Handling Covid Inflation / Ukraine | The hill

US inflation has risen since COVID-19 loosened its grip in mid-2021 and the war in Ukraine is making it worse. The key economic question is how to control inflation and hopefully come out ahead with a more prosperous, stronger and less vulnerable economy. Poor countries will face more painful problems than the US — severe food shortages in Egypt and Africa, for example — but higher inflation here is an especially serious problem because Americans are looking for someone to blame. . So a vitally important political question is whether American voters are smart enough and care enough about freedom here and abroad to tolerate rising prices for a few years because investments in our economy to make against inflation will take time.

Understanding what needs to be done in the coming years starts with a few facts, all of which should make Americans feel safe. The population of the US and our allies in the European Union is 780 million, 5.6 times that of Russia. In the Pacific, Japan, South Korea, Australia and others, some of the best manufacturers in the world will also help us. These allies in Europe and Asia have better technology than Russia. It’s also important that the US only has 40 percent more arable land than Russia and twice as much as China. We have as much or more oil and gas. The United States has made mistakes, but the injustice and inequality that exists here is less intractable than in the authoritarian countries we face.

However, inflation is a serious problem. Prices rose 7.9 percent a year before Russia attacked Ukraine because the US economy was rapidly recovering from COVID-19. They will increase even more for a few years because Russia is a big producer of oil and natural gas, and it will take time for producers of hydrocarbons and alternative energy to increase production in the US and in friendly countries.

Crude oil was cheap in 2020, about $50 a barrel, so gasoline and petroleum products were cheap too. Crude jumped 55 percent in 2021 and at least another 40 percent in recent days to more than $110 due to Ukraine. Rising oil and natural gas prices are the main cause of inflation because when they go up, the price of gasoline, heating oil, jet fuel, propane, fertilizers, chemicals, and even coal jump. It costs more to run a tractor or combine harvester: more to generate electricity, heat an ovene, feed a factory, deliver goods and services.

It’s helpful to remember that the US and the world experienced similar oil-fueled inflation in the 1970s. Then OPEC, the Organization of the Petroleum Exporting Countries, pushed world crude oil prices past 1, $80 a barrel in 1973 to 20 times ($35.50) in 1980, turning the 1970s into a decade of inflation. The good news is that by 1980 the US had adjusted, energy prices fell or remained stable for the next 20-25 years, and inflation ceased to be a hot topic. Based on this experience, American voters can rest assured that “this too shall pass” and it would be foolish to blame anything other than COVID-19 and Russia for current inflation.

Of course, inflation for the next year or two will be driven by bottlenecks other than oil and natural gas. The war will make other products and services scarce, such as grain and nickel from Russia and the Ukraine. Supply chain issues related to COVID have yet to be resolved. The supply of semiconductor chips used in cars, appliances and electronics will take a few years to expand. Housing is scarce and rents, restricted during COVID, are likely to rise. However, energy prices are the biggest source of inflation. We and our allies in Europe and Asia should spend money on job-creating, cleaner, and now less expensive alternatives to coal, oil, and even natural gas. In fact, Europe is already doing it. What the war has done is make this a national security issue for the US, as well as an economic one, so our political leaders in both parties need to recognize this new reality. Status quo approaches like “drill baby” won’t solve the inflation problem.

American voters must also understand that there are only two ways to stabilize and lower prices for things like gasoline, and neither will be quick. The US can reduce demand by slowing wage growth and increasing unemployment so people can’t afford gas and other things, or it can invest in safer technologies like wind, solar and geothermal to reduce our dependency on OPEC+ Russia. larry Summers, President ObamaBarack Hussein ObamaHandling Covid/Ukraine Inflation Questlove says he once mistook Obama for Postmates deliveryman Albright’s pioneering legacy includes a path to leadership for women MORESecretary of the Treasury and influential economist for decades. argues in a recent article that the Federal Reserve should raise interest rates faster and higher than last week because it sees rising wages as the most important future contributor to inflation. Unemployment below 3.5 or 4 percent Summers believes will trigger an inflationary spiral of wages and prices. In evaluating this view, it is helpful to remember that in December 1994, when US unemployment fell below 6 percent, Summers called the idea that unemployment could fall below 5 percent without turning on inflation as “shit”. However, unemployment fell below 4 percent a year later and inflation remained low for nearly three decades until COVID and Ukraine.

Reactionaries always favor policies that keep interest rates high, wages low, and working people dependent on employers, also known as “job givers.” Yet it is shocking that Summers and his many leftist disciples continue to push this “slow the economy” monetarist approach. His belief in high interest rates to slow growth is blind to the specific problems of inflation, energy, chip shortages, transportation bottlenecks, and future grain shortages, all areas where specific public and private investments are needed.

The way forward against inflation is to invest in “supply-side” alternatives that make us less dependent on insecure and polluting supplies of fossil fuels, clogged transportation facilities, inadequate childcare and schools that keep people from working, and things for the style. Slowing down the economy is the wrong way to go.

Paul A. London, Ph.D., was a senior policy adviser and deputy assistant secretary of commerce for economics and statistics in the 1990s, a deputy assistant administrator at the Federal Energy Administration and the Department of Energy, and a visiting fellow at the AmericanEnterprise Institute. . A legislative aide to Sen. Walter Mondale (D-Minn.) in the 1970s, he was a foreign service officer in Paris and Vietnam and is the author of two books, including “The Competition Solution: The Bipartisan Secret Behind American Prosperity.” of Competition: The Bipartisan Secret Behind American Prosperity) (2005).

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