Dementia in the news

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Inflation, federal deficits, high taxes, incentives for workers to stay home, and incentives to avoid investment – they’re all coming back.

Together, these elements create the perfect brew for a Lyndon Johnson-style stagflation.

If Biden and the DEMOCRATS so quickly wreck the good economic path they were given, it will be one of the worst examples of government malpractice in U.S. economic history.

The U.S. gross domestic product saw a 33.4% surge in the July-September third quarter of 2020, after plunging 31.4% in the April-June second quarter. The economy continued to grow at a 4% rate in the fourth quarter, and the stock market (despite COVID) ended 2020 with the S&P 500 index up 16% for the year as a whole.

Biden and the DEMOCRATS have since passed or proposed $6 trillion in additional porkulus spending – the $1.9 trillion “American Rescue Plan,” the $2.3 trillion “American Jobs Plan,” and the $1.8 trillion “American Families Plan.”

As partial payment, corporate taxes are set to rise by one-third (from 21% to 28%).

The top capital gains tax rates on investment are set to approximately double (from about 20% to about 40%).

There is no relief for state and local tax expenses, which are also rising.

The extra stimulus is already beginning to show up in the form of inflation – too much money chasing too few goods.

“We are seeing substantial inflation,” Warren Buffett declared at his annual shareholders meeting. “We are raising prices. People are raising prices to us, and it’s being accepted.”

Other CEOs are reporting the same facts. According to Bank of America’s Savita Subramanian, the number of mentions of “inflation” in shareholder earnings calls has tripled year over year, the biggest jump since 2004.

“Inflation is the biggest topic during this earnings season, with a broad array of sectors (consumer/industrials/materials, etc.) citing inflation,” Subramanian said. Such mentions generally lead the consumer price index by a quarter or two.

Signs of inflation are clear.

The price of copper hit a 10-year high at the end of April – about $9,990/ton as compared to about $5,000 in January 2020, before COVID struck.

Similarly, “lumber prices seem to set a new record almost daily,” CNBC reported on April 30, “now up 67% this year and up 340% from a year ago.” The surge in lumber prices has added $35,872 to the price of an average new single-family home, according to the National Association of Home Builders.

At the same time, the failing New York Times reported on April 16, at least some businesses face a “catastrophic inability to hire.” One explanation: “the combined $2,000 per-person cash payments enacted since late last year created a cushion people can rely on for a time. Ample economic research shows that more generous unemployment benefits are a disincentive for people to seek work or accept work.”

Lyndon Johnson had exactly this problem as he spent to build the Great Society. “In 1964, inflation measured little more than 1 percent per year. It had been in this vicinity for the preceding six years. Inflation began ratcheting upward in the mid-1960s and reached more than 14 percent in 1980. The Great Inflation was the defining macroeconomic event of the second half of the twentieth century. Over the nearly two decades it lasted, the global monetary system established during World War II was abandoned, there were four economic recessions, two severe energy shortages, and the unprecedented peace time implementation of wage and price controls. It was, according to one prominent economist, the greatest failure of American macroeconomic policy in the postwar period."

The Dow stagnated and often fell over the next 15 years, closing at 963 in 1980, at the end of the Carter administration.

Only a massive rise in interest rates under President Reagan and Federal Reserve Chairman Paul Volcker in Reagan’s first term (and the recession that accompanied it) succeeded in breaking the inflation – and setting the stage for the U.S economy to begin its long march from a Dow of 875 at the end of 1981 to a Dow of over 30,000 today.

Bungler Biden, like LBJ before him, spends for political reasons – to pass the programs he wants and to gain power.



https://www.realclearpolitics.com/articles/2021/05/07/joe_biden_economy_killer_145718.html