The simple reason being, economist grasp almost nothing about the economy and how it actually works, on a more existential level.
Including, even why the economy exists.
And politicians, speaking about the economy, don't look at the whole, but the part, as the whole isn't very satisfactory in a right/left construct.
Indeed, left wing politicians would be horrified by a real deep reform of the economy in ways that would actually work, as would right wing politicians.
Witness the latest by economist Robert Reich:
The economic message that will get Biden reelected and give Dems a majority in both Houses of Congress
Indeed, let's break them down and look at the uncomfortable truth.
The economic goal should be more jobs at higher wages. Right?
Let's start there. That seems reasonable enough, so I'll basically concede it. But perhaps a better position would be to state that the economic goal would be more worthwhile jobs that allow for individual family independence, at middle class reasonable wages.
Because, what's an economy for? To serve people.
It isn't really "more decent jobs at higher wages". Indeed, it would really be all jobs at family supporting wages. That's not really the same thing.
I don't know that Reich would disagree with that, but it's important to keep it in overall mind. Economist tend to think that all jobs are super nifty, not matter what they are, as long as 100% of everyone who can work is working, and for good wages.
Actual people, however, don't think that way. They want decent jobs worth doing to support themselves, and their families if they have one, and most people do.
The irony here is that the left and the right have come around to the same position on this, over the year. It's a very Soviet, warehouse the children you unfortunately had so that everyone can work, until they are old, of course, as the Boomer run the economy and it's okay if they retire.
We continue.
Yet the Fed, corporate economists, and the GOP have turned the goal upside down — into fewer jobs and lower wages. Otherwise, they say, we’ll face more inflation.
Bob can't quite seem to grasp that unless an overheated economy is slowed down, wages erode. And the Fed, etc., isn't trying to depress wages. Inflation itself erodes wages. They're trying to slow inflation in the only method known to work.
He knows that, but he has a pet thesis that is, as he would put it:
Rubbish.
And here, several paragraphs later, is the thesis.
The Fed has raised borrowing costs at 10 consecutive meetings, pushing its benchmark rate to over 5 percent. Yet inflation has barely budged. In April, it dropped to 4.9 percent (year-over-year) from 5 percent in March — according to Wednesday’s Labor Bureau data.
Why are the Fed’s rate hikes having so little effect?
Actually, historically, that's not bad.
An ideal inflation rate would be 0%, or quite frankly slight, perhaps 1% or 2% deflation, to recover some lost ground. 5%, however, is headed in the right direction. 3% for much of my life was regarded as basically no inflation at all, and the extremely low inflationary rates we had until COVID were simply extraordinary.
Oh, COVID, remember that? The thing that closed the ports and kept good from coming in, reminding Americans that we make nothing.
A thing like that could almost have been inflationary.
A think like that may also have served to remind Americans that some of the jobs they had left, pre COVID, were awful. Note the big decrease in long haul truck drivers, employees in an industry that had already seen a massive departure of Americans in favor of foreign nationals, and which is effectively subsidized, as we've noted elsewhere.
It's an awful job. It's almost as if we might want to think about doing this more efficiently.
If only private companies could be induced to ship things by rail. . . .oh wait. . .
Anyhow, raising interest rates hasn't worked as it hasn't been high enough, that's why. 5% is a joke. It ought to be at least 8%.
And, additionally, because this inflationary cycle is global, that's also why.
Because, left wing economist, global food prices and energy prices have risen dramatically as a former far left wing operative, now politicians, and a person with a strange relationship (listening right wing politicians) with Donald J. Trump, has invaded a neighbor resulting in the first peer to peer, large scale, conventional war since the Korean War.
That's a lot of the reason why.
But, left wing economist states:
Because inflation is not being propelled by an overheated economy. It’s being propelled by overheated profits.
Okay, I'm a distributist, and I'd favor addressing this to the element it's the truth, but it's just frankly not very true. One basic fact is that those supposedly profiteering business are taking in money that's worth less every day. No wonder they feel they have to take in more.
But Bob says:
So, what’s causing inflation? Corporations with enough monopoly power to raise their prices and fatten their profits — which the Fed’s rate hikes barely affect.
Okay, well then let's go to a Distributist economy and limit the number of areas business enterprises can operate the corporate business form. That would be extremely deflationary, make for more good jobs at a wider level, and be much more stable. It'd do a whole lot more than raising taxes, as Bob suggest, which would be most likely passed on to everyone else.
Any regular economist in favor of that?
Absolute not, as they're all really just corporate capitalist economist and favor slightly tinkering with the mechanics of things. Basically, the difference between a conservative economist and a liberal economist is the difference motor heads of the 70s exhibited on whether they were Holly Carb or Edlebrock fans.
Big whoop.
But here's another uncomfortable truth. Let's go back to the first item.
The economic goal should be more jobs at higher wages. Right?
Part of the reason that wages rose is that during COVID there was a big decrease in immigration, legal and illegal, into the United States.
For years, economist on the left and right have claimed that immigrants take jobs that Americans won't, never mind that they take what are frankly a lot of middle class jobs in some industries. As they didn't come in, Americans took those jobs, but demanded living wages.
Supposedly, in the economist world, immigration had no impact on inflation, or jobs, and in fact boosted the economy. They may have boosted the economy, but its now conclusively demonstrated that they did so by depressing wages.
And this worked an injustice for the native born, including the native born poor. This was always known at some level as it provided the fuel to the occasional riots and domestic strife at the inner city urban level.
This has also caused liberals like commentator Chuck Todd to directly claim that we're experiencing inflation as we aren't seeing immigrants come in. But what this implicitly admits is that the high American immigration rate operates to keep wages low, and that is what was depressing inflation. Absent the high immigration levels, wages would rise to their natural level.
And that's what they've been doing.
Setting aside Donald Trump's pal, Vlad "if Czar Nikki owned I still do" Putin, part of what is going on is at attempt at wage stabilization, at American living wage levels, something that was frustrated by decades of wage erosion due to immigration.
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