It is apparent that Joe Biden and his economic advisors need to go back to freshman year college and study Econ 101. Almost every issue we are dealing with in today’s economy can be improved with a better understanding of the basic economic principle of supply and demand. When supply is greater than demand prices go down. When demand is greater than supply, prices go up. That is why the disruption in the supply chain created shortages and price increases. When supply decreases, and demand remains constant, prices increase. It’s a law of economics. Because the Biden administration does not believe in free market capitalism or a market system, and they do not understand how markets work, they rarely consider the basic economic concepts when making decisions, and that’s why most of their economic decisions turn out to be disasters.
We saw their lack of understanding of supply and demand in the baby formula crisis. When the FDA shut down Abbott’s baby formula manufacturing plant in Michigan in February due to contamination, the administration should have anticipated that there would be a shortage. When you shut down a plant that produces 40% of the baby formula for the country, you are drastically decreasing the supply of baby formula, which drives up prices, and create shortages. The administration should have known that if they did not work to increase the supply, there would be a crisis. But they failed to act because they fail to understand how the supply of goods affects the market.
Our biggest economic issue has been inflation, and that has been driven by government policies. The annual inflation rate for the 12-months ending in April 2022 was 8.5% which is the highest it has been in 41 years. Since the start of the pandemic, we have spent over $5.7 trillion on 5 separate bills dealing with the Covid. And on top of that spending, Joe Biden signed a $1.2 trillion infrastructure bill. In March 2020, the money supply was $16 trillion, it’s now $21.8 trillion. When you print $5.8 trillion out of thin air and inject it into the economy, you dramatically increase the money supply which decreases the value of every dollar which inevitably increases the price of all consumer goods. And Joe Biden continued to show his lack of understanding of economic principles by pushing his $4 trillion ‘Build Back Better’ spending bill that, thankfully, didn’t pass the senate.
This month, in an attempt to control inflation, the Fed hiked interest rates by a half-point which was the largest single increase in the last 22 years. The Fed is trying to make the dollar more valuable by making it cost more to borrow, and to a certain degree that will work, but raising interest rates means that borrowers, i.e., home buyers, will be paying more for less. With higher interest rates, the same mortgage payment will now buy less of a home, or the same price of a home will cost more in mortgage payments. The inflation is hidden in the interest rate increase. Your grocery bill may not increase, but your mortgage payment will. So, they are merely shifting the inflation within the market, and not fundamentally strengthening the currency.
And this comes in a housing market where home prices have been increasing at a record pace, faster than the housing bubble in the mid-2000’s which led to the economic collapse of 2008. The Covid lockdowns caused a major reduction of the production of lumber because mills believed that there would be a dramatic reduction in demand for new homes and building materials. If you decrease the supply of lumber, you increase the price of lumber which in turn drives up the cost of building homes, which means fewer new homes will be built, which decreases the inventory of homes for sale, which drives up housing prices because you have too many buyers vying for too few homes.
Another key driver of inflation has been the cost of energy. One of the first thing Joe Biden did when he took office was shut down the Keystone XL Pipeline and cancel numerous oil drilling contracts on federal land. If you decrease the supply of oil, and the demand stays constant, you will increase the price of gasoline. The price of gasoline has been going up and up for over a year. On Memorial Day weekend, average gas prices reached a record high of $4.62, up 44 cents from last month. Biden didn’t understand that reducing oil production would increase prices, or maybe he did. Maybe his policies are doing exactly what he wants them to do, destroy the fossil fuel industry. But he doesn’t realize that when he attacks the fossil fuel industry, he is attacking the average American family that relies on reasonable gas prices to make ends meet.
Rising gas prices does not only affect what we all pay at the pump; it also increases the price of almost everything we buy. The price of all the goods that require fuel to manufacture and delivery to the consumer will increase when fuel costs increase. And when you increase the cost of manufacturing and delivering goods, you will increase the price of those goods. So, Biden’s misguided energy policy, is showing up in higher bills for everything that we purchase.
Biden and the Democrats lack of understanding of the basic economic principle of supply and demand, is having a destructive effect on issues that are not economic. In the wake of George Floyd’s death, many Democrat politicians defunded the police in their communities, and crime rose to a 30 year high in our major cities. When you defund the police, and take police officers off the street, crime increases. Reducing the supply of police officers, increases the amount of crime. They go hand in hand.
It is not only defunding the police that has led to the increase of crime. Many far-left DA’s have decreased arrests and prosecutions while reducing bail for criminals. When you decrease the accountability and punishment for crime, you will increase the amount of crime. Many of our major cities have stopped arresting people for robbery, and there has been a sharp increase in shoplifting, and smash and grab crimes to the point that many stores are closing their doors because it is no longer profitable when people can steal from you what you had purchased to sell them. When you reduce the number of law enforcers, you increase the number of law breakers. When you increase crime in neighborhood, investment dollars decrease which makes the community poorer which creates more crime which further reduces investment which makes the community even poorer, and so on, and so on.
Along the same lines of the defunding the police mentality, Joe Biden, on Tuesday, said he does not support proposals that would strengthen school security. We have seen that when you make cities soft targets by decreasing the police presence, you get more crime and violence. When you make schools soft targets by not providing ample security, you will get an increase of violence and shootings at schools. When you decrease security, you increase insecurity.
Yesterday, the Biden Administration showed their complete lack of understanding of economic principles. When asked about the Biden administration’s handling of the inflation crisis, Deputy Secretary of the Treasury Wally Adeyemo said, “the most important lesson that we’ve learned here is that we’ve got to do exactly what we’ve done since the beginning of this administration.” Everything they have done has either caused all of our problems, or made them worse.
It is not that the Biden administration does not understand the principle of supply and demand, they simply believe that their virtuous ideology will trump basic economic principles. So, if they believe that printing an extra trillion dollars to inject into the economy is done in the name of equity, or to protect the environment, or whatever woke cause, they are pushing, then somehow the principle of supply and demand will be suspended, and the price of consumer goods won’t skyrocket. But just as the sun shines on both the good and the bad the same, economic principles will equally affect both the non-virtuous and the virtuous policies, the same. Increasing virtue will never decrease inflation.
Judd Garrett is a graduate from Princeton University, and a former NFL player, coach, and executive. He has been a contributor to the website Real Clear Politics. He has recently published his first novel, No Wind.