Who or what caused it? What can be done about it?
Here are some of my simplistic opinions.
- Trump etal cut taxes in 2017 while increasing spending.
- Then during COVID Trump Etal passed RECORD bailouts to put even more cash in the system while encouraging the FED to take historic measures.
- Both of these caused RECORD borrowing by the US government and the printing of a LOT of money.
- Therefore we citizens have tons of cash that should never have been borrowed against our children's future.
- The National Debt is at a RECORD high.
- Then Biden etal passed even more stimulus last year.
- The easiest way to fix this is to raise our taxes so that we do not need a TRILLION + dollar deficit every year.
- And if you don't like paying for your government, then let's cut the entitlements that make up most of the over spending.
- Then maybe with these borrowing and spending cuts, demand would reduce to what supply can support and prices would drop.
And this keeps me wondering why the GOP thinks they are the "fiscally responsible" party. :-O
53 comments:
Trump etal cut taxes in 2017 while increasing spending.
This is a basic problem in implementation of tax policy. While it is politically possible to cut taxes, it is impossible to raise them. That means tax policy cannot be used as a tool to fight changes in currency value. We have too look elsewhere. So what are the alternatives? complaining about the problem doesn't seem to help.
--Hiram
Oh it is easy to raise taxes, just do nothing...
That is how taxes were raised in 2012 and how they will be raised in 2025...
Then everyone will moan about their higher taxes...
If you want to look at taxes in a broader sense, calculate your net worth at tax time last year. What percentage of that was paid in taxes? Now calculate your net worth this year. What percentage of that are you paying in taxes? Did the percentage go up? Or down?
--Hiram
Please tell me why this matters?
Remember that I am the promoting a balanced budget.
(higher taxes and lower spending)
I would suggest considering non-government policy causes for inflation, because I think there's ample evidence that these factors are in play -- including supply chain constraints and corporate profiteering.
And don't forget a those workers demanding higher wages...
And or changing jobs to get them... Is that "personnel profiteering"?
Though I agree with you that there are MANY MANY factors at play...
The primary factor though is... We want what we want... And we will pay more to get it... And most Americans have enough discretionary income to do so...
I just think of American Urban sprawl...
I mean how far out, how much land and how big of a home is enough?
I dream of all that, but my money and time were too valuable to me.
I think my 15 mile / 18 minute commute is too far already. So thankfully right now I am able to just go in 3 days a week.
And if the country needs me to sacrifice, I am willing to go in only when needed. :-)
One problem with cuts as a solution to inflation, is that the same money is spent on the same thing in other ways. When an inflated medical bill is paid, it doesn't really matter in terms of inflation whether the government pays it or some insurance company acting in the place of government.
I have been hearing lately that those checks we received so long ago are driving inflation. Well, I spent that money a while back and it has little impact on my buying decisions now. What does increase the level of my spending is that I am no longer locked away in my basement hiding from the pandemic. And in increasing my spending simply when I leave the house, I am adding to the inflationary pressure in the economy, and I am doing it without consulting government bond interest rates.
--Hiram
If you had not gotten those checks back when. You would not have that money available to spend today.
And it is only worse that the trillions of dollars we are spending today are being literally pulled from the future to over stimulate demand.
The good news is that I am an investor who spends little. Please feel free to keep driving up prices, profits, interest rates, etc.
No doubt people in the future will pull money from their future.
--Hiram
I have to be careful when I walk by the Republican booth at the State Fair, because what I find there is that Republicans, it turns out, are in favor of the same things I am in favor of. Indeed, there positions are often more extreme than mine. Republicans, for example, are in favor of cutting drug prices by 70%. As desirable as that it seems to me, I would never propose that publicly because I just don't know how to make that happen. And that sort of goes to the heart of the problem. Republicans are for things, but they aren't for making the things they are for actually happen.
We are told that Republicans favor balanced budgets. Fine. We spend money on two things. Old people and the military. Which spending is to be cut? How do we make those cuts happen? There are ways, believe me, there are ways, but Republicans don't discuss any of them. The most Republicans can muster are endless complaints that Democrats don't do enough of the things Republicans wouldn't do, and would oppose doing if and when they are proposed.
--Hiram
How exactly will they do that when we have maxxed out the credit cards?
I am often puzzled by your defending our current and forecasted record breaking debt levels.
Implying or saying that it is in someway normal.
I guess as long as it helps pay your bills, you are okay with stealing from children... :-O
"Is that "personnel profiteering"?"
This is the first real burst of significant wage growth for the median worker since the 1990s, so I'd say "no" to that question. Corporate America, writ large, has fared much better that the typical worker over that period.
Well to have "pricing power", one has to:
- have a unique better product or service.
- someone has to be willing to pay for it.
- or the government must require it.
As long as we continue to flood the employment market with low knowledge low differentiation employees and the customers prefer to keep buying from lower cost countries, wages will not go up.
And of course corporations do better since they can have the work done where it is most cost effective. As their customers demand.
It sounds like you want employers to pay more than is required to secure the qualified employees they need to satisfy their customers.
As I often ponder... Do you hire the contractor with the highest bid?
"It sounds like you want employers to pay more than is required to secure the qualified employees they need to satisfy their customers."
No, never said anything remotely close to that.
I am often puzzled by your defending our current and forecasted record breaking debt levels.
All my life, people have complained about deficit spending. Yet things seem to be fine. And the people who complain about it loudest, have no problem lowering taxes whenever they can. And as for reducing spending, as in the case of those 70% reduction in drug prices, they talk about it but they are careful not to do anything about it.
It's not enough to complain about problems, somebody has to step forward and try to solve the problems. Nobody wants to solve the problem of debt. That being the case, it's hard to see how the problem, if it is a problem, will ever get solved.
--Hiram
It is true, you are in the majority who are happy to spend more than you pay.
I keep hoping that the youngsters cut off their greedy elders some day. :-)
Sean,
Well... Then why do you think employees should be paid more?
Do you think corporations should pay more just because they have better profits?
As a shareholder via my IRA and 401K... I am not sure I want them paying more than they need to?
"Is that "personnel profiteering"?" This is the first real burst of significant wage growth for the median worker since the 1990s, so I'd say "no" to that question. Corporate America, writ large, has fared much better that the typical worker over that period.
"Then why do you think employees should be paid more?"
Employees are utilizing this brief period of market power to their advantage -- market power which has been systematically eroded over the last 50 years by the political decisions we have made.
I am okay with that. Please remember that I am an unrepentant capitalist.
I am fine with people or businesses using their "market" power. I am just not sure why you think it is a bad thing for companies to do it and a good things for employees to do it.
Though I am not a fan of unions and the members who seem to demand more by holding kids hostage. While refusing to be held accountable for attaining results.
It will be interesting to see how many cuts and school closures will be needed to meet the Mpls Teacher's ransom demand.
I keep hoping that the youngsters cut off their greedy elders some day. :-)
Now that they don't need to borrow the car from Mom and Dad on Saturday nights, the idea is that they can pretty much leave the parental units by the curb, I suppose. But they should wait until they are at least age of 28 so they can still get the benefit of their health insurance.
--Hiram
What always frustrated me as a shareholder was managers who got bonuses beyond the dreams of avarice for just doing their jobs.
--Hiram
"I am just not sure why you think it is a bad thing for companies to do it and a good things for employees to do it."
It's not necessarily a bad thing. But if we're going to talk about the inflation that consumers are seeing, the fact that profit margins and profits (as an absolute number) are both at historic levels during these times of high inflation has to be raised as a significant factor.
Hiram,
Keeping them insured until 26 was a DEM / Obama accomplishment. For better and worse. So the kids are getting a few dollars for the trillions being lifted from their future.
And yes executive compensation is a frustrating issue. On the other hand, I do not want their job.
Sean,
Maybe... These folks question how significant it is.
Another interesting piece.
The ride could get bumpy...
As everyone tries to take advantage of the shortages and the sloshing excess of disposable income.
Who can grab the most during these "good times".
Keeping them insured until 26 was a DEM / Obama accomplishment. For better and worse. So the kids are getting a few dollars for the trillions being lifted from their future.
That's how borrowing works. Homes would cost a lot less in terms of dollars if we just paid for them upfront. Why don't we do that? Why do we "mortgage" our future?
--Hiram
Yes... Your usual poor rationalization...
Usually we take long term mortgages and bonds so we can purchase and maintain capital goods.
Our house remains worth more than the mortgage usually.
Our roads pay back through efficient cost saving transportation.
Unfortunately the USA is spending a LOT of borrowed money on services and pensions that have minimal long term payback. The money is just spent and the debt is just wracked up.
Like a household that is addicted to consumer spending and credit card debt.
Think about a pension. What people are doing is loaning to a fund, which will return the money loaned in the future. It's people rather than capital goods, but I don't see the difference in investment purposes. People are a much better investment, actually at least in my view, than goods. It's why I buy stocks and not gold.
I buy and sell goods almost completely on credit. The only thing I pay cash for is the occasional Blizzard at Dairy Queen where cash based transactions get a discount. I don't seem to have very severe financial problems, addicted though I may be to plastic. Maybe credit isn't the problem.
--Hiram
Pensions are fine if the people who will receive them initially adequately funded them. In this case they DID NOT...
Of course the credit is the problem, just as it would be if you had spent your life paying the minimum required payment while increasing the balance year over year. Where as I assume you pay immediately for what you charged like most financially smart people.
Inflation is a short term problem. It's about too many dollars chasing too many goods. Today. It's about buying decisions we make when going to the store. It's when the toothpaste goes up in price but we buy it anyway, and don't brush our teeth less often or less thoroughly. It isn't about taxing decisions made four decades ago.
As for credit being a problem, I bet Apple Computer owes a lot more money today than when it started up in a garage. Does that mean it is financially or in any other way, less successful today than it was back then?
--Hiram
I should have said too few dollars chasing too many goods.
--Hiram
Hiram...
4 decades ago? I am talking about today...
~$6 TRILLION borrowed and pumped into the economy in the last 2 years.
Continuing tax and spend policies that require borrowing $1+ TRILLION in normal times.
And yes that is why debt is stated relative revenues, income, assets, etc... Not just a number.
See page 5 for a reminder of how irresponsible our generations are being.
We were given a pretty low debt load country and have put it on the path to insolvency.
There is not shortage of money. The problem is the lack of things to buy.
I don't know about you, but I have been amazed and even astounded had how quickly the economy has bounced back from the pandemic. I certainly didn't foresee that two years ago. I didn't anticipate the problem we would face today is inflation of all things. But the fact is we flooded the economy with money, and I suppose a price has to be paid for that now.
So what is that price?
I am a pre 9 11 thinker. Those were my formative years. I think of political economics in simple terms and metaphors. Inflation is the result of an overheating economy, too many people making too much money. The way to reduce inflation, is to slow the economy. Throw people out of work. Create fewer jobs. Reduce economic activity and growth. Advocacy of those things is what it means when you make fighting inflation a political priority. Is anyone talking about those things now? Are Republicans who are shrieking about inflation telling you the problem is that way too many people have way too much money, and it's time to put a stop to that? Or is that something they desperately want to leave to the Democrats and then complain about it?
--Hiram
"too many people making too much money"
In this case, they did not need to "make it", it was borrowed by the US Government and given to them...
"In this case, they did not need to "make it", it was borrowed by the US Government and given to them..."
In the midst of a global pandemic that dramatically decreased economic activity worldwide and slashed employment levels, then, what would you have done differently? It wasn't a lack of virtue from the typical worker that caused this.
I would have let the country go into recession.
There is little benefit of continually propagating that the US Government National Debt is every citizen's rainy day fund.
Modern America !!! Markets and Economies Only go up !!! Spend, Borrow, Buy more house than you need, etc... Screw saving for the rainy day !!!
Besides the way it was handled gave money to many many people and businesses that did NOT need it. That is why they all have so much discretionary funds currently.
The economy was in recession, two straight quarters of negative GDP growth, including down by one-third in Q2 2020. Your response would be to shrug?
Yes. Our children will have to absorb most of the pain for that recession.
We the "adults in the room" instead of digging into our "rainy day" funds voted ourselves a bunch of checks and put it on our kid's tab.
As an "adult in the room", how do you rationalize page 5 of the report and your support of bailouts and more spending?
I mean me and the Mrs even got fricking checks one time...
Like we had any need for a handout? :-O
What we did during the pandemic was sacrifice lives to steady the economy. People died for the stock market. If the cost now, is a little inflation, from which huge numbers of us actually benefit, we can take comfort in the fact that we are survivors whose stock portfolios increased in value. The burden of pandemic policies mostly fell on others.
--Hiram
"sacrifice lives"???
Are you referring to our letting people choose for themselves how to live their lives?
I am sad that we have so many stupid, fearful and/or selfish residents in our country. Those who insisted on socializing when they were possibly sick, resisted wearing masks and resisted getting vaccinated...
However I certainly do not like the idea of living in a country like China where the government can shutdown a city at the snap of their fingers.
Is that what you think we should allow our government to do?
Are you referring to our letting people choose for themselves how to live their lives?
Only tangentially.
This is a cliche for me, I have said it millions of times, probably thousands of times here, but our response to the pandemic failed because we did not perceive the nature of the problem, or if we did, our perception did not prioritize the saving of lives. To put it as simply as I can, we saw it as a political, or economic, or philosophical, or moral issue, in many other ways, instead of seeing it exclusively as a health issue.
Look at the last two sentences of the preceding posting. Note how they frame the issue in terms of what governments can or cannot do, what we have the will to do which we use the instrument of government to implement. I don't know science or medicine, but what I do know is that viruses don't follow statutes, they don't hire lawyers, they don't drive trucks on city streets. All those things are completely unrelated to viruses and how they kill us.
--Hiram
Yes. But like wolves, viruses weed out the old weak and infirm.
How much the majority needs to give up to save everyone is a "political" issue.
Should saving the lives of the old, infirm, unhealthy, stubborn, etc be our "top priority"?
And at what expense to the children and vast majority of adults?
I just finished a history course about Europe in the 19th century. For the instructor, the 19th century was that time between Waterloo and the Congress of Vienna up until the start of World War I. One of the basic themes of the course, mostly unstated but always there, was how the various forces and trends worked together to bring about the great catastrophes of the two world wars.
One of the things the instructor spent a lot of time talking about was Social Darwinism. We don't hear much about that today, because it formed an integral part of Nazi ideology. One of the things that surprised me most about the aftermath of the pandemic is how those discredited ideas are making a comeback.
--Hiram
That is something very different from what I describe...
One such distortion and misuse is the loose collection of ideologies grouped under the label of "Social Darwinism." Based largely on notions of competition and natural selection, Social Darwinist theories generally hold that the powerful in society are innately better than the weak and that success is proof of their superiority.
Darwin passionately opposed social injustice and oppression. He would have been dismayed to see the events of generations to come: his name attached to opposing ideologies from Marxism to unbridled capitalism, and to policies from ethnic cleansing to forced sterilization. Whether used to rationalize social inequality, racism, or eugenics, so-called Social Darwinist theories are a gross misreading of the ideas first described in the Origin of Species and applied in modern biology.
I what describe is simple science...
Wolves kill the weakest and most infirm elk.
Viruses kill the weakest and most infirm everything.
No political judgments on good / bad, successful / unsuccessful, moral / sinner, etc. As you noted, the virus does not care.
Joe Biden is an elderly and frail man. Despite his age, Donald Trump is extremely vigorous. Which one is the weaker?
--Hiram
I would not know...
My problem is that my memories of Donald Trump and his encounter with Vladimir Putin remain vivid in my mind.
--Hiram
No doubt that Trump bowed to Putin
Trump was afraid of Putin. Putin is a very scary guy.
--Hiram
Personally I think he had a man crush...
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