In the Biden era, news feeds have focused on price increases over the last 12 months. Well, the last big spike in prices caused by the Russian invasion of Ukraine rolled off the 12 month inflation rate last month. Without that awful June 2022 number in the calculation, the latest 12-month CPI increase has been 3%, higher than the Fed’s target of 2%, but not bad considering the shocks of the pandemic, recovery and war.
All things considered, the Biden economy has been doing remarkably well. Unemployment has remained steady at about 3.5%, although it has started inching upward for Black workers in the most recent months, and the number of workers working part time not by choice increased in June. The key thing is: Inflation has come way down without a big increase in unemployment. The big recession that the media have been touting hasn’t happened. Cost increases force prices up, but only competition or regulation can bring them down again. Stage 3 of Bidenomics should be all about restoring competition in markets, or adding price regulation where competition can’t quickly be re-established. And forgiving interest on student loans.
In my way of thinking, Stage 1 of Bidenomics was pandemic recovery, and Stage 2 was mostly industrial policy (CHIPS Act, Inflation Reduction Act) to increase U.S. investment in tech and energy transformation. Stage 3 should be about competition and regulation, and about relief from the Fed’s ridiculous, over-reactive interest rate increases, particularly relief for small businesses and student loan borrowers. Here’s a gift link on the student loan interest problem: NY Times “America’s Student Loans Were Never Going to Be Repaid.”
Note, I’m fine forgiving principal on student loans too, but I think legislatively we should focus our push on relief for high interest rates paid by student borrowers, particularly in light of the Fed’s push to raise interest rates higher than necessary to slow inflation.
Disclosure, our family runs a small business that would benefit from lower interest rates for inventory financing. Several of our employees have incredibly burdensome student loans.
Here are some screenshots of how the media handled yesterday’s CPI report: