Why Joe Manchin is Wrong About Inflation
by By Noah Berlatsky
November 5, 2021
https://www.alternet.org/2021/11/joe-ma ... inflation/
Extract:
(Alternet) Manchin has said he is opposed to social spending in Joe Biden's Build Back Better infrastructure program because he is worried too much spending will result in "runaway inflation." Among other changes, Manchin is scaling back the child tax credit that was passed in the covid-relief funding bill earlier this year. The credit reduced food insecurity among Manchin's constituents in West Virginia from 11.6 percent to 8.4 percent in the month of July.
Manchin is worried that large scale spending will cause prices to rise. Prices go up when there is a lot of demand for goods. If the government spends money, people have more money and want more goods and services. Then demand increases, and you get inflation.
…In the first place, there is little indication that more spending would create the kind of hyperinflation he fears. Prices did rise 4.3 percent year to year in August, which is a 30-year high. However, they have fallen slightly since August — hardly a sign that inflation is running away. Moreover, part of the reason energy prices are spiking is because worldwide demand contracted during the pandemic. It's taking some time for suppliers to ramp up production again.
Even if the Build Back Better act is passed without cuts, government spending is going to fall by about $1 trillion and borrowing is going to drop by $2 trillion from 2021 to 2022 as the covid-relief package is used up. That doesn't suggest an inexorable upward pressure on pricing analogous to what happened during the Johnson era.
...
When the value of money goes down, the real value of debts also goes down. People who have credit card debts or student loans will find it easier to pay down those debts if prices and wages rise across the economy. In contrast, people who hold debts — like credit card companies and banks — will end up being paid back in less valuable dollars. Since creditors are generally wealthier than debtors, inflation can shift resources to less affluent people. Which, one suspects, may be a reason why millionaires like Senator Joe Manchin dislike it
The
Alternet* article cites a Washington University in Saint Louis* article in which it is noted that not investing in education has its own costs:
“Impoverished children grow up having fewer skills and are thus less able to contribute to the productivity of the economy,” said Mark R. Rank, the Herbert S. Hadley Professor of Social Welfare and one of the country’s foremost experts on income inequality. “They are also more likely to experience frequent health care problems and to engage in crime. These costs are borne by the children themselves, but ultimately by the wider society as well.”
These costs are clustered around the loss of economic productivity, increased health and crime costs, and increased costs as a result of child homelessness and maltreatment, finds the study, “Estimating the Economic Cost of Childhood Poverty in the United States,” published March 30 in the journal Social Work Research.
… “It is estimated that for every dollar spent on reducing childhood poverty, the country would save at least $7 with respect to the economic costs of poverty,” said Rank, co-developer of an innovative poverty calculator.
According to the Congressional Budget Office, Rank said that the federal government spent $3.7 trillion in 2015, meaning that the annual cost of childhood poverty represented 28 percent of the entire federal budget that year.
*
https://source.wustl.edu/2018/04/childh ... udy-finds/
The
Alternet article also notes that increases in government spending in some areas could be offset by reductions in others, such as in military spending and ethanol subsidies. In regards to ethanol subsidies, an article in
The Atlantic** is referenced in which it is noted that:
As a way to replace dwindling reserves of oil, ethanol subsidies had a certain brutal logic, especially if oil prices were going to keep rising with no end in sight. But as a way to address climate change, the program never made any sense. Corn ethanol may well be worse for the climate than fossil fuels, and the program does significant damage to both the economy and the environment. Its sole beneficiaries are large agricultural corporations—and the politicians who serve them.
… today’s corn-ethanol program is a glaring failure, and it is unconscionable that politicians of both parties are conspiring to keep it alive despite knowing full well what its problems are.
**
https://www.theatlantic.com/ideas/archi ... us/602191/
Don't mourn, organize.
-Joe Hill
