omits the supply side of things (pun intended).
Supply, of course, is the volume of goods or services available for purchase. Lots of supply and little demand usually means lower prices. Lots of demand and too little supply and prices start to rise. During the pandemic, we immediately saw very high demand for medical supplies, such as test kits, masks, and breathing tubes, supplies which were in low supply because we had insufficient stockpiles of the stuff we needed. Our supplies were insufficient because some of what was stockpiled was too old to use, manufacturers couldn’t keep up with demand, COVID created a labor shortage, and shipping anything was extremely difficult.
Being prepared for a pandemic is something that a president has control over. Actually, preparing for a pandemic or any disaster is exactly what a president is supposed to do. That’s a main part of the job. And yet, as president Donald Trump neglected that part of the job when he trashed the pandemic plan put in place by his predecessor Barack Obama. Why? Because Obama’s name on anything is too much for Trump’s fragile ego. That fragile ego not only hurt us then it will hurt us if he is elected president for Trump has promised to shut down the pandemic preparedness office revived by Biden! The stable genius will not be “told what to do” by experts who might divert attention away from him and he will not stand for Biden’s name on anything.
I am not a big fan of “what if’s” but I have to ask, what if Donald Trump consulted Obama’s pandemic plan and had continued to stockpile things like masks? What if there was a preparedness office coordinating pandemic responses between states, specifically the flow of supplies? What if the preparedness office was there to organize manufacturers retooling and meet demand for medical supplies? Certainly, being prepared would have eased pressure on demand and helped facilitate supply, which would, at the very least, lessen the impact of inflation.
Inflation impacting medical supplies was the first hit. Another driver of inflation was citizen panic – partially fueled by the Trump administration’s lack of preparedness and cavalier attitude towards the pandemic. Remember the run on toilet paper, people stuffing their garages full of the stuff, hoping to never run out of wiping material (idiots could have bought a bidet!), while others planned to turn a big profit from reselling rolls? That run caused toilet paper prices to spike, especially on the resale market. Runs on bottled water, canned and dried foods, hand sanitizer, bleach, and even things like jigsaw puzzles helped drive inflation.
That increase in demand came before major stimulus packages started to take effect. While extra money did make it into our pockets, most of the money went to paying off debt and landed into savings accounts. The stimuluses did not flood the marketplace with money but gave regular people a safety net, one which made them confident enough to keep spending, something essential to beating back a recession, which is what happened.
Our pandemic supply problems weren’t just impacted by increased demand. We had major supply issues. First, big portions of the worldwide economy shut down. Europe adhered to strict COVID controls which kept workers from their jobs, especially in manufacturing. Not only did China get hit hardest by the pandemic, it also had very restrictive COVID controls. Unlike in the United States, in the PRC whole cities were completely shut down for months, some for a couple years. China is a huge exporter of goods, goods that never got made because factories were shuttered due to its pandemic policies. The result is that not enough stuff was getting made to meet demand.
And then there was the problem of shipping the stuff to you and me to buy. Our “supply chain” is how things get from here to there. It is made up of ships, planes, trains, and trucks, as well as warehouses, ports, etc. Limit any of those forms of transport and the supply chain gets restricted. Greatly limit most or all transportation and the supply chain goes into crisis. Don’t have people to work in warehouses or ports and things get worse. During the pandemic the supply chain was in crisis and that crisis was a major – if not the major – driver of inflation.
Adding to the hurt is that it is much easier to juice manufacturing than it is to fix the supply chain, which is almost completely in private hands. Also, as Brookings reports, supply chain disruptions have lingering effects, impacts that are felt months and even years after things have settled down. This is one reason why easing inflation takes time.
One thing that doesn’t help us is “greedflation,” the practice of corporations taking advantage of inflation by hiking their prices, not to cover costs, but to increase profits. The mainstream press treats greedflation as some kind of conspiracy theory, as if corporate America would never exploit consumers. But it’s no conspiracy. Greedflation is not only real, but even uber-capitalists like the Cato Institute acknowledge that greedflation exists, though they view it as both natural and a positive, while denying its impacts. But there are impacts and we feel them.
Cato and others argue that the increase in wages we’ve seen under Biden blunts the impact of inflation, including greedflation. While that is true on the surface, this increase in wages is both uneven and way overdue. For decades, our wages increased so slowly and so little that they were functionally stagnant. That’s okay, we are told, because during the same period inflation was low to non-existent. Really?
Do you know what is not included when calculating inflation? Housing prices, prices which impact rent. Under Trump, housing prices soared, which is great for some home owners and especially investors (who spent the Great Recession gobbling up distressed housing), but it sucks for first time home buyers and especially renters. Unfortunately, while plenty of us felt housing and rent inflation under Trump, it was not a story in the media. And though inflation has pretty much been tamed (which means prices are not going up at the rate that they were), housing prices and rent haven’t stopped climbing or have but its not showing up in the data.
As I wrote, a president’s policies usually don’t cause inflation (there are exceptions which we will get to). But what a president does can help ease it, though even then there are some caveats. Though conservatives blame Biden’s stimuluses for creating inflation, there’s a good argument that both the Trump and Biden stimuluses created a financial bedrock that made it possible to effectively fight rising prices. The stimuluses did more than put some money in people’s pockets, either through payouts or extended unemployment benefits. Those programs helped stabilize the economy, keeping unemployment from growing (after a huge spike under Trump), preventing many businesses from closing, and eventually increasing jobs and boosting wages.
Both Trump and Biden’s stimulus packages also did more than give citizens a safety net and businesses a lifeline. Some money went in rebuilding the pandemic programs Trump trashed. Some money went to vaccine development, something Trump turned on when his base went full COVID denialism. Some money went to rolling out the vaccines, a task that Biden did with praise-worthy efficiency. Some money went to fixing the supply chain, bringing jobs back to the United States, and building supports that could help the economy when we get another pandemic.
There’s also the Infrastructure Bill, which is sometimes framed as a stimulus and sometimes not. I agree. Biden’s infrastructure bill certainly juiced the economy and juicing the economy is stimulus. And, our pre-pandemic infrastructure was in bad, bad shape, so it very much needed a major cash infusion. Our infrastructure sucked thanks to forty years of conservative economics where public spending on infrastructure and anything other than cops, prisons, and war nearly stopped. When money did flow to infrastructure, it was either to pork projects or to fix what broke because we weren’t spending money on maintenance. Things were so bad that even Trump talked and talked and talked about infrastructure, though because all he did was talk, Trump and his many “infrastructure weeks” became a running joke.
An important note: The Trump and Biden stimuluses had the stamp of those administrations, but they had to be passed by Congress, who also gave their input. During the pandemic, under both presidents, Congress was split, so to pass the stimuluses, the bills needed bipartisan support. That happened. Curiously, Republicans, including Trump and Vance, are running against the stimuluses they made happen. On the flipside, Biden’s infrastructure bill was opposed by most Republicans, and made it through Congress with mostly Democratic support. And, yet, Republicans are running on the bill as if they supported it.
Those blaming Biden for inflation would like you to believe that the president could have done more. That’s absurd. One of the biggest weapons in inflation fighting is the Federal Reserve and the setting of interest rates. Though the executive appoints Fed members, the Fed is an independent agency which presidents mostly do not interfere in. Thus, Fed chair Jay Powell raises or drops interest rates after consulting his board, not Biden, who is not an economist and sensibly leaves running the Fed to the experts. But let’s say that Biden did do what Trump says he will do – take control over Fed policy – well, Biden won.
Trump has dogged Biden for not keeping prices low. That’s insane. The president does not have direct control over prices. In our economic system, though we tell ourselves that the market rules, prices are set by the seller, who is the manager or owner of a business, supplier, or manufacturer. The president is not one of those people. If were the United States had a centrally controlled, command economy, as there was in the Soviet Union and in China under Mao (and as there is in North Korea), the president could set prices by fiat, something Trump would like to do. That is not our system. And, seriously, do you really think that corporate America is going to let Trump or any other president institute price controls, and do you really think that Donald Trump will ever tell anyone to check their greed for the public good? My lord.
I wrote earlier that a president’s policies generally do not create inflation. As we’ve seen with pandemic inflation that is true. There are exceptions and one of those exceptions is the center piece in Trump’s economic plan, tariffs. I’ve already gone into the disaster that is Trump’s tariffs proposal in an earlier newsletter, but I will restate something that a vast majority of economists agree on: Trump’s tariffs will lead to more inflation, less money for everyday people, bankrupt Social Security, and economic trouble.
So why do people think that Trump would be better for the economy than Harris. First off, Trump has benefited from a decades-long propaganda campaign framing him as a master businessman. He’s not. He’s a terrible developer with a long string of bankruptcies on his record. He’s been sued repeatedly for running fraudulent businesses and scams. The only “proof” of his business expertise exists in fiction – his ghost-written books and his “reality” TV show. He isn’t a successful businessman; he just plays one on TV.
Second reason for Trump over Harris is that even though economic indicators tell us that Biden/Harris have been great for the economy (inflation tamed, job growth, wage hikes, a robust stock market, etc.) our economy is so rigged to benefit corporations and the wealthy, it takes a while for us to feel the goodness. Also no help is the Republican’s reputation for being the Economics Party, a rep not supported by the facts.
Please note that there are a lot of links above. Those links are to reports and news articles that I’ve referenced. While I have an opinion on all this stuff, it is driven by data and facts not my gut, ego, or whatever voices tell me to praise another man’s penis on the campaign trail. Rather than say “trust me,” I invite your skepticism and urge you to check out my references.