Are Those Interest Rates In Your Pocket Or Are You Just Happy To See Me?

A survey in my most recent AARP magazine (I freely admit to it) determined the biggest issues people are concerned with going into the Midterm Elections are “Inflation” and the “Economy” in general.  No surprise there as economic concerns are usually what concerns Americans the most.

I am particularly worried, however, as a Democrat because we have a Democrat in the White House and Capitol Hill is, at present, thinly controlled by Democrats. This situation is ripe for Republicans to sweep.

A friend, who is a Republican, sent his warning: “ Be prepared.  This is how party control changes.”

I wrote back: “If it’s really about the economy, I’m curious why didn’t you give Obama credit for an economic turnaround after economic collapse under Bush?  Or vote for Gore to continue Clinton’s policies after that period of economic stability after another Bush presided over a recession?”

He responded: “You mean like Reagan who turned Carter’s catastrophe around?”

“That’s my point!” I returned. “Americans vote for change, not because of policies but because of parties.”

If Trump had been re-elected this inflationary period would have arrived anyway.  The question is, would it be this bad?

What Republican candidates are citing as “Biden and Democrat’s reckless spending” was stimulus that saved many businesses from going under and households that needed assistance as a result of the upheaval caused by the pandemic and post pandemic labor, demand and supply chain disruptions (those little things mishandled by a previous administration).

That spending did increase the inflation percentage some analysts say by 2%. Not the lionshare of our inflation, but some. Trump likely would have let those businesses and families falter to avoid that increase and we can decide, individually, if a draconian, survival of the fittest (social Darwinism), Machiavellian approach to financial hardship, is moral.

Let’s back up. “If Trump had been re-elected this inflationary period would have arrived anyway.”

Is that true?

Michael Gapen of U.S. economic research at Bank of America, cites three general causes of our current inflation- increases in household demand and supply-chain shortages due to the pandemic, the war in Ukraine, and because of a strong labor market.

When Covid restrictions eased, consumers re-emerged, but companies weren’t organized to keep up with the increased demand (many had dramatically reduced production).  This led to shipping delays and shortages in labor.

That leads to higher prices on most goods and services.  And that was all going to happen no matter who was President.

That is the source of current inflation, but inflation has deeper roots. Stanford economist, John Taylor, points out that federal monetary policy is a major cause.  The Federal Reserve has kept interest rates much lower than in recent years. Low interest rates mean people can afford to borrow more.

When the economy grows, as it has been, and prices rise faster than wages, the Fed will usually raise interest rates to discourage borrowing.  This reduces inflation.  But the Fed didn’t immediately raise interest rates in order to encourage consumption as a means to bolster businesses trying to recover.

That is all likely to change and the Fed will raise rates to combat inflation.

So…what would Trump have done differently?  Would he have raised interest rates sooner?  Maybe.  I wouldn’t have liked that for my mortgage, and neither would several million other people.

Would he have spared the stimulus packages that put more federal dollars into the system (and that does exacerbate inflation)?  Probably.  But that would have put many small businesses out of business.  And it would have reduced jobs. Many families would not be able tomake the purchases that stimulate the economy.

It becomes a decision we should make as voters, but only when we look at the facts, the consequences and historical results. Then we should decide based on what we feel is best for our family today and for America’s future.

What is shouldn’t be is a party exorcism or a party coup.  It should be a philosophical decision from unbiased information.

I shared these thoughts with my friend and he said: “Show me your evidence.”

I replied: “No. You find evidence.  And find evidence to refute that evidence. Then we can make informed decisions.”

If we relied less (or not at all) on being fed information and parroting it without verification; if we went a step or two beneath the surface of common rhetoric- we might actually see progress that improves our condition.

And that just might reduce some anger that results from ignorant decisions.

Published by gary1164

I'm an advertising executive and former actor/producer