By George Zadigian –

While we often like to think America is “Number One”, underneath that veneer of bravado, we often feel like our free-market economy is less than stable and fair. Inflation has undermined family budgets and our financial plight often feels far from prosperous.

As we try to cope with these challenges, rather than follow in the footsteps of politicians who lash out at political rivals, perhaps it would good to step back, examine why inflation spiked, how our economy is really doing, and what can be done to make things better.

Given that inflation has been hurting every household, it’s no surprise that we often rank it our number one concern. In 2022, the CPI was 6.5% with inflation for food prices 10.4%. Fortunately, over the last twelve months price increases have moderated, and the CPI has come down to 3.4%.

So, why did inflation rise so quickly in the first place? First and foremost, the depth and duration of the economic decline during Covid set us up for a recovery with significant imbalances that would be hard to manage. Unfortunately, when economic growth began to accelerate in 2021, the Fed kept its foot on the economic accelerator, pumping $120 billion per month into the economy and kept interests near zero when it wasn’t needed.

Secondly, during the pandemic the civilian workforce fell by four million people, making it difficult for businesses to keep up with demand. Lastly, many businesses seeing strong catch-up demand and an opportunity to blame rising costs, chose to raise prices beyond their cost increases.

“Greedflation” enabled Fortune 500 companies to earn a record $1.8 trillion last year.

Albert Edwards, a global strategist at megabank Société Générale said he’s “never seen anything like the ‘unprecedented’ and ‘astonishing’ levels of corporate Greedflation”.

With respect to economic growth, our economy grew at a hearty 5.95% in 2021, 2.06% in 2022, and averaged 2.95% growth over the last four quarters, including a 4.9% rise in the last quarter. That compares to a long-term average growth rate of 2%.

If we look at employment, since Biden became President 14 million jobs have been added and unemployment dropped from 6.3% to 3.7%. While that may not ease our frustration with elevated prices at supermarkets, it’s important to recall that without the incredibly strong job market we’ve enjoyed the last few years, life would be much more difficult for millions, and more tenuous for all the rest of us.

So, given what’s already happened, what can be done? One thing we can do is continue to be intentional about refusing to pay elevated prices for brand goods. Without pushback from consumers, businesses will keep prices elevated. A second thing we can do is enlarge the pool of labor by granting immigrants work permits faster. Providing immigrants work permits faster is a win-win, and as of October 1, that’s exactly what the Biden Administration has been doing.

A third thing we must do is increase funding for public education, including skilled trades training. Without a well-educated workforce to propel our economy, productivity and our standard of living will languish.

As we enter 2024 and the economy slows a bit under the weight of eleven Fed interest rate hikes, giving fodder to what was already going to be an incredibly contentious political season, it’s essential that we remember three things.

First and foremost, the inflation we experienced was primarily due to the Fed keeping its foot on the economic accelerator longer than necessary, shrinkage in the pool of available labor, and greedflation on the part of businesses.

Secondly, we need to look for candidates with pragmatic solutions to economic challenges and not just hurling blame on rivals.

Lastly, we should try to view our current economic circumstances through the lens of how far we’ve come since the mess of 2020, and try to take some comfort in that.

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George Zadigian, a registered Republican more in the school of the Lincoln Project these days, writes an occasional opinion column for the Cleveland Plain Dealer in Ohio. We republished it here with his permission.
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