Inflation is has become a severe problem not only in the United States, but worldwide, both in terms of gas prices and the costs of goods and services.
In order to implement a long term fix for inflation, we will need to come to terms with the root causes of it:
You will see economists in the press talking about how increasing wages leads to more inflationary pressures, not fewer, but these opinions are not borne out by actual data. Especially when you consider that wages have not increased (unless you count billionaires) and inflation is through the roof. So what are the actual causes?
First, federal monetary policy has been a free-for-all for big business. The Federal Funds Rate has been less than one percent since the housing crisis of 2007, so big business and banks have been able to borrow money for almost nothing for over a decade.
In addition, in 2020 congress and the Trump administration injected over a trillion dollars into the economy via the PPP program with little oversight, a move that kept many businesses afloat during the early lockdown phase of the pandemic, but greatly increased inflationary pressures.
Similarly, many industries in the US (and worldwide) now operate as oligopolies, with only a handful of companies in direct competition with one another, carving up markets and allowing them to charge “what the market will bear” instead of anything related to the actual costs of goods and services. Couple this with supply chain issues for items like semiconductors (manufactured largely by only two companies globally), and there is more than sufficient potential for price-gouging.
Finally, the 2017 Republican tax package cut taxes for big businesses by 40%, encouraging them to take advantage of profits and discouraging them from creating jobs or increasing wages.
What can be done to fix it?
In the long term, we need an adjustment in federal monetary policy, interest rates, tax code, and full enforcement of antitrust legislation.
In the short-term, we need to restore the child tax credit, implement tax cuts for working families, passing price-gouging legislation, and establish a living wage.