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Sunday, July 21, 2024

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Economics

By Bruce Allen, Del Haven

To the Editor:

Sometime in the aughts, I was appointed to the Middle Township Strategic Planning Committee. I was on the curriculum subcommittee with nine other people, only one of whom was a parent or ordinary citizen. The other eight were all connected to the school system in one way or another.

My recommendation was to require economics for high school graduation. My proposal was met with limited enthusiasm. Believe it or not, I faced questions like, ‘why do kids need that?’ from educators. When I answered that people are being asked to take a more proactive investment stance for their retirement, and that citizens need it to understand political issues, etc., they sloughed them off and the requirement was never submitted to the committee as a whole. A big mistake here and elsewhere, judging from what I read in Spout Off and see on TV.

First off, as everyone should know, but apparently doesn’t, no president has much impact on the economy one way or the other. The economy under Trump was good, but he had little to do with it. Nor does Biden have much impact on inflation. That’s the job of the Federal Reserve. Biden has nothing to do with housing prices, or rent, or the cost of new cars, insurance or Cheerios. Corporations can raise prices because of market asymmetries – that is, sellers know the true cost of production, and trusting buyers don’t.

In ’22 there were supply chain issues, but that eased in early ’23 so for the last couple years corporations raised prices without corresponding rising costs and got inflation adjusted record levels of profits. A tenet of capitalism is that competition will level that off in the long run, and it undoubtedly will, but three years isn’t the long run. Thus, it is just silly to blame Biden for inflation. He didn’t cause it, and, regardless of what he or other Democrats claim, he won’t cure it. To blame Biden for any price rise in groceries is much like blaming Santa Claus for the increased price of Christmas toys. To think otherwise is just plain economic ignorance.

The larger question is how solid the economy is right now and what impact Trump will have on it if he is reelected and carries through on the promises he has made about things he wants enacted. The fact that he can proudly and openly promise his major claims is a sign of how economically illiterate he thinks the American people are.

For example, he promises to deport 30 million illegal foreigners. I agree with him about restricting immigration, but sending all of those immigrants out will create a labor shortage, and basic economics shows that decreased labor supply leads to higher costs and prices – inflation.

He promises extending the tax cuts of ’18 and indeed making more. That leads to more money in circulation – inflation.

He proposes a 20% tariff on imports. Since it’s American companies which pay import tariffs (contrary to Trump’s bizarre claims about China paying them) that means pressure on importers to recoup their loses. Hence, prices rise – inflation.

Very little of this is being recognized by the American people, and that is a result of poor teaching of economics in school.

Judgments should be made on the basis of knowledge and data. It doesn’t look like that is being done much now by the American public which seems to understand very little economics and uses facts less.

BRUCE ALLEN

Del Haven

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