Economic Growth, Not Austerity, Is the Answer to Inflation

Source: The Wall Street Journal.

This brief commentary packs a wallop of truth. The main insight is that inflation has many causes, but only one cure: economic growth (meaning more production).

It is also a useful antidote to the poisonous view that President Biden is not to blame for current inflation. Well, yes, blaming the president may be less than helpful, but a president whose policies do not encourage the economy to grow across the board deserves blame for something.

10 thoughts on “Economic Growth, Not Austerity, Is the Answer to Inflation

  1. Growth policies are there. The GOP keeps blocking them. G-d forbid Biden gets a “win” on economic growth.

    The GOP obstructs, or provides anti-consumer drivel, instead of finding (Don’s favorite word) consensus or compromise. It is about political power, not doing what is right for economic growth.

    Finger pointing notwithstanding, it takes Congress to do the job, as SCOTUS has made perfectly clear this term.

    Liked by 1 person

      1. Build Back Better. ( at least some of the aspects of it). Immigration reform which economist of all ilks say is important for the growth of the economy.

        Investments by the government to grow the economy, not handouts to keep businesses afloat are proposed. But the GOP won’t e consider them because they come from Biden. Look st Obamacare as an example. It was modeled on Romney-care in Mass. But because a black man with a funny name form the opposite party proposed it, it could not happen. Simply because POWER.

        Liked by 1 person

        1. RE: “Build Back Better.”

          That program was widely criticized by economists as being directly inflationary. Also, the bill has not passed because it lacked Democrat support in the Senate.

          I can’t tell what your other comments are referring to.


  2. It’s going to take a hell of a lot of growth to soak up the excess fiat money that has been injected into the economy.

    Pretty hard to do when your policy is to destroy our most successful industries and raise the cost of energy across the board.


    1. RE: “It’s going to take a hell of a lot of growth to soak up the excess fiat money that has been injected into the economy.”

      Since we are technically in a recession our priority needs to be to reverse policies that inhibit production. Anything that allows corporations to keep and reinvest more profits would help.


      1. If that reinvestment was inR & D adn resources, including wages, I would agree. But everytime corporations are given the opportunity to do so, they tend to look more to shareholders and dividends, not the actual positive effects for the economy by investing in the future ACTUAL growth of their companies.

        The Stock Market is NOT the economy.

        Liked by 1 person

  3. Unemployment is very low at 3.6%. Manufacturing is around +4.7%, higher than most in the world. Wages are rising for workers. At other times in history, that might look pretty good.

    Increasing production more might help, but supply lines for raw materials and parts are still a problem. If and when that clears up, production could skyrocket. Hard to increase production until supplies flow. And supply lines are global. It takes years, decades maybe, to rebuild supply lines like China had that made it so hard to bring “home” the factories.

    Hard to see short term fixes or nail blame too narrowly.

    Liked by 2 people

    1. RE: “At other times in history, that might look pretty good.”

      We should dig a little deeper into your numbers:

      • The unemployment rate of 3.6% is roughly the same as before the pandemic, and also lower than the historical average unemployment rate of about 6%. Also, 3.6% is the BLS U-3 metric. The BLS U-6 metric, which some regard as more meaningful, is 7.1%
      • The 4.6% increase in manufacturing is nearly the global average of the manufacturing increases shown in the table you cite; 32 of 82 other countries had better manufacturing increases than the U.S.

      • It is true that wages are rising for workers in nominal terms, but adusted for inflation they are flat or falling for most people.

      Most pundits, including Forbes magazine, are claiming we are in a recession, defined as two consecutive quarters of zero growth. For these and other reasons, I’d be cautious in claiming the economy is in good shape.

      I’m no expert, but my guess is that we’re seeing the early phases of a fundamental re-organization of the global economy, one in which the U.S. is going to suffer greatly if we don’t start implementing pro-growth policies.


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