Evidence is already mounting that the worst of the inflation that has tormented the United States and much of the world for the better part of two years has finally begun to dissipate. Generally, that’s a great thing, but in this case it’s only good, because signs are also emerging that soaring prices will be replaced by an unpleasant if comparatively milder alternative: a recession.
I’m not an economist, but in this case it doesn’t take one to figure out how we got here and where we’re going. For all those who confuse eroding cognitive skills with senility and accuse President Biden of suffering from the latter, they underestimate the craftiness of a politician who’s been on Capitol Hill for so long that when he was first elected to the Senate, some of his colleagues were born in the 1800s.
Biden, you see, niftily pulled the wool over Americans’ eyes in paying for governmental initiatives carrying gargantuan price tags – the type of reckless spending he insisted simply couldn’t work when Bernie Sanders suggested it in the 2020 primaries – by sidestepping the usual way to pay for them: either by raising taxes or borrowing money. Option A, a tax hike, usually amounts to political suicide, and Biden didn’t spend decades trying to get to the White House only to kick himself right out of any chance for reelection. Option B, adding to an already obscenely large deficit is less noticeable: like emptying one more can of garbage onto a heaping trash pile. But even so, enough budget analysts would have called him out on it.
Instead, Biden tried a third approach, one that politicians have avoided for over 40 years – printing large amounts of new money to pay the tab. Simply put, the more supply there is of something, the less it is worth. Hence, grains of sand are infinitely less valuable than nuggets of gold. But the real problem with inflation is that it gives those who have something to sell carte blanche to raise prices even when they don’t need to.
Imagine a large restaurant with an extensive wine cellar, containing thousands of bottles housed in a perfect climate to preserve the wine’s fine taste whenever someone decides to open one. If the price of meat, fish, and potatoes has gone up, it makes some sense that the restaurant would raise its prices accordingly. Of course, a highly profitable restaurant could simply eat the cost, but not many are willing or able to do that. Worse yet, some restaurateurs will see it as an opportunity to raise prices disproportionately (if beef costs them a dollar more, they’ll raise the price of the entrée by three), and also hike the cost of a glass of wine – which they already had in the cellar and are likely not to need to replenish until the inflation tsunami has subsided.
This is why every president since Ronald Reagan has made curbing inflation a top priority, until this one.
The most basic and reliable law of economics is supply and demand. It doesn’t get any simpler than that. When the cost of an item is higher, fewer people will buy it. Accordingly, people will take fewer pleasure drives when they have to spend over $100 to fill up their gas tank. Going out for sushi isn’t as appealing anymore when the bill is almost as high as it is in an upscale New York City steakhouse. When people are price-spooked, it takes them a long time to recover.
In the meantime, there’s a recession, and businesses lay off their excess employees. Except this time, there aren’t many to lay off. The pandemic – and particularly the planet’s reaction to it – was arguably the worst calamity to plague the human race since World War II. But it, too, had some silver linings, one of which was that it forced businesses to reboot their cost-benefit analysis, and even some dinosaurs stuck in the last century were able to appreciate the benefits of working remotely via groundbreaking technology.
Employees stuck in dead-end jobs realized it’s much more enjoyable to spruce up the car and become an Uber driver than to be barked at by loudmouth bosses and rude customers while waiting tables. That’s why so many restaurants have Help Wanted signs in their windows; the jig is up.
Of course, a severe recession – AKA, a depression – would be horrific. But a milder recession is better than runaway inflation. Except, of course, for sellers. Think of it as when the Euro replaced the Drachma in Greece: a cocktail went from the equivalent of thirty-five cents to four dollars. That was awful for everyone, except the person selling the drinks.
Again, those who underestimate Biden are doomed to have to endure him for another four years. When the smoke clears, he can boast about a much-needed infrastructure renaissance without having raised taxes one penny or forcing future generations to pay for it. Too many people will forget that the reason their grocery and gas bills are through the roof is because of pork-filled infrastructure bills and one-size-fits-all pandemic relief packages to countless businesses that didn’t suffer any losses. That includes the ones whose profits rose during the lockdowns – because all they had to do was affirm that there existed a theoretical possibility that they might lose money.
I hope I’m right about inflation being on the way out and an ensuing recession being rather gentle, magnified by the Biden-bashing news networks and ignored by the pro-Biden ones.
But I hope I’m wrong about Americans willing to endure such sloppy economics – among other things – for another four years, all because they’re sick and tired of mean tweets and rightwing conspiracy theories. Time will tell