Inflation in the United States is not only heightening the prices of goods but also causing a dangerous political divide.
If you are like the drastic majority of Americans, then odds are you have found yourself feeling the harsh effects of inflation sometime in the past year. Food, gas, rent, utilities and other basic living expenses have seen sharp increases in costs, with arguably no clear source to blame. Despite the common conservative argument that President Joe Biden and his administration are liable, or even the similarly common liberal argument that corporate greed and the current war in Ukraine are the cause for inflation, neither of these are the be-all and end-all culprits. In reality, current inflation in the United States is a very complicated and unique issue, one that simply can not be understood by looking at just one or two factors. With that being said, it seems as though the majority of the American public does not agree with this sentiment, as inflation has only become an agent for increased political polarization and disagreement.
As a result, understanding the very economic concept of inflation, its origins in today’s America and what can be done to combat it moving forward should be something that every American needs to be aware of, especially with the upcoming election cycle.
To start, it is worth understanding that in regard to its most basic economic principles, inflation typically has to do with an issue of supply and demand. Odds are that over the last two or so years you have heard the term “supply chain shortage” thrown around in various forms of news media. This is where the first factor of inflation today starts to take shape. Because of the COVID-19 pandemic that shut so many businesses down across the globe in 2020, regardless of whether said shutdowns were permanent or temporary, international production of goods slowed down to a certain capacity in almost every industry. At the same time, a decrease in overall spending occurred as American households began to save and accumulate more wealth during the early stages of the pandemic, thus creating a high demand for goods in those very same industries. In short, the nation’s economy was experiencing a perfect storm of low supply and high demand, a storm that has still yet to fully pass. Economists predict it could take years for the American economy to fully recover. Because of this discrepancy between supply and demand, the cost of living in the United States has naturally increased, leaving many Americans pointing fingers at who to blame.
As previously mentioned, a popular recipient with the most “fingers” pointed in their direction is Joe Biden. Remember when I mentioned how more wealth in American households creates a greater demand for goods thus increasing prices? Enter: the Biden administration, who issued stimulus checks in attempts to curb the changing economic environment. To much conservative critique, trillions of dollars entering the nation’s economy at the hands of Joe Biden unquestionably contributed to inflation in the United States today.
However, the use of this argument is not only dim-witted, but also irresponsible in the sense that it completely neglects the prospect of where the nation’s economy would be today without this government aid: experiencing a much more drastic recession than we are right now. And yes, despite the American government and media not recognizing our current economy as experiencing a recession, by definition we are. The United States economy just experienced two successive quarters of decreasing gross domestic product (GDP), indicating the second recession that we have had in the last ten years. Why? Many point to inflation itself resulting in a current decrease of household spending, not because they want to, but because they can not afford otherwise. Enter: corporate greed.
According to The Washington Post, major oil companies such as BP, ExxonMobil, Shell and Chevron made a record $50+ billion in just the last quarter (three-month span) alone. Why? Because they can. Major oil corporations have cornered the market to the extent that gas has become unfathomably expensive for citizens all over the world, all while their profits have grown nauseatingly larger and larger as a result. It is also worth noting that the current conflict in Ukraine has cut off much of the United States’ oil supply in Russia, meaning that the dependence on the avaricious big oil industry is unfortunately at an extremely high point. Although inflation is the result of many cooperative processes, this is one that is arguably the most preventable, and consequently the most disheartening.
On a lighter note, there are things that can be done to ease the severity of inflation in the United States. Many have looked towards the Federal Reserve to take action. One of the Federal Reserve’s main duties is to focus on stabilizing the American economy, thus decreasing inflation. According to the Federal Reserve Bank of Cleveland, “the Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.” Given the current state of the economy, raising interest rates is something that businesses and banks can expect from the Federal Reserve in the coming months. During that time however, it is important that we do not lose sight of why inflation is still so severe.
In essence, there is no sole cause of inflation in the United States, and anyone who says there is, is likely only attempting to shine said reason in a bad light. Therefore, as we proceed into both the upcoming 2022 and 2024 elections, it is vital to remember that inflation should not be something that continues to be used as a tool to pit conservatives against liberals and liberals against conservatives, but instead, as an economic concept that both parties understand equally and are actively fighting against for the betterment of our nation and its peoples.