Inflation

To all of the bitter skeptics who doubted President Joe Biden, Treasury secretary Janet Yellen and the Federal Reserve, I have a message for you: come forth now with your most heartfelt apologies. For a few months the Ivy League know-it-alls had to back-pedal their claims that inflation was transitory. But that changed this week. After months of ridicule, it is Joe Biden and his team of Nobel Laureates (all seventeen of them) who are getting the last laugh. Inflation changed faster than anyone could have imagined. In fact, according to the White House, we went from 9.1 percent inflation in June to 0 percent inflation in July. Joe Biden — as pleased with himself as ever — couldn’t wait to break the news to the American people.

In the summer of 1981, the American air traffic controllers’ union PATCO rejected a salary and benefits deal that had been put forth by the Reagan administration. What happened next lives on in the annals of Republican lore and in labor movement horror stories: PATCO opted for an illegal strike. More than 12,000 air traffic controllers walked off the job, and in one of the most successful union-busts in history, Reagan fired almost all of them. That’s the official account anyway. But there’s much more about the strike that’s less known, or at least misunderstood. For example, did you know that PATCO had actually endorsed Reagan for president in 1980, finding Jimmy Carter too intransigent?

My friend Dave Sr. owns the diner up the road and runs it with his son, Dave Jr. The family business is coming up on its fortieth anniversary, and Dave Sr., who’s eighty now — though you’d never guess it — reflected to me recently on the mom ‘n pop shops that have disappeared over the last fifty years or so. He and another local old-timer counted dozens that used to dot the two-lane road between our town and the next town over. “Now, I don’t think you can count more than five or six [small businesses]!” Dave Sr. said. “And they all made a living out of these places. Between government intervention and red tape and so forth, people are afraid to get into small business.” Running a small business is the epitome of the American Dream.

I have often been struck by the number of pithy observations — revelatory, pointed or simply true — that were not said by the person to whom they are attributed. Vladimir Lenin apparently never said (in Russian or in English) that “the way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.” Mark Twain, to whom many amusing remarks have been falsely attributed, apparently did not contend that reports of his death had been greatly exaggerated. Edmund Burke neither said nor wrote that evil would triumph if good men did nothing.

The fight for a $15 minimum wage started in 2012 with a bang. Hundreds of Walmart, port, and fast food workers walked off their jobs in protest of low wages. An organization called Fight for $15 formed in 2014 following two national strikes by laborers. Seattle became the first city to require a $15 minimum wage that same year. The White House issued an executive order that required new federal contracts to include a $10.10 minimum wage because legislation had stalled in Congress. The stalled federal push led to more state and local action. California and New York put together slow-rising $15 minimum wage laws in 2016 and 2017. Eight other states, mostly in New England, followed with plans to reach a $15 minimum wage by 2026 at the latest.

There is no shortage of reasons to feel gloomy about the American economy right now. First, there’s inflation. In 2021, the Biden administration claimed that the cost of a summer barbecue had declined by 16 cents from the year before. It probably now wishes it hadn’t made that claim. This summer, the cost of that barbecue is up not 16 cents but 17 percent. Hot dogs are up 37 percent over a year ago. This is the highest inflation in forty years, with the consumer price index up 8.6 percent from a year ago. Some necessities, such as gasoline and food, have risen even more sharply, with gas having gone from $2.18 a gallon when Biden was inaugurated to $5.

As a recession looms, policymakers have predictably turned to entrepreneurs to start new businesses and jumpstart the economy. While this may be a good political talking point, the fact is that new business formation has never shortened a recession or reduced its impact. Some economists have looked to Covid to explain the unprecedented number of new businesses that sought IRS tax IDs during the pandemic. Washington’s touted “surge in entrepreneurship” is proving evanescent, however. Many individuals, facing economic lockdowns and the prospect of extended unemployment, decided to create businesses, often from home. Few of these companies will ever employ anyone except their founders — and rates of new business formation are already falling back to pre-pandemic levels.