Decreasing Inflation without a Recession





Can you really decrease inflation without a recession? Isn't "decreased inflation" the definition of "recession"?

First, let's clarify. Our daily experiences of inflation are mainly related to rising prices. What we fear in a recession is that because consumers are not buying products, people lose their jobs.

Goal: We want supply and demand so people can have jobs and so money can be circulated for a healthy economy. What we don't want are the soaring prices. A deceleration of inflation is not a recession but a leveling out for a healthier economy.

Supply-Demand-Prices

Story: Angela has a pencil factory which produces 100 pencils a month which she sells for $2 a piece. At first, consumers like the tie-dye design, and she sells all 100 each month. Her customers tell their friends, and Angela starts selling out of pencils before the end of the month (increased demand). She raises the price to $3 (inflation). Angela uses the extra profits to purchase a new pencil-making machine. Production increases to 200 pencils per month, but Angela doesn't lower the price back (increased supply). Consumers in her town realize they don't need that many tie-dye pencils and don't buy as much (decreased demand). At the end of the month, Angela has pencils left over (increased supply). She lowers the price back to $1 and only produces 80 pencils per month (recession). Angela's friend suggests she present her tie-dye pencils to the neighboring town, and this endeavor proves successful (increased demand). Angela also develops a new optical illusion design. In addition to the tie-dye pencils which she sells in the new town, she produces 100 of these new pencils each month and sells them for $3 each (increased supply, increased demand, and inflation). In time, Angela expands her territory, adds design options, and hires more people, all while gradually increasing the price (normal inflation).

Outrageous Inflation: While there is not an official desired inflation rate, generally, the goal is 2% or less. However, 2021 delivered a 6.7% inflation rate. That's outrageous and bad for the economy. The more our families spend on necessities such as gas for work and mortgage/rent payments, the less we have for other items. While these other items are less essential for the household, they are essential for the providers of these goods and services. We are all affected directly and indirectly.

A Story of How High Prices Kill Economies: Because she is spending more on gas, rent, and groceries, the barista who usually has her hair cut twice a month re-budgets for once a month. For similar reasons, other clients are also seeing the stylist less. The stylist decides to save money by laying off the babysitter. The babysitter now doesn't buy coffee on her way to her babysitting job. Likewise, others are buying less barista coffee, and the barista's hours are cut. She has less income and now goes to the stylist every other month...

Why are we seeing this massive increase in prices? Yes, Covid and Russia have played a role but not nearly as big as the rich corporations who are raising the prices we pay, just because they can. They're price gauging our everyday products and services such as groceries, gasoline, and Internet service (which doesn't even work a lot of the time).

According to The Economic Policy Institute, April 2020-December 2021, corporate profits were the leading contributor of inflation. 54% of inflation was to increase corporate profits. They increase their profits more in 2021 than in any of the past 40 years.

During the previous 40 years, labor costs were the main reason for price increases. However, opportunistic corporations used Covid to send prices through the roof: 54%, compared to 8% increased labor costs and 38% from increase non-labor costs such as supply chain issues. If they weren't lining their pockets, the 2021 inflation rate would have been cut in half (to about 3.3, which is a fairly normal rate).

Examples of price gauging by opportunistic, greedy corporations (The Guardian):

  • Chevron, the oil company, increased profits by 144%.

  • Amazon, the online retailer, increased profits by 333%.

  • Albertsons, the supermarket company, increased profits by 671%.

What we can do: Together, we can make life a bit better for the people of WNC and beyond.

  • Shop local. Help your locally-owned, non-franchise, non-box store businesses compete.

  • Encourage your elected officials to support: the Prescription Drug Affordability Act, the Fair Estate Tax Act linked to a tax cut like the Property Tax Circuit Breaker Act, the Protection from Price Gouging During Emergencies Act, the Protection Against Unlawful Evictions Act, the Fair Minimum Wage Act/the Living Wage Act, and a windfall profits tax.

  • Increase the labor supply through freeing up family caregivers. Providing more subsidized childcare and eldercare options allows family members to seek paid employment with the confidence that their loved ones are safe and that they're not just working to pay the agencies. It also allows family members to go to school for the necessary certifications for skilled labor positions. By increasing the work force, we address worker-shortages and supply issues. Paying for it with the windfall profits tax takes away the price-gouging power of greedy corporations.

  • Help smaller companies be more competitive through redirecting subsidies, legal/bureaucracy assistance, and reliable, affordable, high-speed Internet.

  • Health insurance plans which give preferential treatment to local pharmacies tends to lower costs.

Because Radical Republican Politicians value profits over people, they side with big corporations. They're not looking out for us. I'm on your side and will work for policies which lower costs and connect people with quality jobs so we all have the freedom to thrive.