Economics: Fact and Fiction

 

                    Economics: Fact and Fiction

 

In keeping with the subject of numerous previous columns which is that basically some (too many) Republicans cater to people who don't know how government works, here are several more indices of just exactly how that's working in the current political climate.

First of all, let's consider inflation. Far Right talking heads from Betsy McCaughey to Star Parker to the deplorable Tucker Carlson have all attempted to blunt the force of what is becoming an ever more revelatory January 6th committee open hearing by claiming that President Biden is responsible and solely responsible for inflation. As an adjunct to that they simply toss out the blatant lie that President Biden is also responsible for the high gasoline prices we’re currently experiencing.

 

Let's deal with the first lie last, because it is more complex, and address initially the second lie, that of gasoline prices. As Republicans scream that Biden should open up more federal lands to drilling for petroleum, what slips by relatively unnoticed is that there are currently over six thousand authorized gas and petroleum drilling leases not being used by the petroleum industry. One would be reasonable to ask, “Why is that?” and answer is twofold. In the first case US petroleum refiners are not refining at capacity; rather they are at about 90% capacity and making no real efforts to increase production. Why? Simply because shortage causes higher prices and higher prices are good for the bottom line of the petroleum industry, which is showing record profits, while the rest of us pay $4.95 per gallon at the pump. It must also be noted that proven petroleum wells produce a product which is costing refiners no more as a raw material, no more to refine but, because of the shortage, the market economy that we have allows prices to rise.

 

In a recent column Star Parker made the comment that Biden is responsible for the inflationary cycle we're in simply because he is “More ignorant of economics than a college freshman.” That statement which is blatantly unrealistic actually indicts Parker as having less knowledge of economics than many high school students.

Any criticism regarding the economic literacy of the current administration must be weighed against the miserable economic failures of the Trump administration. This begins with the baseless claim by Trump that “Mexico will pay for the wall” which, of course, they did not. It also brings to mind Trump's comment that “China will pay the tariffs,” which are currently costing each American household about an extra $850 annually. Any high school economics student knows that tariffs are paid by the importer not the exporter. Thus, it has always been and thus it is today. In fact, in 1828, South Carolina came remarkably close to seceding from the Union because of tariffs passed at the request of northern industrialists on British imports of which the South was a disproportionate consumer. Only Andrew Jackson’s threat of armed force, accompanied by a massive reduction in the tariff, soothed that conflict. Remember, Trump couldn’t get into an MBA program and graduated sans honors of any type. It seems he also was not much of a history student.

 It is amazing how quickly the supposedly fiscallly conservative Republican Party has either forgotten or simply ignored the fact that, during what Trump touted as the “best economy ever,” we saw the deficit rise in the pre-COVID years by record amounts. In similar fashion, Betsy McCaughey alleges that the reason we have the current inflationary cycle is that the Biden administration has “Irresponsibly increased the money supply.” Ms. McCaughey is apparently too young to remember 2002 When the previous (Bush 43) Republican administration allowed a huge injection in the money supply with an accompanying record spike in inflation, all to fight a futile war.

How soon Republicans forget this 2020 headline from the conservative Forbes magazine: “Donald Trump And The Fed Are Destroying The U.S. Dollar.” in the body of the following article is this statement: “The Fed has pumped over $1 trillion to the system in recent weeks, with its chair Jerome Powell promising never before seen levels of money printing and so-called quantitative easing to infinity through an unlimited bond-buying program”. FED chair Powell, a Trump appointee, is still in that office.

While the Biden administration has also done significant deficit spending, via the “Build Back Better” initiative passed by Congress, that money is being spent primarily on much needed infrastructure upgrade and repair which puts people to work instead of simply giving them money, as COVID disbursements did in the Trump years. In point of fact, the largest single increase in the money supply in the last 10 years was during the 2018 to 2021 period, part of that pre COVID. I reiterate, Republicans also don't want constituents to understand the difference between giving away money and putting it to constructive use creating jobs in the process.

As to the claims that Biden is responsible for and should do something to end the current inflationary cycle, again it escapes, most people that other than a wartime surge, market economies such as ours have historically had ups and downs. In fact, the U.S. economy has experienced twelve different recessions since World War II until the COVID-19 pandemic, which ended the longest period of economic expansion on record. That period of expansion was “rebound” from the depths of the housing bubble collapse. For the math challenged that’s about one every 6.5 years. Sometimes that has been due to market manipulation by unscrupulous individuals and sometimes it is not in the control of any individual but, as is the current situation, reflects lingering concerns over a global pandemic, continuing supply chain shortfalls and. as I pointed out about the petroleum industry. willingness of people in positions to make excess profits to do so at the expense of their compatriots.

In this economic climate the President of the United States is almost powerless to do anything by himself to change the status quo. Control of the economy is in the lap of the Board of Governors of the Federal Reserve System who are supervised in that role by the Chairman of said board who is currently a Republican (Trump) appointee confirmed by a Republican Senate, one Jerome Powell. Understand this, I am not being critical of chairman Powell, who is under pressure to do what he can to improve the current economic climate. However, it is also true that, as with Psychology and Sociology, Economics is a relatively “soft” science in which, sometimes, one plus one equals “Who the hell knows?”

In Chairman Powell’s case, the tools he possesses are generally limited to changing the interest rate that banks are charged for borrowing from the Fed and or to increase or recommend an increase in the amount of federal debt that is being incurred by the sale of federal securities as a means of injecting money into the system. A discussion of Modern Monetary Theory is far beyond the scope of this column, but it is worth learning. I say that because there has been, for probably 20 years or more, continuing debate about how the money supply should be regulated and why. Rest assured the vast majority of MAGA hat wearers have no idea as to the meaning of what I just wrote. They are instead content to go to their gas station, bitch about the price of gas, and slap a sticker of Biden saying “I did that” next to the price meter.

And finally, as they say, “This just in!” High school dropout and MTG wannabee Lauren Boebert is in the news again. Here’s the headline: “Rep. Lauren Boebert called Biden's infrastructure bill 'wasteful' and 'garbage.' Now she wants $33 million in infrastructure funding for a new bridge.” And so it goes.