Donald Trump’s monumental errors in response to the spreading of the novel coronavirus are the source of higher prices today that too many wise people are mistaking for inflation. Further evidence that President Biden isn’t up to the stresses of another presidential term can be found in his inability to explain why the lede of this write-up is true. This case is being made by someone who voted for Trump in 2020, and who will vote for him again in 2024.
The simple truth is that Trump erred massively in his support for the lockdowns related to the coronavirus, and much, much worse, his signing of the $3 trillion Cares Act subsidized the very lockdowns on a national level without which American consumers wouldn’t be enduring higher prices today.
To get started, it’s most useful to begin with a recent editorial at a locale of opinion popular with conservatives. About the much talked about debate between Trump and Biden, the editorial asserted that “Mr. Biden’s response that Mr. Trump caused inflation by the way he handled Covid was preposterous.” Except that the higher prices that followed Covid precisely make Biden’s case. Biden’s problem is that he doesn’t know how to make it. Neither do his advisers.
What supports the above claim can be found in the commentary that followed the sentences in the editorial about Biden’s assertion as “preposterous.” The editorial then said that the “economy was recovering smartly when Mr. Biden took office, with GDP rising 5.2% in the first quarter of 2021. His $1.9 trillion spending blizzard in March 2021 flooded the economy with unnecessary money.” The previous assertion fails four times, and realistically many more times than that.
For one, it implies that roaring economic growth is an inflationary condition. It’s not. Inflation is a decline in the monetary unit which logically coincides with slower growth as investment in wealth that already exists (hard, inflation hedges) wins out over investment in the dollar-denominated returns representing wealth that doesn’t yet exist.
For two, the economy can’t be “flooded with money.” If it could, poverty would have been solved long ago in East St. Louis, Baltimore, El Monte, CA, and Pueblo, CO. Money is a consequence of production, meaning it circulates where there’s production, period. Government can’t alter this economic truth.
For three, governments cannot increase demand. This truth is the basis of supply side economics. And there’s no getting around it. Governments produce nothing, so the idea that they can stimulate “excess demand” as overnight Keynesians in the conservative camp claim is an impossibility. If President Biden’s ill thought $1.9 trillion spending plan put money in people’s pockets, it did so only insofar as the pockets of others were commensurately lighter.
Fourth, even if it were true that government spending could bring on rising prices (something Japan, the United States and China have revealed as impressively false for decades) through the impossibility that is increased demand, the fact remains that Donald Trump yet again signed into law a $3 trillion spending program in 2020, and was intent on a spending program bigger than Biden’s had he been re-elected. Short of conservatives embracing the Keynesian “demand multiplier,” the spending angle used by them to explain higher prices under Biden is utter nonsense.
What does make sense simply because it’s a truth as old economics, is that the prices of all market goods go down as the number of hands and machines involved in the making of them increase. This statement of the obvious has of course long raised the question of why conservatives have called for Federal Reserve stabs at price controls instead of government getting out of the way so that participants in the “closed economy” that is the world economy could reconnect. What’s not a mystery is who signed into the law the spending errors that enabled a reversal of global economic cooperation so plainly instrumental in the higher prices of certain goods (in an economy defined by tradeoffs – meaning all economies – higher prices beget lower prices elsewhere, by definition) that consumers are suffering to this day.
While command and control is not inflation, the higher prices of today once again have Trump’s fingerprints all over them. That he won’t admit these truths is not surprising, but what’s worrisome is that those closest to him remain in denial. Because make no mistake, any reasonable assessment of what’s transpired since March of 2020 would support a case that Biden wants to make, but doesn’t know how to. Readers should similarly make no mistake that if Trump had been elected, the arguments being made here would be Republican arguments.
