IMMEDIATE RELEASE 20 May 2022
Today’s Events in Historical Perspective
America’s Longest-Running Column Founded 1932
Our temporary economic problems are temporary
By Douglas Cohn and Eleanor Clift
WASHINGTON — The cable news pundits are forecasting more bad news as the war in Ukraine is holding up critical grain shipments. But this is not bad news for America or American farmers. Calling U.S. farms “the backbone of freedom,” President Biden says American farm products will fill the gap.
Biden’s message to consumers is to ignore the gloom and doom. Help is on the way, and he is right.
He’s looking at the big picture, and there’s nothing wrong with the U.S. economy that a little time won’t fix.
First, ignore Conventional Wisdom. It’s based on false assumptions and panic. One thing feeds upon another, and pretty soon the herd instinct takes over, and everyone says the sky is falling.
Second, there’s nothing structurally wrong with the economy. It’s not like the Dust Bowl of the 1930s when a severe drought caused dust storms that choked off much of the middle of the country destroying crops and livelihoods. And it’s nothing like the oil embargoes of the 1970s that were imposed by a foreign power and led to long lines at U.S. gas stations.
What we have now are temporary problems. And, by definition, temporary problems are temporary. We are experiencing supply chain interruptions and pent-up demand after two-plus years of Pandemic. Over the next three or four months, these pressures will subside.
We import a great number of consumer goods from China. Those supply chains have been interrupted due to China’s determination to lock down parts of the country in its effort to contain the spread of Covid.
But other countries such as Vietnam, South Korea, and the Philippines are ready to step up. They have excess capacity and can fill the gap left by China’s slowdown much like U.S. farmers are prepared to step in and provide wheat and corn and other farm products when Ukraine cannot.
This is not ideology; this is basic economics. When supply meets or surpasses demand inflation goes down.
The stock market has steadily declined since Biden took office, a phenomenon his supporters would attribute to his reality-based presidency, and his critics would take as evidence that the previous president’s policies worked. Neither would be correct. The stock market is a day-to-day barometer of what is best for an investor’s wallet.
The latest selloff was prompted by poor earnings from giant retailers Walmart, Target, Home Depot, and Lowe’s. After benefitting disproportionately during the height of the Pandemic as people stayed close to home, they have returned to earth.
They will be fine, they will figure it out, and they will adjust. Their experience is a microcosm of a sorting-out process that’s going on at all levels of the economy.
What’s the worst that can happen? Will the Ukraine war lead to a global food shortage? Will inflation reach the levels it did during the oil crisis when Jimmy Carter was in the White House? Will frustration with the slowness of government’s response lead to the end of democracy?
These are all valid questions, and they are the stock of trade for cable television pundits. However, a fact-based logical response to the economic challenges as they now exist would provide a more reasonable and less dramatic outcome.
Inflation will subside over the next several months as supply chains open up and should be less determinative in the Fall midterm elections.
When problems are temporary, the economy bounces quickly back, perhaps in the time it takes our Asian trading partners to ramp up production and fill the supply chain or farmers in Iowa to move from planting to harvest.
See Eleanor Clift’s latest book Selecting a President, and Douglas Cohn’s latest books The President’s First Year: The Only School for Presidents Is the Presidency and World War 4: Nine Scenarios (endorsed by seven flag officers).
© 2021 U.S. News Syndicate, Inc.
Distributed by U.S. News Syndicate, Inc.
END WASHINGTON MERRY-GO-ROUND
IMMEDIATE RELEASE 20 May 2022