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Put Focus on Economic Growth to Combat Inflation
Lasting help for consumers requires a focus on long-term actions such as lowering tariffs, improving supply chains, and building more houses
While government can’t do much to halt inflation in the short-term, it can take action to promote economic growth, the most effective antidote to inflation’s impact.
As Mark Hester discussed in his column Friday, short-term inflationary “fixes” can do more harm than good. A holiday on federal and state gas taxes may seem like a good short-term palliative, but it comes at the expense of reducing revenue for the long-term investment in roads, bridges and public transit.
Here are actions that can address and outlast inflationary pressure by positioning America for future growth:
Former President Trump imposed tariffs, especially on China, to punish unfair trade practices. In China’s case, tariffs haven’t changed Chinese trade policies while raising prices on a wide range of goods and disrupting supply chains. The Biden administration is considering removing many of the punitive tariffs, excluding those on aluminum and steel that are intended to protect domestic manufacturers. President Biden should move ahead to cancel the Trump tariffs, including lowering those on aluminum and steel, to boost supply and ease upward pressure on prices. The administration already sidestepped an investigation into illegal shipment of solar panels made in China through Southeast Asian nations to ensure a steady supply to support rooftop installations that can reduce electricity bills.
Unsnarl Supply Chains
Disrupted supply chains are a major cause of inflation. Make unsnarling supply chains a national priority and act quickly and decisively. The Biden administration has jawboned West Coast port authorities and longshoremen to work longer hours to reduce the backlog of containers marooned on port docks, but stacks of containers remain because of a shortage of truck drivers. Why not employ National Guardsmen to eliminate the backlog of shipments that leaves shelves empty and drives up prices. The Biden administration has been willing to invoke the Domestic Production Act to ensure production of items in extreme shortage, such as baby formula, and talk face-to-face with oil company executives about using their spiking profits to upgrade or reopen US refineries.
Invest in Infrastructure
Fiscal hawks want to pull back on federal spending, but that could do long-term harm with little short-term benefit. We should invest in our future. The bipartisan infrastructure package adopted by Congress and signed into law aims at improving America’s aging roads, bridges, ports, airports and water systems and expanding the reach of broadband technology and electric charging stations to all corners of the nation. This is forward-looking spending that will create good-paying jobs now and future opportunity.
Biden’s unsuccessful Build Back Better agenda went further and should be reconsidered. He urged investment in human infrastructure from childcare facilities, home health care, energy efficiency, technical education, sustainable agricultural practices, clean energy innovation and equitable opportunity. Congress should pass the CHIPS Act to incent expanded domestic semiconductor manufacturing capacity and boost research into next-generation computer chip technology. These initiatives will build a stronger economic foundation for more Americans.
Build More Housing
Housing prices were skyrocketing before inflation broke out. The most direct explanation is there are too few houses to go around, which has pushed up the price of housing and rents. Higher mortgage rates to combat inflation are making housing financially unattainable for a growing number of Americans. There is no quick fix for building more housing. It requires available land, agreeable zoning, access to utilities, affordable building supplies and enough construction workers, plumbers and electricians. Housing is one of those industries that benefits everyone – the people who live in houses, the people who build them, the people who provide building supplies and the communities that benefit from having them. Let’s have a robust national housing policy that reduces the gap between supply and demand. While we’re at it, let’s not forget housing for the houseless, which will provide a foundation for many people who are able and willing to work if they had the stability of a home.
Boost Supply Through Innovation
The fundamental cause of inflation is too much demand chasing too few goods. A 21st Century solution is to boost supply through innovation in logistics, manufacturing and distribution. In prior generations, more supply meant more factories. But they take time to build and can become obsolete too quickly in a fast-paced economy. We should prioritize innovation to make goods faster and better, deliver them at less cost and provide good-paying jobs in America. Key technologies to supercharge supply include the internet of things, artificial intelligence for machine learning and 3D printing. These technologies analyze and solve supply chain hiccups, personalize products and speed delivery.
Help Those Who Need Help
Some Americans need help to pay for higher gas prices, groceries and consumer goods, not to mention childcare, rent, utilities, medical bills and an appliance that goes kaput. Biden and Congress did a good job keeping the heads of the nation’s poorest citizens above water during the coronavirus pandemic. They should renew that effort with targeted supplemental payments that help lower-income people make ends meet so they can remain in the job market. It will be even harder to match supply with demand if frontline workers cannot afford to work.