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 On top of paying more for groceries, consumers are paying more
for gasoline. The growing supply chain crisis is threatening the consumer’s
ability to purchase Christmas presents as they find more empty shelves or longer
than expected “delays” from online orders. Vice President Kamala Harris even
encouraged parents to start buying toys early for Christmas. Both inflation and
the supply chain crisis are creating economic problems, and both are caused by
poor government policies.
The Biden administration and other liberals have mocked both the supply chain
crisis and inflation. Press Secretary Jen Psaki referred to the supply chain
crisis as the “tragedy of the treadmill,” which meant that people will just have
to wait longer to get their purchase. White House Chief of Staff Ron Klain
supported a social media tweet that inflation was a “high class” problem. Both
comments imply that these issues are only an inconvenience and impacting only
wealthy Americans. Both demonstrate how out-of-touch the administration is with
what is occurring.
At the heart of inflation is the out-of-control spending by the federal
government. President Joe Biden’s “Build Back Better” agenda is costing
trillions. Stephen Moore, an economist and senior fellow with FreedomWorks,
wrote that the nation is experiencing “slow growth while inflation has hit its
highest level in more than a decade at 5.6 percent.”
“In addition, consumer confidence in the economy has tumbled,” Moore added.
It is not just the massive overspending by the federal government that is
causing economic problems. The nation’s supply chain has failed partly because
of the COVID-19 pandemic that has disrupted businesses and transportation
systems across the globe. As the United States economy began to open, it created
a demand for consumer goods. Poor public policy responses have also impacted the
supply chain. Strict vaccine mandates are driving people out of the workforce.
As an example, airlines have had to cancel thousands of flights and vaccine
mandates may result in numerous workers losing their jobs.
The vaccine mandates not only bring questions of personal
liberty, but they are forcing people to leave the workforce, which is the last
thing that is needed.
“It’s as if the Biden administration is trying to put a lump of coal in
Americans’ stockings this Christmas (never mind, they are killing the coal
industry too),” wrote U.S. Sen. Bill Hagerty, a Republican from Tennessee.
“As it is, the pandemic and the overbroad lockdown response have spawned severe
disruptions in global supply chains. We now face looming shortages of everything
from computer chips and food to toys for Christmas,” Peter Navarro, an economist
who served as an assistant to President Donald Trump for trade and manufacturing
policy, wrote.
President Biden’s stimulus programs and expansion of welfare programs are also
discouraging people from entering the workforce. The threat of massive tax
increases is impacting businesses.
“Why invest when the politicians in Washington are threatening to tax away your
earnings in the name of paying your 'fair share'? Businesses that make profits
are now demonized as enemies of the people in this new liberal anti-growth
crusade. They keep forgetting that without employers, there are no jobs," Moore
argues.
The pandemic is changing the nature of work. The “great resignation” is
occurring with people leaving their current jobs in search of better employment
opportunities such as working from home. This is creating competition within
businesses in terms of increased wages and benefit packages. Iowa’s unemployment
rate is at 4% and, just as with many other states, businesses cannot find
workers to fill positions. The American Trucking Association
estimates that the United States is confronted with a shortage of 80,000 truck
drivers. This shortage of truck drivers is fueling the supply chain crisis
because products cannot be shipped. It is not just a shortage of truckers, but
also warehouse workers to help load and unload the cargo from the trucks.
This is also impacting the bottlenecks that are occurring at the nation’s ports
as a plethora of cargo ships are waiting to unload. Consumers cannot get goods
and businesses cannot get parts and other equipment, which impacts their ability
to produce and serve their customers.
 Creighton University’s Mid-America Business Conditions Index recently
demonstrated growth in manufacturing, but supply chain concerns are creating and
weakening confidence in the economy.
“Almost one-third of supply managers reported that inventory stockpiling has
contributed significantly to supply chain bottlenecks,” said Ernie Goss, Ph.D.,
director of Creighton University’s Economic Forecasting Group and the Jack A.
MacAllister Chair in Regional Economics in the Heider College of Business. The
survey also reflected that both the supply chain and the labor shortage are the
main causes for the decreasing confidence in the economy.
U.S. Sen. Ron Johnson, a Republican from Wisconsin, writing in The Wall Street
Journal, argues that the combination of rising inflation, the supply chain
crisis, and the labor shortage is going to have serious economic consequences
similar to the stagflation of the 1970s. Stagflation refers to the combination
of slow economic growth and increasing prices.
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Both the COVID-19 pandemic and the supply chain
crisis have also shed greater light on our national dependency on
other countries for not only consumer goods, but also necessities.
The United States has become dangerously dependent on foreign
nations, even potentially hostile nations such as China, for
essential goods. One example is the shortage of
semiconductors.
“Why are semiconductors so important? Because computer chips are the
'brains' of not just computers, cars, and medical devices, but also
the weapons systems that support America’s military. Being so
dependent on imported computer chips leaves America’s national
security vulnerable to the whims of the global market,” wrote
Michael Stumo, who serves as CEO for the Coalition for a Prosperous
America.
The supply chain crisis is a reminder how dependent the nation has
become on foreign countries. For decades, the United States has
followed a policy of globalization and free-trade deals that have
hollowed out manufacturing. A question needs to be asked why the
United States cannot manufacture these necessities?
Joel Kotkin, a Washington fellow at the Claremont Institute Center
for the American Way of Life, correctly notes that this problem not
only predates President Biden, but has left the nation vulnerable to
supply chain problems. As Kotkin argues:
Our vulnerability to supply chain disruption clearly predates the
Biden Administration, forged by the abandonment of the production
economy over the past 50 years by American business and government,
encouraged and applauded by the clerisy of business consultants. The
result has been massive trade deficits that now extend to high-tech
products, and even components for military goods, many of which are
now produced in China. When companies move production abroad, they
often follow up by shifting research and development as well. All we
are left with is advertising the products, and ringing up the sales,
assuming they arrive." The United States is still
running large trade deficits. The trade deficit in August was a
record $73.3 billion. Since 2001, the nation “has rung up over $12
trillion in accumulated global deficits.” China’s exports to the
United States have risen 31% since 2018. It is estimated that 3.7
million American jobs alone were lost to China between 2001 and
2018. This does not include manufacturing that was lost to other
countries.
Many economists and policymakers will argue that globalization is a
net positive. The consumer benefits with cheap goods and businesses
can earn more profit because they can save money by paying lower
wages and fewer regulations in foreign countries. However, the
result is not only a loss in manufacturing jobs and greater
dependency, but lower wages and more people depending upon social
welfare programs to survive.
“We must make every effort to restore a vibrant manufacturing sector
in this country that can employ working men at living wages – wages
that can feed a family and support a community. And we can start by
requiring that at least half of all goods and supplies critical for
our national security be made in the United States,” U.S. Sen. Josh
Hawley of Missouri said.
What can be done to solve the supply chain crisis and to prevent
stagflation? First, the federal government must begin to reduce
spending and begin to address the national debt. It will also
require preventing any new tax increases. Tax increases will only
damage the economy. Policymakers must also incentivize work. The
“human infrastructure” component of the “Build Back Better” agenda
will not only expand and revolutionize welfare, but it will
discourage work. “The president’s plan would be the
largest tax-and-spend increase – and disincentive to work – since
the introduction of the income tax,” wrote economists Casey Mulligan
and Vance Ginn in The Wall Street Journal. Economics is about
incentives and tax increases along with expanding welfare and
entitlement programs will discourage both businesses and employment.
“Having spent my career in business, I can tell you the last thing
our economy needs right now is burdensome government mandates that
discourage hiring and work. The Biden mandates will not only
severely disrupt American life, but will push jobs back overseas and
encourage government dependency,” argues Sen. Hagerty.
Sen. Hawley is also correct that we need to rebalance trade and
bring back manufacturing to the United States. Manufacturing
provides better paying wages and strengthens communities. President
Donald Trump was the first to start to rebalance our trade policy
and encourage the growth of manufacturing.
It is uncertain when the supply chain crisis will be resolved.
Americans are being told that they will just have to “deal” with
empty store shelves. President Biden’s reckless fiscal policies are
not only driving inflation, but they threaten to torpedo the
economic recovery that has emerged from the pandemic. Americans are
starting to realize that “Build Back Better” is more of a wrecking
ball.
As Sen. Hagerty argues: “We already have that blueprint to follow:
it’s tax cuts for all Americans, it’s deregulation, it’s energy
independence, and it’s reciprocal trade. That creates an America
with low unemployment and rising wages across all demographics,
where workers get their shot at the American Dream.”
John Hendrickson serves as the policy director for Tax Education
Foundation of Iowa
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